Journal

A journal may be defined as 'a book of original entry or prime entry where transactions ate recorded first from the source documents in the chronological order'. The journal shows the

Names of accounts to be debited and credited and the amount involved. A journal entry is not complete without a narration, which is a brief description of the nature of the transaction, the process of making entries in the journal is known as journalizing. Unlike an account, a journal has only one side with date, particulars, and ledger folio (LIF) and two amount Columns, the first for debit and the second for credit.

Form of journal

Making entries in the journal: A separate journal entry is made for each transaction. The date column is used to record the date of transaction. Usually the year is recorded at the top and the month and date are recorded against each entry. The next step is identifying the accounts affected and then determining the account to be debited and the account to be credited. The name of the account to be debited is written at the extreme left of the particulars column, with the abbreviation 'Dr.' at the extreme right of the column. The amount is placed in the Dr. Column against the account. In the next line, the name of the account to be credited, proceeded by 'To', is written, leaving a few spaces from the left. (Note that the abbreviation 'Cr -' is not written against the name of the account). The amount is put on the Cr. amount column. A brief description showing the nature of the transaction is ~ven in the particulars column within brackets. Then a line touching the two lines of the particulars column is drawn.

In the LJF column the page numbers of the ledger where the relevant accounts are posted are recorded as and wben posting is made. this facilitates future reference.

Compound journal entries

A journal entry with more than one debit or credit or both is called a Compound journal entry. A compound entry is made only in respect of similar or related transactions which occur on the same date.

Opening entry

It is customary to open a separate set of books for each accounting year. In these books, the previous year's balances of assets, liabilities and capital are recorded first. The journal entry passed in the books to record the previous year's balances of accounts is known as opening journal entry. In the opening journal entry each individual asset is debited and credit is given to each individual liability and capital, In case the capital account balance is not given, the difference between the total of assets and total of liabilities is taken as capital.

Cash discount

Cash discount is the reduction allowed by the creditor to the debtor on the amount due by tile latter. The concession is allowed to encourage prompt settlement of accounts. For the debtor who pays the amount, it is an income and for the creditor, who allows it, it is an expense.

Banking Transactions

For reasons of convenience and safety, majority of the cash transactions are nowadays settled by means of cheques. Though cheques are equivalent to cash, the following guide lines are to be observed while making journal entries.

1. Cheques received are treated as cash and hence when cheques are received cash account is debited. However, if the cheques received are deposited into the bank on the same day, the bank account can be debited. Similarly, for direct deposit by the customers, the bank account should be debited.
2. When cheques are issued, the bank makes payment on behalf of the trader and hence the bank account should be credited.
3. When the bank allows interest, the bank account is debited and when the bank charges the customer for services, the bank account is credited.