Introduction:
- An accounting journal is a detailed account of all the financial transactions done by business.
- It is used for the future reconciling of accounts and the transfer of information to other official accounting records, such as the general ledger.
- A journal states that details of the transaction like, the date of a transaction, which accounts were affected, and the amounts.
How to record Journal Entries:
- The record of financial transaction as journal entry which is derived from the from invoices, purchase orders, receipts, cash register tapes and other data sources.
- Once you’ve analysed the transactions, the information is documented in a chronological order in the journal. Each Each transaction that is listed in the journal is known as a journal entry.
- The journal entries are usually recorded using the double entry method of bookkeeping. Each transaction is recorded in two columns, debit and credit.
Example
| Date | Particulars | Amount (Dr) | Amount(Cr) |
|---|---|---|---|
| 22-04-2022 | Office Expenses A/c Dr | 15,000 | |
| To Bank/Cash A/c | 15,000 |
Steps for completing Journal Entries:
Following are the three steps for completing journal entries of a business:
- Identifying the financial transactions which affect your business of the organization.
- Analyse how the transaction changed the the financial position, whether it has increased or decreased in the financial performance.
- Use debits and credits to record the changes in the general journal. Ideally, the debited accounts are listed before credited accounts and every journal entry is accompanied by the transaction title, date and description. In the double-entry bookkeeping method, whenever a transaction occurs, there are at least two accounts affected.
Types of Journal Entry:
Double-Entry Bookkeeping in Journals:
Double-entry bookkeeping is the most common form of accounting. It directly affects the way journals are kept and how journal entries are recorded. Every business transaction is made up of an exchange between two accounts.
Example
Company purchases 1,00,000 worth of inventory with Bank, the records two transactions in a journal entry
| Date | Particulars | Amount (Dr) | Amount (Cr) |
|---|---|---|---|
| 01-06-2022 | Purchases A/c Dr | 1,00,000 | |
| To Bank A/c | 1,00,000 |
Single-Entry Journal:
Single-entry bookkeeping is rarely used in accounting and business. It is the most basic form of accounting and is set up like a check book, in that there is only a single account used for each journal entry. It is a simple running total of cash inflows and cash outflows.
Example
Company purchases Rs 1,00,000 worth of inventory with cash, the single-entry system records a Rs 1,00,000 reduction in cash, with the total ending balance below it.
