Journal is a book of accounts in which all day to day business transactions are recorded in a chronological order - in the order of occurrence. Transactions when recorded in a journal are known as ‘entries’. It is the book in which transactions are recorded for the first time. Journal is also known as ‘Book of Original Record’ or ‘Book of Primary Entry’.

Business transactions of financial nature are classified into various categories of accounts:

  1. Assets
  2. Liabilities
  3. Capital
  4. Revenue
  5. Expenses

All business transactions belonging to any of these categories can be recorded in a journal. The process of recording transactions in the journal is known as Journalising.

Small business units generally maintain one journal in which all the business transactions are recorded. But in case of big business houses as the transactions are large in number, the journal is divided into various books which are called special journals. Different transactions are recorded in these books depending upon the nature of transactions. For example, all credit sales of goods are recorded in Sales Book, all credit purchases of goods are recorded in Purchase Book and Cash transactions in Cash Book and so on.

Purpose of Preparing Journal

  1. It provides the date wise record of all the business transactions.
  2. It gives complete information about a transaction at one place and also provides an explanation of the transaction.
  3. It helps in the understanding of the principles of Double Entry System as entries in Journal are classified into Debit and Credit.
  4. It is easier to post the entries of this book into ledger without any difficulty.

Format of Journal

Journal is a columnar book. Each column is given a name which is written on its top.

Date: In this column, you record the date of the transaction with its month and accounting year. Year can be written only once. Month can also be written only once for all the transactions belong to a particular month.

Particulars: The accounts affected by a transaction i.e. the accounts which have to be debited and credited are recorded in this column. In the first line write the name of the account to be debited against which Dr is written. In the second line after leaving some space, name of the account which has to be credited is written. In the next line narration is written. Narration is the explanation of a particular journal entry. It should be short, complete and clear. A line is drawn before making the next entry so as to separate the two.

Ledger Folio (L.F.): The transaction in the journal is posted in the ledger. Page number of ledger on which the two accounts are opened is written in the column of ledger folio.

Dr. Amount: In this column, the amount to be debited is written against the same line in which the debited account is written.

Cr. Amount: In this column, the amount to be credited is written against the same line in which the credited account is written.

At the end of each page the two columns are totaled and are carried forward to the next page with words 'carried forward' (c/f). This total is written in the next page on its top with words 'brought forward' (b/f).