Book of original Journal

According to double entry system of bookkeeping, transactions are recorded in the books of accounts in two stages:

First stage: Journal

Second stage: Ledger

The flow of accounting information from the time a transaction takes place to its recording in the ledger may be illustrated as follows:

Business Transaction

↓

Business Document Prepared

↓

Entry Recorded in Journal

↓

Entry Posted to Ledger

The initial record of each transaction is evidenced by a business document such as invoice, cash, voucher

Narration:

A short explanation of each transaction is written under each entry which is called narration. The subject matter of the transaction can be ascertained through narration. Besides this, if there be any mistake in determining debit or credit aspect of a transaction, it can be easily detected from narration. “A journal entry is not complete without narration”.

Characteristics:

Journal has the following features:

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

Advantages of Journal:

The following are the advantages of journal:

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

Format of Journal: