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Journal is the book of original entry in which, after following the rules of debit and credit, all business transactions are recorded in a chronological order. The word journal has been derived from the French word “jour”, which means “a day”. Thus, journal means a book which records all monetary transactions of a business on daily basis. The monetary transactions are recorded in chronological order i.e., in the order of their occurrence.
As the recording of transactions is done first in the journal, it is also called the book of original entry or prime entry. Journalizing is defined as the process of recording transactions in the journal. After determining the particular account to be debited and credited, each transaction is separately recorded.
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:
- Journal is the first successful step of the double entry system. A transaction is recorded first of all in the journal. So, the journal is called the book of original entry.
- A transaction is recorded on the same day it takes place. So, the journal is also called a day book.
- Transactions are recorded chronologically. So, the journal is called chronological book.
- 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 the journal is called “assistant to ledger” or “subsidiary book”.
- The narration is written below each entry.
- The amount is written in the last two columns – debit amount in debit column and credit amount in the credit column.
Advantages of Journal:
The following are the advantages of the journal:
- 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.
- Since the transactions are kept recorded in journal chronologically with narration, it can be easily ascertained when and why a transaction has taken place.
- For each and every transaction which of the two concerned accounts will be debited and which account credited, are clearly written in the journal. So, there is no possibility of committing any mistake in writing the ledger.
- Since all the details of transactions are recorded in the journal, it is not necessary to repeat them in the ledger. As a result, ledger is kept tidy and brief.
- Journal shows the complete story of a transaction in one entry.
- Any mistake in the ledger can be easily detected with the help of journal.
Limitations of Journal:
(i) Bulky and voluminous:
Journal is the main book of original entry which records all business transactions. Sometimes, it becomes so bulky and voluminous that it cannot be handled easily.
(ii) Information in the scattered form:
In this book, all information is recorded on daily basis and scattered form; hence it is very difficult to locate a particular transaction unless one remembers the date of occurrence of that transaction.
(iii) Time-consuming:
Unlike posting from subsidiary books, posting the transactions from journal to ledger accounts take too much time because every time one has to post the transactions in different ledger accounts.
(iv) Lack of internal control:
Unlike other books of original entries like subsidiary books and cash book, the journal does not facilitate the internal control, because in the journal only transactions are recorded in chronological order. However, subsidiary books and cash book gives a clear picture of the special type of transactions recorded therein.