Books of Accounts

There are two types of books of accounts. 1 Book of original entry: They include Journal and Sub-Division of Journal. 2 Principal Book- General Ledger

Books of Accounts at a glance
Book of Original Entry and book of Final Entry Or Principal Book. . ACCOUNTING CYCLE ➢ Meaning of an accounting cycle: ➢ An accounting cycle is a complete sequence beginning with recording of transactions and ending with preparation of financial accounts. There are six steps, ➢ Journalizing Ledger Posting Balancing ➢ Trial Balance Income Statement Position statement or balance sheet

Business transactions are recorded in the books of original entry on the basis of source document. Journal is derived from the French word, “jour” which means a day. Journal therefore, means a ‘daily record’. Journal can, thus be defined as “a book wherein the account to be debited and that to be credited are specified together with explanation for the entry.” This explanation is called ‘narration’. The record of any particular transaction in the journal is called journal entry and the process of recording is called journalizing. A journal is a book of “Original entry” or “Primary entry”. It is a book of daily record. First of all business transactions are recorded in the “Journal” and subsequently they are posted in the ledger. In modern times, a journal is divided into various books known as “subsidiary Books” Thus Journal is a book of original entry. . Transaction is first recorded in journal, in the order of their occurrence. After that posting of the entry is made from journal to ledger. Transactions are initially recorded in chronological order in a journal before being transferred to the accounts. Features of a Journal:


It is a book of prime, original or first entry. It records transactions in a systematic manner. It analyses the transaction into their debits and credits.

Importance of a Journal
(I) (II) (III)

Complete record of transaction: As both debit and credit aspects of each transaction are entered in the Journal it provides complete information about the transaction that have taken place. Quick reference: Business transactions are recorded in the journal in the chronological order it facilitates quick and easy reference to any transaction. Proper understanding: Narration of the transaction is given below each entry. It helps to have proper understanding of the transaction recorded.

(IV) (V) (VI)

Avoids the necessity of immediate posting: There is no urgency to post them to the ledger. Ledger posting can be done at the convenience of the ledger clerk. Minimum errors: As debit and credit aspects of the transactions are recorded, arithmetical accuracy can be ensured. Evidence in the court: journal is book of original entry. Hence, courts consider journal as an evidence of business transactions.

Utility of a Journal:
(i) (ii) (iii)
(iv) (v) (vi)


It contains a record of various transactions that take place every day. It provides a complete record of transactions as both the aspects of transactions are recorded at one place. Since narration of a transaction is written in the journal, there is no need to given an explanation in the ledger. It facilitates cross checking of transactions. Since transactions are recorded in the Journal, there is no need to post the transaction to the ledger immediately. From the legal point of view also a Journal becomes necessary. Courts recognize the journal as evidence in approving or disapproving claims. It helps to locate and prevent errors.

SUB-DIVISION OF JOURNAL ➢ Sub-division of journal. Journal is sub divided as follows. ➢ purchase book, sales book, ➢ Purchase return book, ➢ sales return book, cash-book, ➢ Bills receivable book. Bills payable book ➢ journal proper or General journal : It is for recording (1) Opening entries (2) Closing entries (3) Adjustment entries (4) Rectification entries (5)Transfer entries (6) Credit purchase and (7) sale of assets and property. FORM OF JOURNAL Every company has a General Journal which contains 1. Spaces for dates, 2. Particulars-Account titles and explanations, 3. Ledger Folio .or References, and 4. two money columns for Debit & Credit. JOURNAL Date Particulars L/F 2004 Jan 1 Cash A/c………………..Dr To Capital (Being business commenced with cash)

Debit 10000



Combined Entry: In combined Entry two or more accounts are debited or credited by equating total debit amount with total credit amount. Example of Combined entry : Pradeep started business with cash Rs. 15,000, Goods Rs. 3000 and Machinery Rs. 2000 Date 2004 Jan 1 Particulars Cash A/c………………..Dr Goods Account…………Dr Machinery Account……..Dr To Capital Account (Being business commenced with cash ,Goods and Machinery) L/F Debit 15000 3000 2000 20000 Credit

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