Journal proper15th April 2020
Journal Proper is mainly used for original records of a transaction which due to their importance or rareness of occurrence do not find a place in any of the subsidiary books of accounting. It is also known as a Miscellaneous Journal and it looks much like any other journal.
Journal proper [or General Journal] is a simple book of chronological record of business transactions. The use of this book is very much restricted in modern accounting system.
Only those transactions, which cannot be conveniently recorded in any of the other books of original entry i.e., subsidiary books or which are not sufficiently numerous to necessitate a special book being devised for them, are recorded in this book.
Sample Format of a Journal Proper
Types of entries that are entered in the journal proper:
- Opening Entries
- Closing Entries
- Rectification Entries
- Transfer Entries
- Adjustment Entries
- Miscellaneous Entries
As the name suggests, opening entries are recorded at the beginning of a financial period. The balances mentioned in the balance sheet of the previous year are brought forward by recording the liabilities, capital, and assets from the previous year.
The rule to be applied to make an opening entry is
|To Liabilities A/C||Credit|
|To Capital A/C||Credit|
Sample Format of an Opening Entry in a Journal Proper
|To Sundry Creditors A/C||24,000|
|To Capital A/C||26,000|
All amounts mentioned in the sample format are the closing balances of the previous year balance sheet.
Almost the opposite of the opening entries, they are recorded at the end of a financial period; closing entries are related to nominal accounts. These accounts are closed by transferring their balances to trading and profit and loss accounts. A record is not included in the ledger without a journal entry, so closing entries are recorded with the help of a journal proper and then recorded in the ledger.
|Profit & Loss A/C||Debit|
|To Salaries A/C||Credit|
At the end of a period Salary account is closed by transferring its balance to profit and loss account.
In the world of accounting erasing or removing a journal entry once recorded is a strict NO!. Mistakes should only be corrected by passing another entry in the journal.
A purchase for 10,000 was omitted by mistake, it belonged to Unreal Pvt Ltd.
Rectification entry, in this case, will be
|To Unreal Pvt Ltd.||10,000|
In simple terms, the transfer entry is used to transfer an item from one account into another. All such transfers are made with the help of journal entries.
Let us take an example where a general reserve is created for a business by transferring 5,00,000 from the profits.
|mm/dd||Profit & Loss A/C||5,00,000|
|To General Reserve||5,00,000|
The amount of expenses or incomes may need to be adjusted for advances paid or received at the end of a financial period, these types of adjustments are made with the help of a journal entry. They are very common at the end of an accounting period. Adjustment entries are mainly used for accrual or depreciation related entries.
There are outstanding wages of 50,000 which need to be accounted for
|To Outstanding Wages A/C||50,000|
Miscellaneous or Other Entries
In addition to the above entries, there are other entries that can be recorded in a journal proper.
- Discount allowed and received
- Purchase or sale of items on credit other than goods
- Effects of accidents such as losses due to fire
- Consignment and joint venture transactions
- Endorsement and dishonor of bills of exchange
- Transaction for goods distributed as samples
- Sale of obsolete assets