AFA

CA EKTA JAIN

Exercise
• Purchased a Building for Rs.20,000/-.
• Paid Cash Rs.1,000/- to Satheesh.

• Paid Salary Rs.1000/-.
• Received Commission Rs.250/-.

• Sold goods for Cash Rs.3500/-.

Date Particulars LF Debit Amount Credit Amount in of or of . Journalising is an act of recording entering transactions in a Journal in the order date.Journal Journal is the prime or original book of entry which all transactions are recorded in the form entries.

000 Credit Amount .000/Date 1981 Jan 1 Particulars Cash a/c Dr. 15.Journal Entry Jan 1. To Prakash’s Capital a/c (Being cash invetsed to business) LF Debit Amount 15. 1981 Prakash Started a business Rs.000 15.

so it is called book of original entry or prime entry or primary entry or preliminary entry.Definition and Explanation of Journal:  The word journal has been derived from the French word "Jour" Jour means day.  . Transactions are recorded daily in journal and hence it has named so. journal means daily. This facilitates writing of ledger. This book is know as journal. Since transactions are first of all recorded in journal. or first entry. A soon as a transaction takes place its debit and credit aspects are analysed and first of all recorded chronologically (in the order of their occurrence) in a book together with its short description. So. Thus we see that the most important function of journal is to show the relationship between the two accounts connected with a transaction.

"A journal entry is not complete without narration". The subject matter of the transaction can be ascertained through narration.         Entry: Recording a transaction in the appropriate place of the concerned book of account is called entry. it can be easily detected from narration. Ledger Entry: Recording a transaction from journal to the concerned account in the ledger is called ledger entry. Characteristics: . if there be any mistake in determining debit or credit aspect of a transaction. Besides this. Narration: A short explanation of each transaction is written under each entry which is called narration. It is also known as ledger posting. Entry may be of the following two types: Journal Entry: Recording a transaction in a journal is called journal entry or journalising.

Transactions are recorded chronologically. So. So. The amount is written in the last two columns .        Characteristics: Journal has the following features: Journal is the first successful step of the double entry system. are clearly written into consecutive lines. journal is called the book of original entry. A transaction is recorded on the same day it takes place. For each transaction the names of the two concerned accounts indicating which is debited and which is credited. A transaction is recorded first of all in the journal. This makes ledger posting easy.debit amount in debit column and credit amount in credit column. That is why journal is called "assistant to ledger" or "subsidiary book". journal is called chronological book. So. . journal is also called a day book. Narration is written below each entry.

it can be easily ascertained when and why a transaction has taken place. it is not necessary to repeat them in ledger. So there is no possibility of any transaction being omitted from the books of account.        Advantages of Journal: The following are the advantages of journal: Each transaction is recorded as soon as it takes place. For each and every transaction which of the two concerned accounts will be debited and which account credited. . there is no possibility of committing any mistake in writing the ledger. Since all the details of transactions are recorded in journal. Journal shows the complete story of a transaction in one entry. Any mistake in ledger can be easily. So. Since the transactions are kept recorded in journal chronologically with narration. are clearly written in journal. As a result ledger is kept tidy and brief.

. journal proper) the above form is used. While the name of account debited always placed close the the left hand margin line.F): The page numbers of the ledger where the two concerned accounts have been posted. It is not fully correct. are written in this column against the name of each account. It is not necessary to place the word "Cr. Below the names of the two accounts. This arrangement will show clearly which account is debited and which credited. So." after the name of the credited account. Ledger Folio (L. This also shows that credit amount is placed on the right side of debit amount. it follows that the other account must be Cr. the year and in the second line. when a transaction is posted to ledger.in the first line. Amount: The debit amount is written in the first "amount" column against the name of account debited and the credit amount in the second "amount" column against the name of account credited. This will help locating easily the two concerned accounts from the ledger. But modern practice is not to use this word. Out of them only in one subdivision (i. first the name of the month and thereafter the actual date. Thus if a folio number stands written in this column. According to tradition narration is written starting with a word "being". the concerned folio number of the ledger is written in this column. in the third line narration is written usually within a bracket. Because in large concerns journal is divided into eight subdivisions for the sake of convenience. The world "Dr" is used at the end of the name of account debited. it will mean that the transaction has already been posted to ledger.e. the name of account credited is commenced a short distance away from the margin line. here it has not been used too.e. i.          The various columns of journal are explained in details below: Date: The date of transaction is written in this column in two lines . In most of countries even in Great Britain using the word "To" at the beginning of the name of account credited has become out-dated. Particulars: In this column the names of the two connected accounts are written in two consecutive lines in the first line the name of account debited and in the second line the name of account credited. On the other hand. because if one account is Dr. Note: Although the above form of journal is used in examination answer book. But it is optional for the students.

... The entry in which more than one account is debited or more than one account is credited.05 we bought furniture from Salman Bros..... Example of Simple Entry: For example.       Simple Entry and Compound Entry: Every transaction effects two accounts ..F Amount Amount 10... on 10...05 Furniture A/C ... Thus in recording a transaction in a journal one account is debited and another account is credited. is known as compound entry... Three or more accounts are connected with a compound entry..04.Dr.. 10000 To Salman Bros A/C 10000 (Being furniture purchased on credit) ...04..... The entry is: Date Particulars L.... This type of entry is called simple entry..one is debited and another is account is credited.

.. 1000 Rent A/C …………………………...Dr.05.......05 Salary A/C ..05 we paid $ 1.. For this the entry will be:  Date Particulars L.Dr...Example Compound Entry: For example on 16.....05.......000 on account o salaries and $ 600 on account of rent.. 600 To Cash A/C 1600 (Being salaries and rent)   .F Amount Amount  16....

900 15 Sold goods on credit to Dilawar Bros. $450 28 Received from Dilawar Bros. $1.800 X withdrew from business $900 Charged depreciation on $240 Borrowed from Shafiq $1.000 07 Purchased goods on credit from Sarwar & Co. $1. 3 X commenced business with a capital of $15. $600.250 20 Paid salaries $960 25 Received commission $75 26 Returned goods to Sarwar & Co.000 05 Purchased good $6.500 Paid to Sarwar & Co.              Journalise the following transactions: 2005 Feb. $2. $3.400 11 Sold goods $3.500 . 27 Returned goods to Dilawar Bros.000 10 Purchased furniture $2.

............Dr...................000 10 Furniture A/C... Commission A/C (Being commission received) 75 75 ........000 6........................000 7 Purchases A/C........................250 2..000 15. Capital (Being capital brought in) 15......400 11 Cash A/C...Dr......250 20 Salaries A/C................. Cash A/C (Being furniture purchased for cash) 2...........  Date Particular L........... A/C (Being goods purchased form Sarwar & Co on credit) 3..............F Amount Amount 2005 Feb...... A/C....................000 3.......................Dr...........Dr.......Dr.................900 15 Dilawar Bros.......000 5 Purchases A/C........................400 2..............................................Dr... Sales A/C (Being goods sold on credit to Dilawar) 2..........................900 3................ Sarwar & Co......... Cash A/C (Being salaries paid) 960 960 25 Cash A/C....... Sales A/C (Being goods sold for cash) 3.......................Dr..Dr. Cash A/C (Being goods purchased for cash) 6...... 3 Cash A/C .......

............................................ A/C (Being amount received from Dilawar Bros..........500 1...............) 1.......800 " Drawings A/C.........Dr............. Dilawar Bros......................... Purchases A/C Return (Being goods returned to Sarwar & co......) 1...........Dr. 26 Sarwar & Co......... Cash A/C (Being amount paid to Sarwar & Co.) 600 600 27 Sales Returns A/C............. Cash A/C (Being amount paid to Sarwar & Co................Dr.................500 ..... A/C..500 1.....Dr...... A/C (Being goods returned by Dilawar Bros.......800 1.......................Dr..Dr..... Shafiq A/C (Being amount borrowed from Shafiq) 1............... A/C.........500 " Sarwar & Co.) 900 900 " Depreciation A/C....................... Dilawar Bros............. Furniture A/C (Being depreciation charged on furniture) 240 240 " Cash A/C.......) 450 450 28 Cash A/C..................Dr.............

000  Rs. Cash Purchase of goods iv. Cash sale of goods ii.000  Rs. 2.00.00. Outstanding wages  SOLUTION Rs.00. 3. Collection from customers viii.00.Journalise following transactions : i. 3.000  Rs. 20. 4. 8.000  .000  Rs. Credit purchase of goods v.000  Rs.00.00.000  Rs.000  Rs. Office supplies purchased on credit vi.000  Rs. 50. Payment to creditors for goods vii.00. 2. 9. Credit sale of goods iii. Payment of wages ix.

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