Professional Documents
Culture Documents
Journal entry:
Debit Credit
Debit Credit
Supplies A/c 50
To Cash a/c 50
• Journalising ≡ Recording
• Journal
A Journal is a book in which an accounting transaction is
written in accounting terms. This is the first (accounting)
record for a transaction.
» Meaning
1. A daily written record of (usually personal) experiences
and observations
2. A book in which transactions are recorded as they occur
• Journal Entry
A recording in the Journal relevant to an accounting
transaction is what is called a Journal Entry.
» Prime (Meaning)
1. First in rank or degree
2. Important
• No Journal » No Accounting
The importance of the Journal can be assessed from the fact that
"There would be no accounting without a journal".
» Recording
The process of writing a transaction in the journal is called
recording.
• Heading
The heading gives the following information:
• Date
Date of recording the transaction.
The line starting with "To" is indented (i.e. the first letter of the
name of the Account that is Debited and the letter "T" do not fall
in the same vertical line). "T" always lies to the right of the first
letter of the account head that is debited.
We do not find the use of the letters "Cr" on this line or anywhere
in the entry.
• Narration
[ Being the amount ....]
The sentence that appears below the lines containing the Account
Heads that are Debited and Credited is called the narration for the
journal entry.
The narration is a brief explanation for the entry. It includes
certain details in relation to the transaction. The purpose of the
narration is to enable anyone who reads it to get a preliminary
idea of why the entry is being recorded. If the information in the
narration does not provide the required detail, one can always
refer the Voucher/Receipt (which is the actual proof for the
transaction journalised through that entry) using the relevant
voucher/receipt number recorded relating to that entry.
"Ledger Folio" is the page number in the ledger record, where the
information shown in the journal entry has been carried to. This
information is distinct for each account head.
The Ledger Folio information will enable tracking of flow of
information from the journal to the ledger.
• Debit amount
This is the amount relating to the element (account head) that is
being debited. This generally is the transaction value. The amount
is written in the same line as Debit entry i.e. in vertical alignment
with it. The currency related to the amounts is written in the
column header itself.
• Credit amount
This is the amount relating to the element (account head) that is
being credited. This generally is the transaction value. The
amount is written in the same line as Credit entry i.e. in vertical
alignment with it. The currency related to the amounts is written
in the column header itself.
Purchases Book
Purchases Book is also known as 'Invoice Journal' or 'Bought
Journal' or Purchases Journal, issued for recording credit
purchases of goods meant for resale. Cash purchases will not be
entered in Purchases Book (to be entered in cash book) and
credit purchases of goods not meant for resale viz., assets shall
be entered in journal proper and not in the purchases book.
Form of the Purchases Book
Usual Purchase book should have columns for date, invoice
number, particulars, ledger folio, details and amount.
Invoice
When we purchase goods on credit we receive a statement from
the supplier giving the particulars of the goods supplied by him.
This statement is called an invoice. The invoice states the
quantity, price and value of goods supplied. It also states the
discounts allowable (trade and cash) and the conditions under
which payment is expected.
Trade Discount
It is an allowance made by the supplier to the retailers off the
catalogue or invoice or list price. (The object of allowing 'trade
discount' is to enable the retailer to sell the goods to the
consumer at list price and still leaving margin for meeting
business expenses and his profit.) Trade discount is offered
without reference to the time factor within which supplier expects
to receive the payment. Entries in the books of both supplier as
well as retailer are made on the basis of net amount i.e. invoice
price less trade discount.
It may be distinguished from cash discount as follows:
Trade discount
1. It is a concession "off the catalogue price" and allowed on
purchases.
2. It is not recorded in ledger accounts.
3. It is deducted from the invoice.
Cash discount
1. It is a concession allowed on payment being made "within
certain period"
2. Ledger account is maintained for discount allowed and availed.
3. It is not deducted from the invoice.
Sales Book
In this book are recorded all goods sold on credit. The ruling is
similar to that of purchases book. If there are cash sales they are
recorded in cash book and sale of assets (distinguish between
goods and assets) are recorded in the journal proper. The entries
in the sales book are made from the copies of the invoices which
have been sent to the customers along with the .goods. Such
copies of the invoices may be termed as 'Outward invoice' Each
such outward invoice should be numbered consecutively and the
reference be given in the sales book along with the entry.
.Posting. The net amounts of the invoices are posted to the
ledger as follows: Debit the personal accounts of the customers
with the value of sales to them. Credit Sales account with the
periodical total.