CHAPTER 9:BOOKS OF ORIGINAL ENTRY - JOURNAL, ASSIGNMENTS # 5 - 8 ANSWERS TO ASSIGNMENTS # 1 - 4

LEARNING OBJECTIVES:

AFTER GOING THROUGH THIS LESSON, YOU SHALL BE ABLE TO UNDERSTAND:

MEANING OF JOURNAL
FORMAT OF THE JOURNAL
TERMINOLOGY FOR JOURNAL
FEATURES OF JOURNAL
STEPS IN JOURNALISING
RECORDING OF TRANSACTIONS IN JOURNAL
ADVANTAGES OF JOURNAL
LIMITATIONS OF JOURNAL



Meaning of Journal

Journal is derived from the French word Jour, which means daily records.

All the business transactions are first recorded in the Journal, therefore, it is also known as the “Book of Original Entry or Book of Prime Entry”.

In this book, we record the business transactions in a chronological order that means in the order (or date) of their occurrence.

In the Journal, business transactions are recorded in the form of an entry (having effects on two sides).

This entry is popularly referred to as Journal Entry.

FORMAT OF THE JOURNAL LINK


Date− Date of transaction (in order of occurrence)

Particulars− Details of business transactions like, name of the parties involved and the name of related accounts, are recorded

L.F.− Page number of ledger book on which relevant account appears

Debit Amount− Amount against the account to be debited

Credit Amount− Amount against the account to be credited



Terminology for Journal

1) Book of Original Entry:

Journal is the first book where the transactions are recorded directly from the source documents of a transaction like vouchers, etc. for the very first time. Hence, the name book of original entry.

2) Entry:

 It is a record of the financial transaction in the Journal hence the name Journal entry.

3) Journalising:

 The process of recording the transactions in the Journal is called Journalising.

4) Posting:

The entries from the Journal are recorded in a book called ledger which classifies the items of a transaction into their respective accounts. This process of transferring from the Journal to the ledger accounts is called Posting.


Features of Journal

1) Journal is the book of original entry as transactions are recorded first in Journal as and when they take place.

2) This is also referred to as book of prime entry as the transactions recorded in Journal are subsequently transferred to Ledger accounts.

3) The transactions are recorded in chronological order i.e. in date-wise order.

4) Recording of transactions is done on the basis of Double Entry System of Book-Keeping i.e. it records both the debit and credit aspects of a transaction.

5) Journal shows complete details of a transaction in one entry with a brief explanation called ‘Narration’.

6) The recording of transactions is done in the form of Journal entries and this method is called ‘Journalising’.



Steps of Journalising

CLICK HERE FOR: STEPS OF JOURNALISING LINK

TASK # 2

WATCH THE GIVEN VIDEO NUMBER ONE  FOR EXPLANATION AND CLARITY OF STEPS TO JOURNALISING

CLICK HERE FOR VIDEO NUMBER ONE FOR STEPS TO JOURNALISING LINK

Following are the steps involved in recording a business transaction.

(1) Identify the accounts involved in the transaction.

(2) Analyse the nature of accounts identified in Step 1.

(3) Identify which rule of accounting is applicable.

(4) With the help of above rule, identify which account is to be debited and which to be credited.

(5) Ascertain the amount by which the accounts are to be debited or credited.

(6) Under the date column of Journal, record the date of transaction.

(7) In the Particulars Column, on the extreme left hand corner write the 'Name of Account' that is to be debited. In the same line, write abbreviation Dr. (debit) on the extreme right hand corner under the same head. In the debit amount column, we write the amount to be debited against the Name of Account.

(8) Again in the Particulars Column, in the next line little indented towards right we write the 'Name of Account' to be credited, preceded by word “To”. In the credit amount column, we write the amount to be credited against the 'Name of Account'.

(9) In the next line, under “Particulars Column” we write narration in brackets. Narration is simply the summary of business transaction recorded.

TASK# 3

WATCH THE VIDEO NUMBER TWO FOR THE EXPLANATION AND CLARITY OF RECORDING OF TRANSACTIONS IN THE JOURNAL

CLICK HERE FOR VIDEO NUMBER TWO FOR 'RECORDING OF TRANSACTIONS IN THE JOURNAL' LINK

Advantages of Journal

CLICK HERE FOR ADVANTAGES OF THE JOURNAL LINK

(1) In Journal, transactions are recorded in the chronological order i.e. transactions are recorded in the order of their occurrence.

(2) Every Journal entry is supported by a narration which acts as a small explanation of the transaction.

(3) It records both the aspects or dual aspect of a transaction i.e. debit and credit. As amount is recorded in both debit column and credit column, therefore, possibility of any mistake or errors is minimum. Moreover, if there is any error then it will be easily detected.

Limitations of Journal

CLICK HERE FOR LIMITATIONS OF JOURNAL LINK

Following are the limitations of Journal.

(1) Recording of all transactions in Journal is a time consuming process and it also involves cost in terms of money.

(2) As recording of transaction takes time, therefore, this system causes delay in providing information.

(3) As journal is prepared by a single person, so there is no one to check his work. This shows lack of internal check system.

(4) Due to recording of large number of transactions, Journal becomes very bulky or voluminous book.


TASK # 4

DO ASSIGNMENTS # 5 TO 8

ASSIGNMENT # 5

ON WHICH SIDE, THE INCREASE IN THE FOLLOWING ACCOUNTS WILL BE RECORDED? ALSO SPECIFY THE NATURE OF ACCOUNTS TO WHICH THEY BELONG:

1. BILLS PAYABLE ACCOUNT
2. RENT ACCOUNT
3. CREDITORS ACCOUNT
4. SALES ACCOUNT
5. KARAN (THE PROPRIETOR)



ASSIGNMENT # 6

ON WHICH SIDE, THE DECREASE IN THE FOLLOWING ACCOUNTS WILL BE RECORDED? ALSO SPECIFY THE NATURE OF ACCOUNTS.

1. RENT OUTSTANDING ACCOUNT
2. FREIGHT ACCOUNT
3. SALARY PAYABLE ACCOUNT
4. AMIT (CUSTOMER)


ASSIGNMENT # 7

CLASSIFY THE FOLLOWING ACCOUNTS INTO PERSONAL, REAL OR NOMINAL ACCOUNTS:

1. COMMISSION RECEIVED
2. PURCHASE ACCOUNT
3. GOODWILL
4. FURNITURE
5. SALARY ACCOUNT
6. BANK ACCOUNT
7. DISCOUNT ALLOWED ACCOUNT
8. DEBTORS ACCOUNT


ASSIGNMENT # 8

FROM THE FOLLOWING TRANSACTIONS, SHOW THE ACCOUNTS TO BE DEBITED AND CREDITED UNDER MODERN APPROACH AND TRADITIONAL APPROACH:

1. RECEIVED COMMISSION
2. GOODS PURCHASED FROM ANKIT ON CREDIT
3. GOODS SOLD FOR CASH

TASK # 5

CHECK THE ANSWERS TO THE ASSIGNMENTS # 1 TO 4


ASSIGNMENT # 1

ON WHICH SIDE, THE INCREASE IN THE FOLLOWING ACCOUNTS WILL BE RECORDED? ALSO SPECIFY THE NATURE OF ACCOUNTS TO WHICH THEY BELONG:
1.FURNITURE
2. DEBTORS
3. INTEREST RECEIVED ACCOUNT
4. CASH ACCOUNT
5. BANK ACCOUNT 

ANSWER
1. Furniture : DEBIT the increase) ASSET
2. Debtors: Debit -Asset
3. Interest received account : Credit - Income
4. Cash account: Debit - Asset
5. Bank account: Debit-Asset

ASSIGNMENT # 2

ON WHICH SIDE, THE DECREASE IN THE FOLLOWING ACCOUNTS WILL BE RECORDED? ALSO SPECIFY THE NATURE OF ACCOUNTS.
1.MACHINERY ACCOUNT
2.BANK OVERDRAFT ACCOUNT
3. ACCRUED COMMISSION ACCOUNT
4. KAPIL (SUPPLIER)

ANSWER :
1. Machinery: CREDIT (the decrease) ASSET
2. Bank overdraft account: Debit- Liabilities
3. Accrued Commission account: Credit- Asset
4. Kapil (supplier) account : Debit- Liabilities

ASSIGNMENT # 3

CLASSIFY THE FOLLOWING ACCOUNTS INTO PERSONAL, REAL OR NOMINAL ACCOUNTS:

1. CAPITAL
2. PLANT AND MACHINERY
3. TRAVELLING EXPENSES
4. CREDITORS
5. COMMISSION PAID

Answers #3

PERSONAL ACCOUNTS:

1.CAPITAL

4.CREDITORS

REAL ACCOUNTS:

2.PLANT AND MACHINERY

NOMINAL ACCOUNTS:

3. TRAVELLING EXPENSES

5. COMMISSION PAID

ASSIGNMENT # 4

FROM THE FOLLOWING TRANSACTIONS, SHOW THE ACCOUNTS TO BE DEBITED AND CREDITED UNDER MODERN APPROACH AND TRADITIONAL APPROACH:

1. MAYANK STARTED BUSINESS WITH CASH
2. GOODS PURCHASED IN CASH
3. RENT PAID
4. GOOD SOLD TO SHYAM ON CREDIT

ACCORDING TO MODERN APPROACH OR AMERICAN APPROACH

S.no	Affected Accounts	Nature of Account	Effect of Transaction	Debit or Credit
1. 2. 3. 4.	CASH CAPITAL PURCHASES CASH RENT CASH SHYAM SALES	ASSET CAPITAL EXPENSE ASSET EXPENSE ASSET ASSET REVENUE	INCREASE INCREASE INCRESE DECREASE INCREASE DECREASE INCREASE INCREASE	DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT

ACCORDING TO TRADITIONAL APPROACH OR ENGLISH APPROACH

S.no	Affected Accounts	Nature of Account	Effect of Transaction	Debit or Credit
1. 2. 3. 4.	CASH CAPITAL PURCHASES CASH RENT CASH SHYAM SALES	REAL PERSONAL NOMINAL REAL NOMINAL REAL PERSONAL NOMINAL	Dr. WHAT COMES IN Cr. THE GIVER Dr. ALL EXPENSES Cr. WHAT GOES OUT Dr. ALL EXOENSES Cr. WHAT GOES OUT Dr. THE RECEIVER Cr. ALL INCOMES	DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT