8 Journalising

Introduction

• The French word ‘Jour’ means ‘day’.

• Thus, Journal is a daily record of business transactions.

• Journal is a book of ‘Primary Entry’ or ‘Original Entry’.

• Journal is a date wise record (chronological record) of all business transactions.

Journalizing – a step by step approach

Transaction 1


April 1, 2012 : Cash deposited in to ICICI Bank Rs.5656/-









Transaction 2


April 2nd , 2012 : Salary paid to Manager Ms. Geetha for the month of March 2011 Rs.50,000/-

Note

• In a transaction one account will give benefit, while the other receives the benefit.

• But here, three accounts are involved.

• In such a case, we can omit the personal account (Geetha’s Account) .

• The reason is that, when cash is involved in the transaction, we need not remember the party’s details. But if it is a credit transaction, we remember the party’s name.

• However we can do such omission of personal accounts only when more than two accounts are involved in the transaction in the same direction.

Examples of Journal Entries in simplified manner


Focus on Credit side account in Journal Entry

1/1/2013 - Purchased goods (for cash - from Mr. A) for Rs.10,000.

• Here purchase is based on Goods. So Debit is named as Purchase.

• Except main info. nothing is mentioned in the entry, then it is based on cash transaction only. 

• Bracket information's are extra. If the brackets are removed it gives the same meaning and JE is also same.

Focus on Credit side account in Journal Entry

1/1/2013 - Purchased good from Mr. A (for credit) Rs.10,000.

• Name of Creditor (Mr. A) mentioned in the entry with out the term cash, then it is called as credit transaction.

• Bracket info. same as earlier.

Focus on Fixed assets how write entry while purchasing

1/1/2013 - Purchased Furniture (for cash from Mr.A) for Rs.1,00,000.

• Here purchase is based on Asset(Furniture). So Debit is named as name of asset.
• Bracket info. same as earlier.

Focus on Debit side account in Journal Entry

1/1/2013 - Sale of good (for cash to Mr. A) for Rs.10,000.

Here purchase is based on Goods. So Debit is named as Purchase.

• If nothing is mentioned in the entry, then it is based on cash transaction only.
• Bracket info. same as earlier.

Focus on Debit side account in Journal Entry

1/1/2013 – Sale of good to Mr. A (for credit) Rs.10,000.

• Name of creditor (Mr. A) mentioned in the entry with out the term cash, then it is called as credit transaction.
• Bracket info. same as earlier.

Focus on Fixed assets how write entry while selling

1/1/2013 - Sale of Computer (for cash to Mr. A) for Rs.10,000.

• Here sales is based on Asset(Computer). So Credit is named as name of asset.
• Bracket info. same as earlier.

Focus on Discount received and how write compound entry

Purchased good for Rs.9,000 with discount (received) of Rs.1,000 or 10%

• Discount received will come at when we pay cash.

• More than two account in one journal entry is called as compound entry.
• Bracket info. same as earlier.

Focus on Discount allowed and how write compound entry

Sold good for Rs.18,000 with discount (allowed) of Rs.2,000 or 10%

 

• Discount allowed will come at when we receive cash. 

• More than two account in one journal entry is called as compound entry. 
• Bracket info. same as earlier.

Tit bits

• Discount allowed or received will arise in JE only when we do those transaction at listed price. Its is also know as cash discount. 

• Trade discount means discount happening on bulk purchase or in the total amount. 

• Trade discount allowed or received happens that will not reflect in JE. Amt should be mentioned in JE after deducting that discount.

Focus on Withdraw entry and contra concept

Withdraw cash (from bank for office use) of Rs.10,000.

• Cash coming inn so cash is debited and bank is credited. 

• (It’s a general entry for withdraw) 
• Bracket info. same as earlier.

Focus on Withdraw entry of owners purpose

Withdraw cash from bank for own purpose or private use or owners use or owners expenses of Rs.10,000.

• Cash withdrawn for owners any purpose we have to mention it as drawings a/c in Debit side. 

• If that cash is withdrawn from existing cash in hand, instead of Bank a/c use Cash a/c on credit. 
• Bracket info. same as earlier.

Focus on cancellation of already written entry

Cheque received from a customer has a discount allowed Rs. 1000 and now that cheque is dishonored.