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UNIT -2 PRIMARY BOOKS(JOURNAL) 2.1 Meaning and Definition 2.2Format of Journal 2.3Rules of Debit and Credit 2.

4Posting Journal entries 2.5Practical exercises

1.1 Meaning and definition : Journal is derived from the French word Jour which means a day. So journal means a daily record of business transactions. It is a book of original or prime entry because every transaction is the first recorded in it before being posted into the ledger. The Process of recording the transaction in the journal is called journalizing.
JOURNAL Date Particulars L.F Amount(Dr.)Amount(Cr.)

Journal is kept on a columnar basis. It has the following five columns. 1. Column 1(date): In this column the date of the transaction is recorded. The year is written at the top of the column in each page . 2. Column2(Particulars): In this column the details of the accounts that have to be debited and credited are recorded. First the account to be debited is recorded at the left of this column. The abbreviation Dr. is written towards the end of the column. In the next line after leaving little space the name of the account to be credited is entered with a prefix To . Narration should be as informative and short as possible. 3. Column3(Ledger folio): This column is meant to record the page number on which the various accounts are kept in the ledger. 4. Column4(Amount): This column is used for entering the amount to be debited to the account named. 5. Column5(Amount): This column is used for entering the amount to be credited to the account named.

Rules of Debit and Credit : Classification of Account : Basically the accounts are classified in three categories 1. Personal Account 2. Real Account 3. Nominal Account

Classification of Account

Personal A/c

Real A/c

Nominal A/c

Natural

Representative

Tangible

Intangible

Expenses and losses

Income & Gains

Personal Account : Those accounts , which are related to persons, firms, companies with whom the business deals is called personal account.

The Person who receives something is called debit and the person who gives something is called credit .

DEBIT THE RECEIVER

CREDIT THE GIVER

Real Account : These are the account of assets. Real Accounts may be of following types:

1. Tangible Account: This account represents such things, which can be touched and felt. I.e. land, Building, stock, cash etc.

2. Intangible Account: This account represents such things which cannot be touched and felt i.e. goodwill, trademark, etc.If an asset comes to business, it is given debited and if an asset goes out from the business it is given credit.

DEBIT WHAT COMES IN

CREDIT WHAT GOES OUT

Nominal Account: Accounts which relate to income, expenses, gains and losses are called nominal accounts. Interest received , wages salary, rent and postage etc. All the expenses and losses are debited and all income and gains are credited.

DEBIT ALL EXPENSES AND LOSSES

CREDIT ALL INCOMES AND GAINS

Some important points for journal Entries :

1. The date is entered on the left hand side. 2. All transactions must be recorded in order of dates. 3. The account representing anything coming into business is debited. 4. The account representing the receiver of anything is debited. 5. The account representing anything going out of business is credited. 6. The account representing the giver of anything is credited.

7. Narration of every journal entry is necessary.

Compound journal entry : Compound entry is that where more than one accounts are debited or credited in the single entry.

If the amount is spent on the same day for salaries, wages, advertisement, repair etc. , a combined entry can be passed by debiting all the expenses account with their respective amount and crediting cash account with total amount spent.

Salary a/c

Dr. 500

Wages a/c

Dr. 400

Advertisement a/c Dr. 300

Repair a/c

Dr. 200

To cash a/c

1400

(___________________)

Operating / opening entry : When a business starts his books for the new financial year, it has to pass opening

entry , . it is to debit the respective accounts with the opening balance of various assets and to credit the relevant accounts with the opening amounts due to creditors and to credit capital account with the amount of capital in the beginning.

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