Journal entry

A journal entry is the act of keeping or making records of any transactions either economic or non-economic.

Transactions are listed in an accounting journal that shows a company's debit and credit balances. The journal entry can consist of several recordings, each of which is either a debit or a credit. The total of the debits must equal the total of the credits, or the journal entry is considered unbalanced.

Journal entries can record unique items or recurring items such as depreciation or bond amortization. In accounting software, journal entries are usually entered using a separate module from accounts payable, which typically has its own sub-ledger, that indirectly affects the general ledger. As a result, journal entries directly change the account balances on the general ledger. A properly documented journal entry consists of the correct date, amount(s) that will be debited, amount that will be credited, narration of the transaction, and unique reference number (i.e. check number).

The book in which transactions are recorded serially and chronologically in their dual aspect - Debit and Credit - with date of transactions, particulars of transactions showing the accounts concerned in each transaction and the circumstances leading to the transactions (i.e., narration) and the amount of the transactions is called a Journal.

Recording

In order to record journal entries, one needs to have knowledge about:

1. Type of Accounts
2. Golden Rules of Accounting
3. Experience of Working
4. Knowledge on debit and credit transactions

Advantages of Journal:

i. Provide date in chronological order.

ii. Explanation of the transaction.

iii. Ledger posting of transportation.

iv. Possibility of Error reduction.

Disadvantages of journal :

I. An unsuitable large amount of transportation.

ii. The cash balance is not revealed.

iii. Not a substitute to the ledger.

Sub-division of Journal

There are two types of journal

1. Special Journals.

2. Journal Proper.

A. Types of Special Journals: Journal where similar types of transactions are recorded is known as Special Journal. Special journal can be classified in two parts - Cash Book and Day Books.

Types of Cash Books

1. Single Column Cash Book.

2. Double Column Cash Book

3. Triple/Treble Column Cash Book

4. Petty Cash Book.

Types of Day Books

1. Purchase Book.

2. Sales Book.

3. Returns Outward Book.

4. Returns Inward Book.

5. Bills Payable Book.

6. Bills Receivable Book.

B. Journal Proper [ The Following nature of transactions are recorded in Journal Proper]

1.Open Entries.

2. Adjustment Entries.

3. Closing Entries.

4. Rectification Entries.

5. Transfer Entry.

6. Residuary Entry.

Type of accounts

There are three types of accounts in accounting:

1. Personal account
2. Real account
3. Nominal account

Personal accounts consist of all those accounts which are related to a person, business, firm, etc... There are also subtypes of personal account:

1. Natural Personal Any person like Mohan Account, Ram account etc.
2. Artificial Personal Any company or group of people like Microsoft account, Hindustan Petroleum account etc.
3. Representative Personal this type of Personal a/c represents owner like. Capital a/c, drawings a/c etc.

Dr. the receiver. Cr. the giver.

For example: Mohan's account, Apple ltd. account etc. Capital account

Real accounts consist of all those accounts which are related to assets. Intangible assets are also considered as Real Accounts.

For example: Plant and Machinery account, Stock account etc.

Dr. What comes in. Cr. What goes out.

Nominal accounts consist of all those accounts which are related to expenses, losses, Income and Gains.

Dr. are all expenses and losses. Cr. are all income and gains.

For example: Rent account, wages account etc.

See also

• Double-entry bookkeeping system
• Debits and credits
• Single-entry bookkeeping system
• Trial balance