JOURNAL

MADE BY –

Isha And Deepika

IntroductionIntroductionJOURNAL IS DERIVED FROM FRENCH WORD JOURNAL IS DERIVED FROM FRENCH WORD ‘‘JOURJOUR’’ WHICH MEANS A WHICH MEANS A DAY.DAY.

MeaningMeaningJournal means daily record. It is a book of orignal Journal means daily record. It is a book of orignal record where every transaction is recorded in the record where every transaction is recorded in the first instance and then it is posted to ledger.first instance and then it is posted to ledger.

The form in which it is recorded is called journal The form in which it is recorded is called journal entery.entery.

Recording of transaction in journal is known as Recording of transaction in journal is known as Journalising.Journalising.

Advantages of JournalAdvantages of Journal As a transaction in journal are entered as and when As a transaction in journal are entered as and when

they take place, the possibility of ommission of a they take place, the possibility of ommission of a transaction in the books of accounts is minimised.transaction in the books of accounts is minimised.

As transactions are recorded in chronological order As transactions are recorded in chronological order it is easy to locate a the required transaction.it is easy to locate a the required transaction.

By analysing each transaction into debit & credit By analysing each transaction into debit & credit aspects, the journal facilitates the posing into aspects, the journal facilitates the posing into ledger.ledger.

As journal carries a naration ledger can be made As journal carries a naration ledger can be made without explanation.without explanation.

Since the entire transaction is recorded at one Since the entire transaction is recorded at one place in journal the identity of each transaction is place in journal the identity of each transaction is maintained on a permanent basis.maintained on a permanent basis.

Specimen of JournalSpecimen of Journal

Date Particulars LF Dr. amt

Cr.amt.

Rules for JournalisingRules for Journalising

PERSONAL ACCOUNTSPERSONAL ACCOUNTS

Debit the receiver & Credit the giverDebit the receiver & Credit the giver..

Eg:- Paid rs 5000/- to Sham.Eg:- Paid rs 5000/- to Sham.Sham A/c Sham A/c drdr 5000/-5000/-

To Cash A/cTo Cash A/c 5000/-5000/-

Eg;- Received rs 1000/- from HariEg;- Received rs 1000/- from HariCash A/cCash A/c drdr 1000/-1000/-

To Hari A/cTo Hari A/c 1000/-1000/-

REAL ACCOUNTSREAL ACCOUNTS

Debit What Comes In & Credit What goes out.Debit What Comes In & Credit What goes out.

Eg :- Purchased furniture worth rs 10000/-Eg :- Purchased furniture worth rs 10000/-

Furniture A/cFurniture A/c drdr 1000010000

To Cash A/cTo Cash A/c 1000010000

Eg:- Sold machinery for rs 6000.-Eg:- Sold machinery for rs 6000.-

Cash A/c Cash A/c drdr 60006000

To machineryTo machinery 60006000

NOMINAL ACCOUNTSNOMINAL ACCOUNTS

Debit all expenses and losses & Credit Debit all expenses and losses & Credit all incomes and gainsall incomes and gains

Eg:- Paid salary rs 12000/-Eg:- Paid salary rs 12000/-Salary A/cSalary A/c drdr 1200012000

To cash A/cTo cash A/c1200012000

Eg:- Received rs 1000/- for Eg:- Received rs 1000/- for commission.commission.

Cash A/c Cash A/c drdr 10001000To commissionTo commission

10001000

Points to be noted before Points to be noted before journalisingjournalising

Purchases account: when goods are purchased Purchases account: when goods are purchased instead of debiting “Goods A/c” “Purchase A/c” instead of debiting “Goods A/c” “Purchase A/c” is debited.is debited.

Sales account: when goods are sold instead of Sales account: when goods are sold instead of crediting “Goods A/c” “Sales A/c” is credited.crediting “Goods A/c” “Sales A/c” is credited.

If goods/assets are purchased on credit then If goods/assets are purchased on credit then “Supplier A/c” is credited.“Supplier A/c” is credited.

If goods/assets are sold on credit then “Debtor If goods/assets are sold on credit then “Debtor A/c” is debited.A/c” is debited.

If nothing is mentioned whether cash or credit it If nothing is mentioned whether cash or credit it will be treated as credit transactionwill be treated as credit transaction

Expenditure on installation, errection or repair Expenditure on installation, errection or repair of an asset will be added to the cost of asset.of an asset will be added to the cost of asset.

Some Special Enteries

Opening Entries Compound Entries Bad Debts Bad Debts Recovered Outstanding Expenses

Prepaid Expenses Depreciation Interest on Capital Interest on Drawings Discount Entries

Opening EntriesOpening Entries::The closing balances of last year have to be carried forward to the The closing balances of last year have to be carried forward to the

next year, the first entry of the new year represents the same next year, the first entry of the new year represents the same and is called opening entry.and is called opening entry.

E.g.: Following balances appeared in the books of Sita on 1E.g.: Following balances appeared in the books of Sita on 1stst Jan, Jan, 2009:2009:

AssetsAssets: Cash 8000; Stock 3000; Debtors 5000; Machinery 7000;: Cash 8000; Stock 3000; Debtors 5000; Machinery 7000;LiabilitiesLiabilities: Creditors 7000; Capital 20000;: Creditors 7000; Capital 20000;

DateDate ParticularsParticulars L.L.FF

Dr Dr AmountAmount

Cr Cr AmountAmount

20020099

Jan Jan 11

Cash A/c Cash A/c DrDr

Stock A/c Stock A/c DrDr

Debtors A/cDebtors A/c

Machinery A/c Machinery A/c DrDr

Goodwill A/c (b/f) Goodwill A/c (b/f) DrDr

To Capital A/cTo Capital A/c

To Creditors A/cTo Creditors A/c

80008000

30003000

50005000

70007000

40004000

70007000

2000020000

Compound EntriesCompound EntriesSometimes two or more transactions relating to a Sometimes two or more transactions relating to a

particular account take place on the same date. In particular account take place on the same date. In such cases, instead of passing separate entries for such cases, instead of passing separate entries for all such transactions, only one entry is passed. all such transactions, only one entry is passed. Such journal entry is termed as compound journal Such journal entry is termed as compound journal entry.entry.

Eg. On 30Eg. On 30thth june paid rs.5000 for salaries and june paid rs.5000 for salaries and rs.2000 for rentrs.2000 for rent

3030thth june Salary A/c dr 5000 june Salary A/c dr 5000 Rent A/c dr 2000Rent A/c dr 2000 To cash A/C 7000To cash A/C 7000

Bad DebtsBad Debts Debts which can’t be recovered are called bad debtsDebts which can’t be recovered are called bad debts..Eg. Ram who owed 3000 to business was declared as Eg. Ram who owed 3000 to business was declared as

insolventinsolvent Bad debt A/c dr 3000Bad debt A/c dr 3000 To Ram A/c 3000To Ram A/c 3000

Bad Debts RecoveredSometimes, it so happens that the bad debts

previously written off are subsequently recovered. Eg. Ram who was decclared bad debt ,his debts woth

rs 3000 were recovered. Cash A/c dr 3000 To Bad debts recovered A/c

3000

Outstanding ExpensesThere are certain expenses which are yet to be paid at

the end of the accounting year due to some reasons. Such expenses are termed as Outstanding expenses

Eg. Employee is paid salary @ 1000 pm but salary has been paid only for 11 months.

Salary A/c dr 1000 To Outstanding Salary A/c 1000

Prepaid ExpensesPrepaid ExpensesCertain expenses which are related to the next year but Certain expenses which are related to the next year but

have been paid during the current year in advance are have been paid during the current year in advance are called prepaid expenses. The benefit of such expenses called prepaid expenses. The benefit of such expenses will be received during the next accounting year.will be received during the next accounting year.

E.g out of the rent paid during this year , rs. 1,000 is E.g out of the rent paid during this year , rs. 1,000 is related to next year.related to next year.

Prepaid rent A/c dr 1000Prepaid rent A/c dr 1000 To rent A/c 1000To rent A/c 1000

DepreciationDepreciationDecrease in the value of fix asset on account of wear and Decrease in the value of fix asset on account of wear and

tear, passage of time etctear, passage of time etc..E.g Provide 10% depreciation on furniture costing rs 5000E.g Provide 10% depreciation on furniture costing rs 5000 Depreciation A/c dr 500Depreciation A/c dr 500 To Furniture A/c 500To Furniture A/c 500

Interest on CapitalInterest on CapitalIn order to ascertain the true efficiency of the business it In order to ascertain the true efficiency of the business it

is a normal practice to charge business with interst on is a normal practice to charge business with interst on proprietor’s capital.proprietor’s capital.

E.g provide 12% interst on capital amounting to rs. E.g provide 12% interst on capital amounting to rs. 1,00,0001,00,000

Interst on capital A/c dr 12000Interst on capital A/c dr 12000

To capital A/c 12000To capital A/c 12000

Interest on DrawingsInterest on DrawingsIt is an expense for the proprietor and a gain to the It is an expense for the proprietor and a gain to the

business.it is charged on the drawings made by the business.it is charged on the drawings made by the proprietor.proprietor.

E.g Charge interst on drawings rs. 800E.g Charge interst on drawings rs. 800

Drawings A/c dr 800Drawings A/c dr 800

To interest on drawings A/c 800To interest on drawings A/c 800

Discount

Cash Discount Trade Discount

Trade discountTrade discount::The discount is allowed by seller to its customers at a fixed The discount is allowed by seller to its customers at a fixed

percentage on the listed price of the goods is termed as trade percentage on the listed price of the goods is termed as trade discount. No separate entry is passed for trade discount.discount. No separate entry is passed for trade discount.

Cash discount:Cash discount:This discount is allowed to customers to make prompt payment.as This discount is allowed to customers to make prompt payment.as

the discount is allowed at the time of payment , so the entry for the discount is allowed at the time of payment , so the entry for cash discountis recorded along with the entry for payment.cash discountis recorded along with the entry for payment.

SOMETIMES CUSTOMER IS ALLOWED BOTH THE ACCOUNTS .IN SUCH SOMETIMES CUSTOMER IS ALLOWED BOTH THE ACCOUNTS .IN SUCH A CASE ,FIRST TRADE DISCOUNT IS TO BE DEDUCTED FROM LIST A CASE ,FIRST TRADE DISCOUNT IS TO BE DEDUCTED FROM LIST PRICE AND THEN CASH DISCOUNT IS TO BE CALCULATED ON THE PRICE AND THEN CASH DISCOUNT IS TO BE CALCULATED ON THE BALANCE OF PAYMENTBALANCE OF PAYMENT

• For e.g if a M/s Ram sells goods of list price of rs For e.g if a M/s Ram sells goods of list price of rs 20000 at 10% trade discount and 2% cash 20000 at 10% trade discount and 2% cash discount ,the net amount will be calculated as discount ,the net amount will be calculated as under:under:

Rs.Rs.

List price 20,000List price 20,000

less: less: trade discount @ 10% trade discount @ 10% 2,0002,000

18,00018,000

less: less: cash discount @ 2% cash discount @ 2% 3,603,60

17,640 17,640

The entry will be:-The entry will be:-

Cash A/c dr 17,640Cash A/c dr 17,640

Discount A/c dr 360Discount A/c dr 360

To Sales A/c 18,000To Sales A/c 18,000

Special Transactions Related To Special Transactions Related To GoodsGoodsDRAWINGS IN GOODSDRAWINGS IN GOODS : : sometimes proprietor sometimes proprietor

withdraws goods from the business for his personal withdraws goods from the business for his personal use.use.

E.g. Proprietor withdrew for his personal use cash Rs. E.g. Proprietor withdrew for his personal use cash Rs. 2,000 and goods worth Rs. 10002,000 and goods worth Rs. 1000

Drawings A/c dr 3,000Drawings A/c dr 3,000

To Cash A/c 2,000To Cash A/c 2,000

To Purchases A/c 1,000To Purchases A/c 1,000

GOODS GIVEN AWAY AS CHARITY : GOODS GIVEN AWAY AS CHARITY : charity is an charity is an expense of business, as such charity account will be expense of business, as such charity account will be debited goods are going out of business at cost price, debited goods are going out of business at cost price, hence purchases are reduced to that extent and as hence purchases are reduced to that extent and as such, purchases account will be credited.such, purchases account will be credited.

E.G Goods for Rs. 5,000 were given away as charity.E.G Goods for Rs. 5,000 were given away as charity.

Charity A/c dr 5,000Charity A/c dr 5,000

To purchases A/c 5,000To purchases A/c 5,000

GOODS DISTRIBUTED AS FREE SAMPLESGOODS DISTRIBUTED AS FREE SAMPLES : : Sometimes the goods are distributed as free Sometimes the goods are distributed as free samples to the potential buyers in order to promote samples to the potential buyers in order to promote sales. As such, free samples can legitimately be sales. As such, free samples can legitimately be treated as an expense of business.treated as an expense of business.

E.g. Goods worth Rs. 2500 were distributed as free E.g. Goods worth Rs. 2500 were distributed as free samples.samples.

Free samples A/c dr 2500Free samples A/c dr 2500

To Purchases A/c 2500To Purchases A/c 2500

LOSS OF GOODS BY THEFT/FIRE :LOSS OF GOODS BY THEFT/FIRE : cost value of cost value of goods have been lost so we will credit the goods have been lost so we will credit the purchases.purchases.

E.GE.G Goods worth Rs. 5000 were stolen by an Goods worth Rs. 5000 were stolen by an employeeemployee

Lost by theft A/c dr 5000Lost by theft A/c dr 5000

To purchases A/c 5000To purchases A/c 5000

REVIEW QUESTIONSREVIEW QUESTIONS

QuestionsQuestions Dr A/cDr A/c Cr A/cCr A/c AmtAmtSold to Ram on Sold to Ram on credit goods of Rs credit goods of Rs 50005000

Cartage paid in Cartage paid in cash rs 300cash rs 300

Goods costing rs Goods costing rs 2000 lost by fire2000 lost by fire

Salary Salary outstanding rs outstanding rs 900900

Paid rs 500 on Paid rs 500 on installation of installation of machinerymachinery

REVIEW QUESTIONSREVIEW QUESTIONS

QuestionsQuestions Dr A/cDr A/c Cr A/cCr A/c AmtAmtSold to Ram on Sold to Ram on credit goods of Rs credit goods of Rs 50005000

Cartage paid in Cartage paid in cash rs 300cash rs 300

Goods costing rs Goods costing rs 2000 lost by fire2000 lost by fire

Salary Salary outstanding rs outstanding rs 900900

Paid rs 500 on Paid rs 500 on installation of installation of machinerymachinery

Ram Ram A/cA/c

CartagCartage A/ce A/c

Lost byLost by

Fire A/cFire A/c

Salary Salary A/cA/c

MachinMachinery A/cery A/c

Sales A/cSales A/c

Cash A/cCash A/c

Purchase Purchase A/cA/c

OutstandiOutstanding Salary ng Salary A/cA/c

Cash A/cCash A/c

50005000

300300

20002000

900900

500500

REVIEW QUESTIONSREVIEW QUESTIONS

QuestionsQuestions Dr A/cDr A/c Cr A/cCr A/c AmtAmtPaid Bank charges for Paid Bank charges for its services Rs. 200its services Rs. 200

Purchses furniture for Purchses furniture for Rs 6000Rs 6000

Charge interest on Charge interest on capital rs 700capital rs 700

Ram a debtor who Ram a debtor who owed 7500 turned into owed 7500 turned into bad debtbad debt

Received 1200 of a bad Received 1200 of a bad debt written off last debt written off last yearyear

Proprietor withdrew Proprietor withdrew goods of rs 5000 for goods of rs 5000 for personal usepersonal use

REVIEW QUESTIONSREVIEW QUESTIONS

QuestionsQuestions Dr A/cDr A/c Cr A/cCr A/c AmtAmtPaid Bank charges for Paid Bank charges for its services Rs. 200its services Rs. 200

Purchses furniture for Purchses furniture for Rs 6000Rs 6000

Charge interest on Charge interest on capital rs 700capital rs 700

Ram a debtor who Ram a debtor who owed 7500 turned into owed 7500 turned into bad debtbad debt

Received 1200 of a bad Received 1200 of a bad debt written off last debt written off last yearyear

Proprietor withdrew Proprietor withdrew goods of rs 5000 for goods of rs 5000 for personal usepersonal use

Bank Bank charge charge A/cA/c

FurnitureFurniture

A/cA/c

Interest Interest on capital on capital A/cA/c

IIBad Debt Bad Debt A/cA/c

Cash A/cCash A/c

Drawings Drawings A/cA/c

Cash A/cCash A/c

Cash A/cCash A/c

Capital Capital A/cA/c

Ram A/cRam A/c

Bad Debts Bad Debts RecovereRecovered A/cd A/c

Purchases Purchases A/cA/c

200200

60006000

700700

75007500

12001200

50005000

Limitations Of Limitations Of JournalJournal

When the number of transactions is When the number of transactions is large, it is not possible to record all large, it is not possible to record all transactions in journaltransactions in journal

In order to ascertain cash balance In order to ascertain cash balance everyday, cash transaction are usually everyday, cash transaction are usually recorded in separate book called ‘cash recorded in separate book called ‘cash book’ .thus transactions need not to be book’ .thus transactions need not to be recorded in journal.recorded in journal.

Journal does not provide the required Journal does not provide the required information on prompt basis.information on prompt basis.

Many transactions are repetitive in Many transactions are repetitive in nature and if all transactions are nature and if all transactions are recorded in journal it will involve recorded in journal it will involve debiting and crediting the same debiting and crediting the same accounts and repetitive posting labour accounts and repetitive posting labour alsoalso..

ConclusiConclusionon

Though it has some Though it has some limitations but its limitations but its advantages advantages overshadow all its overshadow all its limitations. Thus limitations. Thus Journal as a book of Journal as a book of prime entry is of prime entry is of utmost importance.utmost importance.

Made By:Made By:Isha(149), Deepika (139)Isha(149), Deepika (139)