Books of Accounts

There are two types of books of accounts.

1 Book of original entry:
They include Journal and Sub-Division of Journal.
2 Principal Book- General Ledger
Books of Accounts at a glance
Book of Original Entry and book of Final Entry Or Principal Book.
.

ACCOUNTING CYCLE
➢ Meaning of an accounting cycle:
➢ An accounting cycle is a complete sequence beginning with recording of transactions and
ending with preparation of financial accounts. There are six steps,
➢ Journalizing Ledger Posting Balancing
➢ Trial Balance Income Statement Position statement or balance sheet

JOURNAL:
Business transactions are recorded in the books of original entry on the basis of source document. Journal is
derived from the French word, “jour” which means a day. Journal therefore, means a ‘daily record’.
Journal can, thus be defined as “a book wherein the account to be debited and that to be credited are specified
together with explanation for the entry.” This explanation is called ‘narration’. The record of any particular
transaction in the journal is called journal entry and the process of recording is called journalizing.
A journal is a book of “Original entry” or “Primary entry”. It is a book of daily record. First of all business
transactions are recorded in the “Journal” and subsequently they are posted in the ledger. In modern times, a
journal is divided into various books known as “subsidiary Books”
Thus Journal is a book of original entry. . Transaction is first recorded in journal, in the order of their
occurrence. After that posting of the entry is made from journal to ledger. Transactions are initially recorded
in chronological order in a journal before being transferred to the accounts.
Features of a Journal:
(i) It is a book of prime, original or first entry.
(ii) It records transactions in a systematic manner.
(iii) It analyses the transaction into their debits and credits.

Importance of a Journal
(I) Complete record of transaction: As both debit and credit aspects of each transaction are entered in
the Journal it provides complete information about the transaction that have taken place.
(II) Quick reference: Business transactions are recorded in the journal in the chronological order it
facilitates quick and easy reference to any transaction.
(III) Proper understanding: Narration of the transaction is given below each entry. It helps to have proper
understanding of the transaction recorded.
(IV) Avoids the necessity of immediate posting: There is no urgency to post them to the ledger. Ledger
posting can be done at the convenience of the ledger clerk.
(V) Minimum errors: As debit and credit aspects of the transactions are recorded, arithmetical accuracy
can be ensured.
(VI) Evidence in the court: journal is book of original entry. Hence, courts consider journal as an evidence
of business transactions.

Utility of a Journal:
(i) It contains a record of various transactions that take place every day.
(ii) It provides a complete record of transactions as both the aspects of transactions are recorded
at one place.
(iii) Since narration of a transaction is written in the journal, there is no need to given an
explanation in the ledger.
(iv) It facilitates cross checking of transactions.
(v) Since transactions are recorded in the Journal, there is no need to post the transaction to the
ledger immediately.
(vi) From the legal point of view also a Journal becomes necessary. Courts recognize the journal
as evidence in approving or disapproving claims.
(vii) It helps to locate and prevent errors.

SUB-DIVISION OF JOURNAL

➢ Sub-division of journal. Journal is sub divided as follows.

➢ purchase book, sales book,
➢ Purchase return book,
➢ sales return book, cash-book,
➢ Bills receivable book. Bills payable book
➢ journal proper or General journal : It is for recording (1) Opening entries (2) Closing entries
(3) Adjustment entries (4) Rectification entries (5)Transfer entries (6) Credit purchase and (7)
sale of assets and property.

FORM OF JOURNAL
Every company has a General Journal which contains
1. Spaces for dates,
2. Particulars-Account titles and explanations,
3. Ledger Folio .or References, and
4. two money columns for Debit & Credit.
JOURNAL
Date Particulars L/F Debit Credit
2004 Cash A/c………………..Dr 10000

Jan 1 To Capital 10000

(Being business commenced
with cash)
Combined Entry: In combined Entry two or more accounts are debited or credited by equating total
debit amount with total credit amount.

Example of Combined entry :

Pradeep started business with cash Rs. 15,000, Goods Rs. 3000 and Machinery Rs. 2000

Date Particulars L/F Debit Credit

2004 Cash A/c………………..Dr 15000

Jan 1 Goods Account…………Dr 3000

Machinery Account……..Dr 2000

To Capital Account 20000

(Being business commenced

with cash ,Goods and
Machinery)