Chapter 5: Books of Original Entry – Journal

Books of accounts used under the double entry system of accounting are:

a) Journal b) Ledger

Journal

The word ‘Journal’ has been derived from the French word ‘jour’ which means ‘day’.

Journal, therefore, means a daily record of monetary transactions.

A Journal is referred as a Book of Original Entry or Book of Prime Entry as it is the first place
where a transaction is recorded in a chronological (day-to-day) order. It contains record of all
monetary transactions in order of the date as and when the transactions take place.

Features of a Journal:

 A journal contains day to day transactions in a chronological order (following the order in
which they occur).
 It is a book of original entry in which transactions are first written and then after posted
into the ledger.
 It records both the debit and credit aspects of a transaction by using the double entry
system of book keeping.
 Each entry in the journal is followed by a brief explanation of the transaction which is
called ‘Narration’. This is an important part of the entry. Each narration should start with
the word ‘being’.

Advantages of Journal:

Although it is not necessary to maintain a journal and the transactions can be recorded directly in
the ledger accounts, a journal still is used for the following reasons:

 As transactions in journal are entered as and when they take place, the possibility of
omission of a transaction in the books of accounts is minimized.
 As transactions in journal are recorded in chronological order, it is very easy to locate a
particular transaction when required.
 Each entry in the journal carries narration which gives a brief explanation of the
transaction. Hence, postings in the ledger can be made without explanation.
 Once the transaction is recorded in journal, posting in the ledger can be made as and
when convenient.
 Format of a Journal

In the books of ………..

Journal Entries

Date Particulars Ledger Amount (Dr.) Amount (Cr.)

folio ₹ ₹
(1) (2) (3) (4) (5)

2022

17th June. Furniture A/c. Dr. 20000

To Cash A/c. 20000

(being furniture purchased for cash.)

(1) Date:
 In this column, the date of the transaction is written. The sequence of the dates
and months should be strictly maintained.

(2) Particulars:
 In this column, the names of the accounts involved are written. Each transaction
affects two accounts.
 The name of the account to be debited is written first with the word ‘Dr’ towards
the end of the column.
 In the next line, after leaving a little space the name of the account to be credited
is written beginning with the word ‘To’.
 Then in the next line a brief explanation of the entry together with necessary
details is given. This is called ‘narration’. The narration should be short, complete
and clear.
 A line should be drawn below the narration to separate one journal entry from the
other.

(3) Ledger Folio or L/f:

 All entries from the Journal are later posted into the ledger accounts. In this
column, the page number or folio number of the ledger account to which the
transaction is posted from Journal is written.

(4) Amount (Dr.):

 In this column, the amount to be debited is written.
(5) Amount (Cr.):
 In this column, the amount to be credited is written.

Simple and Compound Entry

1. Simple Entry
Simple entry is an entry in which only two accounts are affected i.e. one account is
debited and the other account is credited with an equal amount.

For example:
Purchased machinery for cash ₹ 70000.

Machinery A/c Dr. 70000

To Cash A/c 70000

(being machinery purchased for cash.)

2. Compound Entry
Compound entry is an entry in which two or more accounts are debited and two or more
accounts are credited or vice-versa.

For example:
A business paid ₹ 50000 for salaries and ₹ 20000 for rent on 31st August, 2020.

Salaries A/c Dr. 50000

Rent A/c Dr. 20000

To Cash A/c 70000

(being expenses paid by the business.)