A journal is a book in which transactions are recorded in the order in which they occur i.

e, in
chronological order.

A journal is called a book of prime entry because transactions are entered first in this book.

The process of recording a transaction in a journal is called Journalizing.

An entry made in the journal is called a Journal Entry

• Format of Journal Entry

• Eg.1.Transaction (Dr.N.P Srinivasan 21)

Transaction1:

1.1.2010 Rohan started business with Rs.50,000

Journal: In this transaction, the receiving aspect is cash(real a/c) received by business. Giving aspect is
that Rohan (personal a/c)is the giver.

Transaction:2 (Dr.N.P Srinivasan 21)

2.1.2010 purchased Furniture for Rs.10,000

Journal: Here furniture (real a/c) is received and cash (real a/c)is paid

Transaction:3 (Dr.N.P Srinivasan 21)

3.1.2010 purchased goods from Raj for Rs.20,000

Journal: here goods are received and Raj is the giver of goods on credit

Transaction:4 (Dr.N.P Srinivasan 21)

5.1.2010 Sold goods for cash Rs.25,000

Journal: Here Cash comes in and goods go out

Transaction:5 (Dr.N.P Srinivasan 21)

12.1.2010 Paid wages Rs.7000

Journal: Here wages being an Expense (Nominal a/c) and Cash(real a/c) is paid

Transaction:6

17.1.2010 Interest received Rs.1500

Journal: Here interest being an income (nominal a/c) and cash (real a/c) comes in

Trade Discount (allowed at the time of purchase, not recorded in books of account)

1.The firm sells goods for Rs. 5,000 to Mr.X at a trade discount of 20%.

Cash Discount (allowed to a debtor by a creditor at the time of making payment)

 1. Mr. A owed Rs.5,000 to the firm. He settled his account in full at a discount of 2%.

2. Suppose the firm owes Rs.10,000 to Mr.X, who allows a discount of 5% on full settlement of hi
account.

• Opening entries & Closing entries

Opening Entries (3/8/11)

In case of a continuing business we are required to pass an entry in the journal for bringing in the new
books. all assets and liabilities are appearing in the books on the last day of the P.Y. This entry is known
as opening entry.

Compound Entry

In this type of entry there may be more than one debits or more than one credits or both. In such cases
the entry is known as compound journal entry

A ledger is the principal book of accounts where similar transactions relating to a particular or a thing
are recorded.

Posting means the process of transferring the debit and credit items from the journal to their respective
accounts in ledger. it may be done daily, weekly, monthly according to the convenience and
requirements of the business

Trial Balance

It is a balance of all ledger accounts are extracted and are written up in a statement known as T.B

-To check arithmetical accuracy

Subsidiary Books or Special Journal

It refers to the journals meant for specific transactions of similar nature.

In a big business firms, to avoid inconvenience and delay in collection of information required, Journal
subdivided into many Subsidiary Books.

Special journals are vary according to the requirements of each enterprise.

Types of Special Journal

Name of Special Journal

A. Cash Journals

1.Simple (single column) cash book

2.Cash book with discount column(Double column)

3.Cash book with bank & discount column(Three column)

4.Petty Cash book

Specific Transactions to be Recorded

-Cash transactions

-cash &discount transactions

-cash,bank & discount trans.

-petty cash transactions

B. Goods Journals

1.)Purchase book 2).Sales book 3).Sales return (inward) book 4.)Purchase return (outward) book

C. Bills Journal

1. Bills Receivable Book 2. Bills Payable book

D. Journal Proper (general ledger)

-credit purchase of goods -credit sales of good -goods returned by customers -goods returned to
suppliers -Bills receivable drawn -Bills payable accepted -for other transactions.eg opening entries etc.

Cash Book

A cash book is a special journal which is used for recording all cash receipts and cash payments.

1. Single Column Cash Book

All cash receipts are recorded on the debit side and all cash payments on the credit side.

2. Two Column Cash Book

3. Three column cash book

Contra Entries

When a transaction affects both the sides of the cash book, such a transaction is entered on
both sides and is called as contra entry.
For example; when a cash is deposited into bank, it is entered in the debit side of the cash book
by writing “To Cash” and entering the amount in the bank column. The other entry is on the
credit side by writing “By Bank” and entering the amount in the cash column.

4. Petty Cash Book

All small payments to be made by cash are recorded in the petty cash book.

Imprest System of Petty Cash Book

It is a system where the petty cashier is given a lump sum in cash keeping in view the possible needs of
the business to meet its petty expenses for a stated period e.g. a week , or a month.

At the end of this period, the petty cashier submits the accounts for the amount spent by him during the
period and gets from the main cashier the exact amount of petty cash disbursed, thus bringing his cash
balance to the original starting figure. This system is known as imprest system.