JOURNAL
Introduction:
As stated earlier, under the conventional or theoretical method of book-keeping, all the transactions of a business are, first, recorded in a single book of original entry or first entry called the Journal, General Journal or Ordinary Journal, as and when they take place. Then, the entries in the journal are posted or transferred to the appropriate accounts in the book of second or final entry called the Ledger, periodically, say, weekly, fortnightly, monthly or quarterly, to know the exact position of each account on any particular date. Finally, at the end of the accounting year, from the ledger account balances, whose arithmetical accuracy is checked by a Trial Balance, Final Accounts (i.e., the Trading and Profit and Loss Account and the Balance Sheet) are prepared to ascertain the net profit or net loss of the business for the accounting year and the financial position of the business as on the last date of the accounting year. So, it is necessary for us to have detailed study of the Journal.
Meaning of Journal:
The term 'Journal' is derived from the French word 'Jour', which means a day. Journal, therefore, means a day book or a daily record. It is the book wherein all the transactions are first recorded in the order of dates, i.e., as and when they take place. In the Journal, each transaction is analysed (i.e., classified) into it's debit (i.e., receiving or incoming) aspect and credit (i.e., giving or outgoing) aspect, and both the debit and credit aspects of each transaction are recorded together in one entry, with an explanation for the entry.
The act of recording a transaction in the journal (i.e., the process of making an entry in the journal) is called Journalising. The record of a transaction in the journal (i.e., the entry for a transaction made in the journal) is called a 'journal entry'.
Essential Features of Journal:
The chief features of the journal are:
1. The journal is a book of prime, original or first entry, as all business transactions are first recorded in the journal.
2. It is true that the journal is a book of original or first entry. But it is only a subsidiary book, i.e., a book which is subordinate to the ledger, which is the principal book of accounts. So, the journal can be regarded as the queen of books of account, subordinate to the king of books of account, viz., the ledger.
3. The journal analyses the various transactions into their debits and credits, so that they could be easily posted to the ledger accounts. In other words, the journal is helpful in the preparation of accounts in the ledger. It is for this reason that the journal is called the gateway to the ledger.
Need for Journal or Importance, Advantages or Uses of Journal:
No doubt, transactions can be entered in the various ledger accounts straightaway without recording them in the journal. But, if transactions are straightaway recorded in the ledger, there are greater chances of committing mistakes. So, in practice, such a procedure is not at all followed. That means, journal is absolutely necessary. It is necessary for the following reasons:
1. The journal provides the chronological (i.e., date-wise) record of all the business transactions.
2. As the business transactions are recorded in the journal in the chronological order (i.e., in the order of dates), the journal facilitates quick and easy reference to any transaction.
3. As both the debit and credit aspects of each transaction are entered in the journal together in one entry, journal provides a complete record of each transaction in one place.
4 By providing narration, i.e., a brief explanation, to each entry just below the entry, journal helps one to understand the purpose and the nature of the entry.
5. Journal helps in the understanding of the principles of double-entry system, as entries in the journal are classified into debits and credits.
6. Journal avoids the necessity of making entries in the ledger immediately (i.e., as and when the transactions take place). When the journal is maintained, the entries in the ledger can be made from journal entries at leisure, say, weekly, fortnightly, monthly or quarterly, depending upon the convenience of the ledger clerk.
7. The maintenance of the journal, besides the ledger, facilitates cross checking and helps in the checking of the arithmetical accuracy of the books of accounts.
8. It is easier to post from the journal to the ledger, as it can be easily ascertained from the journal as to which account is to be debited and which account to be credited.
9. Journal reduces the possibilities of errors, as the amounts to be debited and credited are written by side by side in the journal.
10. Journal makes the detection of errors, if any, easy, because the entries in the journal are made date-wise.
11. As the journal is a book of original entry, and the ledger is a book of final entry, courts consider the journal entries, and not the ledger entries, as proof of the business transactions. That means, even from the legal point of view, the journal is required to be maintained.
Limitations of Journal:
Journal suffers from certain limitations. They are:
1. If all the business transactions are recorded in the journal, the journal will become very bulky.
2. The work of writing up of the journal is laborious and tedious.
3. Journal will not be helpful to a businessman, in knowing the cash balance, bank balance, debtors balance, creditors balance, sales, purchases, etc. each day.
4. A journal is only a subsidiary book. It is not a book of final entry. That means, a journal will not provide final information on the various matters of business.
5. Journal is useful only for a small concern with a low volume of business transactions. It is not very useful for a big concerns with a large volume of business transactions.
Meaning of Journal:
The term 'Journal' is derived from the French word 'Jour', which means a day. Journal, therefore, means a day book or a daily record. It is the book wherein all the transactions are first recorded in the order of dates, i.e., as and when they take place. In the Journal, each transaction is analysed (i.e., classified) into it's debit (i.e., receiving or incoming) aspect and credit (i.e., giving or outgoing) aspect, and both the debit and credit aspects of each transaction are recorded together in one entry, with an explanation for the entry.
The act of recording a transaction in the journal (i.e., the process of making an entry in the journal) is called Journalising. The record of a transaction in the journal (i.e., the entry for a transaction made in the journal) is called a 'journal entry'.
Essential Features of Journal:
The chief features of the journal are:
1. The journal is a book of prime, original or first entry, as all business transactions are first recorded in the journal.
2. It is true that the journal is a book of original or first entry. But it is only a subsidiary book, i.e., a book which is subordinate to the ledger, which is the principal book of accounts. So, the journal can be regarded as the queen of books of account, subordinate to the king of books of account, viz., the ledger.
3. The journal analyses the various transactions into their debits and credits, so that they could be easily posted to the ledger accounts. In other words, the journal is helpful in the preparation of accounts in the ledger. It is for this reason that the journal is called the gateway to the ledger.
Need for Journal or Importance, Advantages or Uses of Journal:
No doubt, transactions can be entered in the various ledger accounts straightaway without recording them in the journal. But, if transactions are straightaway recorded in the ledger, there are greater chances of committing mistakes. So, in practice, such a procedure is not at all followed. That means, journal is absolutely necessary. It is necessary for the following reasons:
1. The journal provides the chronological (i.e., date-wise) record of all the business transactions.
2. As the business transactions are recorded in the journal in the chronological order (i.e., in the order of dates), the journal facilitates quick and easy reference to any transaction.
3. As both the debit and credit aspects of each transaction are entered in the journal together in one entry, journal provides a complete record of each transaction in one place.
4 By providing narration, i.e., a brief explanation, to each entry just below the entry, journal helps one to understand the purpose and the nature of the entry.
5. Journal helps in the understanding of the principles of double-entry system, as entries in the journal are classified into debits and credits.
6. Journal avoids the necessity of making entries in the ledger immediately (i.e., as and when the transactions take place). When the journal is maintained, the entries in the ledger can be made from journal entries at leisure, say, weekly, fortnightly, monthly or quarterly, depending upon the convenience of the ledger clerk.
7. The maintenance of the journal, besides the ledger, facilitates cross checking and helps in the checking of the arithmetical accuracy of the books of accounts.
8. It is easier to post from the journal to the ledger, as it can be easily ascertained from the journal as to which account is to be debited and which account to be credited.
9. Journal reduces the possibilities of errors, as the amounts to be debited and credited are written by side by side in the journal.
10. Journal makes the detection of errors, if any, easy, because the entries in the journal are made date-wise.
11. As the journal is a book of original entry, and the ledger is a book of final entry, courts consider the journal entries, and not the ledger entries, as proof of the business transactions. That means, even from the legal point of view, the journal is required to be maintained.
Limitations of Journal:
Journal suffers from certain limitations. They are:
1. If all the business transactions are recorded in the journal, the journal will become very bulky.
2. The work of writing up of the journal is laborious and tedious.
3. Journal will not be helpful to a businessman, in knowing the cash balance, bank balance, debtors balance, creditors balance, sales, purchases, etc. each day.
4. A journal is only a subsidiary book. It is not a book of final entry. That means, a journal will not provide final information on the various matters of business.
5. Journal is useful only for a small concern with a low volume of business transactions. It is not very useful for a big concerns with a large volume of business transactions.
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