The document discusses the journal, which is the primary book of accounts where business transactions are initially recorded. It defines the journal, provides details about its purpose and usage, and explains concepts like rules of journal entries, types of accounts, and the process of journalizing transactions. Key points covered include that the journal records debit and credit entries of transactions in chronological order, and is the starting point for posting transactions to individual accounts in the ledger.

1. Recording of Business Transaction
Recording of Business transaction is vital to a business's financial statements and a key
responsibility of the accounting department. Learn the definition of a transaction, understand
the importance of recording transactions, and explore the process of double-entry
accounting, with examples of credits and debits
Meaning of Journal
The journal or journal is the primary or basic book of the traders. This is the register in which
all business transactions are entered date wise. In this, the accounts are made in the same
order in which the transactions have taken place in the business. The word 'Journal' is
derived from the French word 'Jour' which means day book, diary or 'day'. It is called 'Day'
or 'Din' or 'Rose' in Hindi. By adding nal in Jour, a Journal was created, whose Hindi
translation is 'Roznamcha'. Therefore, Journal or Roznamcha means daily account. Since
in this the transactions are recorded from the Waste Book or the Remembrance Book (or
Commemorative Book), so it is also called the Permit Book. Thus, since entries are made in
it every day according to date, hence it is also called daily register or daily record.
Thus, Journal is that book in which initial accounting of both the aspects of all business
transactions is done date wise and according to the rules. Therefore, according to a learned
writer, “The book in which all business transactions are written in a systematic manner in the
beginning, it is called journal
Definition of Journal
"The journal or 'daily record' is that book of primary entries in which date wise transactions
are recorded from the memory book or the junk itself. While writing the entries, they are in
the form of debit and credit. It is classified, so that later it is convenient to do correct posting
in the ledger. "
Books of Original entry -- journal
The book in which business transactions are first recorded sequentially is called 'Books of
Original Entry' or Books of Prime Entry. The original (source) documents are used for
recording the transaction in this book. There are some transactions in business whose
frequency is large in number. In large business enterprises, the number of transactions is
very large, due to which the size of the journal becomes large. Therefore, the book of
opening or primary entry is divided into several sub-books, which are also called subsidiary
books, which are as follows:
1. Cash Book
2. Purchases Book
3. Sales Book
4. Purchases Returns Book
5. Sales Returns Book

2. 6. Bills Receivable Book
7. Bills Payable Book
8.Journal Proper
journal is a book in which all day to day business transactions are accounted in
chronological order according to the rules of double accounting system. Later these
transactions are posted in different accounts.
Journal
Recording of Business Transactions. Defination of Journal.
Features of Journal
1. Journal is a book of opening entry. This transaction is first recorded in this book.
2. Journal is a subsidiary book. All transactions from this book are transferred to the ledger.
3. All transactions in the journal are analysed or classified into debit and credit.
4. Transactions in the journal are written according to the chronological order.
5. Generally there are five boxes in a journal.
The journal helps in creation of accounts in the ledger. Hence the journal is called the
gateway to the ledger.
Objectives or functions of journal
The following are the objectives of the Journal:
(1) The purpose of the Journal is to keep records of all transactions sequentially and date
wise.
(2) In double accounting system, every transaction has two sides. Journal tells us which
account should be debited and which account should be credited.
(3) Journal The third purpose is to facilitate the filing of accounts in the ledger or ledger.
(4) The fourth purpose of the Journal is to provide information regarding the transaction.

3. (5) The fifth purpose of the journal is to provide assistance in resolving disputes and
differences.
Advantages / Importance of Journal
The use of journal has ended in many countries because its work is done by subsidiary
books. Again entries can be made in the ledger even without the journal. Still some
countries ; For example, in France, Italy, Spain, Australia and Russia, the use of journals is
considered mandatory. In Russia, the situation is that in the courts, business disputes are
settled only on the evidence of the journal. This fact explains the importance of journal or
journal. In a nutshell, the journal has the following advantages or importance:
1. Date wise transaction details are entered in the journal date wise, so complete details of
the transactions are found date wise.
2. Facility of Khatauni - There is a facility to do Khatauni (posting) in various accounts
opened in the ledger from the journal. Although it can be written directly in the ledger from
the West Book, but there can be difficulty in that.
3. Getting the full details of the transaction - Along with the entry of the transactions in the
journal, a brief description of the transaction is given in the form of 'narration'. As a result,
complete details of transactions are found at one place.
4. Less chance of inaccuracies - In the journal, the entries of both the forms of the
transaction i.e. debit or credit are made simultaneously. This reduces the chances of
impurities.
Limitation of Journal
1. Very thick (Bulky and Volumnious) - When the number of transactions is more and it is
written in a single book, then the size and thickness of the journal will become very high.
2. Delay in Information - All transactions are recorded in the journal. Therefore, it is difficult
to get information quickly and easily.

4. 3. Time and Cost Consuming - Recording all the transactions in the journal increases the
time and cost.
4. Ascertaining Cash Balance - The businessman wants to find the cash balance of the
business every day. Therefore, the entry of cash is done directly in a separate book called
'Cash Book'. This reduces the importance of the journal.
For all these reasons, the use of the journal is limited. It is used only when the number
of transactions is less. When the number of transactions is high, the journal is divided into
several sub-journals called Special Purpose Subsidiary Books.
Journalising
It is worth mentioning here that the process of accounting in a journal is called Journalising
and Journalising is done according to certain rules. In the journal, one account is debited
and the other is credited.
Process or steps involved in Journalising
The process of journalising can be divided into the following five stages:
To Identify the Accounts to be affected
To Determine the Nature of Affects
To Apply the Rule of Journal
Entry in the journal
Casting and Carry Forward
Step 1:
Identify the Accounts to be Affected -- Each behavior affects two (or more) accounts.
Therefore, before accounting the transactions in the books, it is necessary to identify the two
accounts which are being affected by the transaction.
Step 2 :
To Determine the Nature of Affects - After identification of two (or more) accounts we
should find out the nature of the accounts i.e. whether these accounts are related to
personal account, real account or non-real account .

5. Step 3 :
To Apply the Rules of Journal - Based on the nature of the accounts, the accounts are
recorded in the journal by applying the prescribed rules to debit-credit the transactions.
Therefore, out of the concerned account, which account is to be named (Debit) and which
account is to be credited, it is decided. Therefore, the rules of journalising should be
remembered for accounting in the journal.
Step 4 :
Passing of Entry in the Journal - Accounting should be done in the Journal by applying
the rules of the Journal i.e. the accounts to be debited should be debited and the accounts to
be credited and after the entry Brief description (explanation or brief explanation) should be
written.
Step 5 :
Casting and Carry Forward - Finally in each page of the journal, the sums of both the
fields are added separately because the entries in the journal can continue for several
pages. The totals of both the debit and credit fields are the same. If the accounts in the
journal do not end on one page, the words 'Carry Forward or C/F or c/f' are written in the
description box on the left against the amounts 'added' and The same amounts are written
'Brought Forward' (Brought Forward or B / F or b / f) in the Debit and Credit fields, before the
journal is accounted for on the seco journal
Rules of Journalising
( Rules of Debit and Credit in journal )
Journal entries are made in the business books according to the type of accounts and the
nature of transactions. For this the following two ideologies are prevalent:
Must Read Rules of debit and Credit.
Rules for Journalising : Traditional Approach
The traditional method is based on the British System of Accounting:
1. For Personal Accounts:
(i) Debit the Receiver.
(ii) Credit the giver.

6. Example
(i) ₹ 500 was given to Samresh. Here Samresh's account is personal account. Samaresh is
about to get. So Samresh's account will be debited.
(ii) Shailesh got ₹ 500. Shailesh is the giver. Therefore, Shailesh's account will be credited.
2. For Real Accounts :
(i) Debit what comes in.
(ii) Credit what goes out.
Example
accounts form of the transaction is the real account and the other form the personal account
– bought the tractor from Ashok. In this transaction the tractor will be debited as the tractor
arrives. Will credit Ashok's account.
(b) Both sides of the transaction Actual Account - Cash purchased the goods. There are two
sides to this transaction - (i) cash i.e. cash, (ii) goods. Goods are incoming goods, so
'Goods' will be debited. It is a cashable item, so we will credit the cash.
(c) One side of the transaction is the real account, the other is the non-real account - salaries
paid. Salary is non-real account and cash is real account. It is a cash item, so we will credit
it and salary is an expense, so we will debit it.
(3). For Nominal Account :
(1). Debit all expenses and losses.
(2). Credit all gains and profits.
Example
(a) Salary paid. 'Salary' is an unrealised account. Here is the salary expense. Salary is
paid in cash. Cash is a real account and is an outgoing item, so salary will be debited and
cash credited.
(b) interest received. 'Interest' is non-real account and it is income, so here interest will be
credited and cash or cash account will be debited as cash is real account.
Golden Rules of Journal
Rules of Debit and Credit in Journal
Accounts Rule
Personal Account Debit the receiver
Credit the giver
Real Account Debit what come in

7. Credit what goes out
Nominal Account Debit all expenses and Losses
Credit all income and Gain
Points to be taken into consideration while making Journal entry
(1) In the first line, the account to be debited should be written in full and in front of it Account
or A / c and in front of it (in the description box itself) before the account page 'Dr. The word
' (name) should be written.
Eg :
Cash A / c .... Dr. But A / c should not be written at the end of the personal account and 's'
should be put in the name if it is written.
Eg :
( i ) Shailesh .... Dr.
( ii ) Shailesh's A / c .... Dr.
Shailesh's – Dr. Should not write this is wrong . A / c should be written after adding ' s.
(2) The name of the account to be credited is written in the second line, but this account
should be written leaving a little space at the end and the word To should be written before
writing the name of the account. Cr. The word is not written. Or
(3) After entering debit and credit, the details of the transaction should be written in the
description box itself, which is called explanation or narration. This description should be
enclosed in parentheses.
Etc.....
Division of Goods Account
In small business, work is done from only one 'Goods Account' for the purchase, sale,
purchase return, sales return etc., but in large business undertakings, the goods account is
divided into the following accounts:
( 1 ) Purchases Account
( 2 ) Sales Account
( 3 ) Purchases Returns Account or Returns Outward Account
( 4 ) Sales Returns Account ( Sales Returns Account or Returns Inward Account )
(5) Stock Account.
1. Purchase Account - The goods purchased are written in 'Purchase Account'. Therefore,
on the purchase of goods, instead of 'Goods Account', the Purchases Account is 'debited'.

8. 2. Sales Account- When goods are sold, then it is written in this account. Therefore, on the
sale of goods, the Sales Account is credited in lieu of the goods.
3. Purchase Return Account – The goods which are returned after purchase are written in
this account. The Purchases Returns Account is 'credited'.
4. Sales Return Account – The goods sold which are returned by the customers are written
in this account. Returns Inward or Sales Returns Account is 'debited' for sales return.
5. Stock Account - The goods which remain unsold at the end of the year or at the end of the
specified period are shown in 'Shopping Account'. It is 'debited'. The unsold goods at the
end of the year are called 'Closing Stock'. This next accounting | The opening stock in the
year is called. The closing stock is the debit balance of the account.
Journalise of the following transaction :
2017
Jan 1 . Sandeep started Business with Cash. ₹ 20,00
Jan 2. Purchased furniture for Cash. ₹ 1,000
Jan 5. Purchase goods for Cash. ₹ 3,000
Jan 7. Bought goods for Cash. ₹ 5,000
Jan 10. Cash Deposited into Bank. ₹ 10,000
Solution
Journal Entry
Date
2017
Particular
L.F
Amount
₹

9. Amount
₹
Jan 1.
Cash A/c Dr.
To Capital A/c
(Being Business started with Cash)
20,000
20,000
Jan 2.
Furniture A/c Dr.
To Cash A/c
(Being furniture bought)
1,000
1,000
Jan 5.
Purchase A/c Dr.
To Cash A/c
(Being goods purchase for Cash)
3,000

10. 3,000
Jan 7.
Purchase A/c Dr.
To Cash A/c
(Being goods purchased for Cash)
5,000
5,000
Jan 10.
Bank A/c Dr.
To Cash A/c
(Being Cash deposit into Bank)
Total
10,000
39,000
10,000

11. 39,000
Compound Entry / Composite Entry
When two or more transactions are of the same nature (i.e. relating to only one side of an
account) and occur on the same date, instead of writing them separately, they should be
recorded as one entry. can be written in This type of account is called composite or
compound account. The purpose of composite or compound accounts is to save time and
space and reduce the number of accounts. It is convenient to do mixed or combined
accounts in the following situations:
(i) when one account is debited and several accounts are credited,
(ii) one account is credited and several accounts are debited,
(iii) when several linked accounts are debited or credited.
Modern Approach : Accounting equation method/ America System
According to the modern view there are the following five bases of business:
1. Capital
3. Assets
2. Liabilities
4.Revenue / Gain and Profit
5. Expenses and Losses
Whenever there is a transaction or transaction, it changes and these changes are
recorded daily. Since the accounts are divided into five classes on the basis of their nature
according to the method of accounting equation or modern thought, it is evident that different
rules have been made for their names and credits. We should remember that there is an
'increase' in Capital, Liabilities, Assets, Expenses and Losses, and Income and Profit when a
business transaction or transaction takes place. Increase) or 'Decrease', the accounts
related to these are 'debited' or 'credited'.
Modern Rules for Debit and Credit
Natures of Account Debit Credit
Capital Account Debit the decrease in Capital Credit the increase in Capital
Liabilities Account Debit the decrease in Liabilities Credit the increase in Liabilities
Assets Account Debit the increase in Assets Credit the decrease in Assets

12. Expenses and Losses Account Debit the increase in Expenses and Losses Credit the
decrease in Expenses and Losses
Revenue / Income and Gains Account Debit the decrease in Income, Revenue, Gain
and Profits
Credit the increase in Income and Profit
Journalise the following transaction :
1. Rohit start Business with the Capital of ₹ 5,00,000
2. Opened a Bank Account in state Bank of India with an amount of ₹ 4,80,000
3. Bought Furniture for ₹ 60,000 and Cheque was issued on the same day for Payment
4. Brought plant and Machinery for the Business for ₹ 1,25,000and an advance of ₹
10,000 cash is paid to M/S Sumit Singh
5. Goods Purchase from M/S Mukesh traders for ₹ 55,000
6. Goods Costing ₹ 25,000 sold to Rajani Enter prises for ₹ 35,000 .
Solution
Journal Entry
Date
Particular
L.F
Amount ₹
Dr.
Amount ₹
Cr.
1
Cash A/c Dr.
To Capital A/c
(Being Business started with Cash)
5,00,000

13. 5,00,000
2
Bank A/c Dr.
To Cash A/c
(Being Bank Account open with SBI)
4,80,000
4,80,000
3
Furniture A/c Dr.
To Bank A/c
(Being furniture purchased and made payment
through Bank)
60,000
60,000
4
Plant and Machinery A/c Dr.
To Cash A/c
To Sumit singh A/c
(Being plant & machinery ....)

14. 1,25,000
10,000
1,25,000
5
Purchase A/c Dr.
To M/S Mukesh trades A/c
(Being the goods purchase on Credit)
55,000
55,000
6
Rajani Enterprises A/c Dr.
To Sales A/c
(Being goods sold on Credit)
35,000
35,000