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Journal

Journal is derived from the French word “Jour” which means a day. Journal therefore means day to day transactions which are recorded in the books. It is in the form of debit and credit and is maintained with the help of accounting rules. The process of recording the transactions in a journal is called journalising.

A journal may be defined as the book of original or prime entry containing a chronological record of the business transactions.

 

Explanation

1. Date. The date on which the transaction takes place is entered in the journal.

2. Particulars. Under the particulars column, the names of the account to be debited is written in the first line, and in the second line, the account to be credited is written preceded by the word To Narration which also explains briefly about the transaction.

3. L.F. It stands for ledger folio. It means the page number in the ledger in which the entry is posted.

4. Debit. N arne of the account to be debited against the ‘Dr’ account is entered.

5. Credit. Name of the account to be credited against the ‘Cr’ account is entered.

 

Procedure for Journalising

In any particular transaction first of all we have to identify the receiving aspect and giving aspect of the transaction. All the transactions affect at least two ofthe basic accounting.

The rule for journalizing should be selected as follows.

 

                                                        PROBLEMS AND SOLUTIONS

Problem 1. Journalise the following transaction in the journal of Mr.T.R.Ramu. 2003, Jan 1 Ramu commenced business with a capital of Rs. 50,000

                                ↓                                                                                                                                                                   ↓

                         Real A/c                                                                                                                                               Personal A/c       

 

The above transaction has to affect the two accounts i.e., (i) Real Ale and (ii) Personal A/c. After finding out the affected accounts, we have to apply the accounting rules as against the particular transaction. Here cash is coming to the business and Ramu is the giver.

 

2. Amount Deposited in Canara Bank Rs. 20,000

↓                              ↓

Personal A/c          Real A/c

 

Affected Accounts in the above transaction :

(i) Personal Account

(ii) Real Account.

In the above transaction, the Canara Bank is the artificial person to receive the money. It relates to Personal Accounts. As per the Personal Accounts rules, Debit the Receiver. Here Canara Bank Account is debited and amount relates to real account. Amount goes out according to real account credit what goes out. Here cash goes out. So the Cash Ale is credited.

 

3. Goods Purchased for cash Rs. 10,000

↓                                  ↓

Real A/c               Real A/c

 

This is the cash transaction. The two aspects to be recorded are goods or purchase account and cash account. Both are related to Real Account. Now we apply Real Account rules.

 

 

4. Purchase of goods worth Rs. 5.000 from Murali

↓                                                ↓                            ↓

Real A/c                               Real A/c         Personal A/c

 

This is the credit transaction. But the above transaction affects three accounts.

Namely,

(i)                 Good -; Real Account

(ii)               Amount -; Real Account

(ii)               Murali -; Personal Account

 

Here, there is no need to give the effect on one Real Account [i.e., Amount – Real Account]. Because, at the time of purchase, there is no settlement of money.

 

Goods Account relates to the Real Account. As per the Real Account rules, Goods Account is to be debited.

 

Murali is the Personal Account. As per the Personal Account rules Murali is the giver.

So his account is to be credited.

 

Credit Transaction and Cash Transaction 

If purchase and Sales Transaction bears a name means it is treated as credit transaction. And at the same time, even though there is a name, specifically mentioned cash means, it is treated as cash transaction.

5. Sold goods to Rajan Brothers for Rs. 10,000

↓                  ↓                                        ↓

Real A/c  Personal A/c          Real A/c

This is a credit transaction for two reasons :  

  (i) Purchaser’s name is given.

  (ii) There is no mention that it is cash transaction.

The above transaction affects the three Accounts. i.e., 

    (i) Real Account (goods)

   (ii) Personal Account (Rajan Brothers)

  (iii) Real Account (Amount).

In the three accounts, we have to give the effect on only two accounts i.e., Goods account and Personal account.

Here, Rajan Brothers receives the goods, and goods go out from the business. So the journal entry will be

6. Sold goods worth $ 2,500

↓                          ↓

Real A/c            Real A/c

This is the cash transaction. The above transaction affects two accounts. i.e.,

    (i) Real Account→ goods

   (ii) Real Account → Amount.

Amount of $ 2,500 is coming to the business. As per the Real Account rules, Debit when comes in. Here cash comes in. So cash account is debited and goods go out from the business. It is also a real account. As per the Real Account rules, Credit what goes out. Here goods go out from the business, so cash account is credited.

7.  Amount of Rs. 9,000 Received from Rajan Brothers as full settlement

↓                                                       ↓

Real A/c                                    Personal A/c

This transaction directly affects two accounts.

   (i) Real Account (Amount)

  (ii) (Personal Account) Rajan Brothers.

Indirectly, it affects one account i.e., Nominal Account (Discount Account).

Actual sale of goods worth to Rajan Brothers                                             $  10,000

Amount Received from Rajan Brothers                                                       $    9,000

 The Amount treated as Discount A/c                                                          $      1000 

Here, we allow the discount to Rajan Brothers.

For receiving cash $ 9,000, Cash Account is to be debited. Discount is the Nominal Account. As per the Nominal Account rules Debit all expenses and losses. Here Discount is  he Expenses. So Discount Account is to be debited in the value of. Rajan brother is the giver, so his account is to be credited.

The journal entry will

8.Paid Salaries $.  25,000

↓                     ↓

Nominal A/c   Real A/c

The transaction has to affect the two accounts. i. e., (i) Salaries account relates to Nominal Account. Its rule is debit all expenses and losses and accordingly it is to be debited. (ii)  ash account relates to real account. Its rule is credit what goes out. Accordingly it is to be credited. Therefore the journal entry will be.

9. Commission Received $. 3,500

↓                                      ↓

Nominal A/c                 Real A/c

The transaction is obviously by cash and is an income. So the two important aspects are commission and cash. (i) Commission account relates to Nominal Account. As per the Nominal account rules credit all incomes and gains, accordingly it is to be credited. (ii) Cash account relates to Real Account. As per the Real account rules Debit what comes in. Accordingly cash account is to be debited. The journal entry will be

10. Entertainment expenses $ 1.000 paid

↓                                              ↓

Nominal A/c                   Real A/c

This is a cash transaction. Cash is going out and the entertainment is the expenditure. Cash relates to Real Account. As per Real Account Rules credit what goes out and accordingly it is to be credited. Entertainment relates to Nominal Account. Its rule is Debit all expenses and Losses. Accordingly, it is to be Debited. So the journal entry will be.