Journal & Ledger

The business transactions are recorded in the

books of accounts which are customarily divided
into two classes
1. Journals
2. Ledger
Ledger is called Principal Book of account as all
the accounting information can be secured from
this book. Journal helps the posting of entries
into the ledger accounts; it is therefore, also
known as subsidiary Book
Journals: A journal is that primary book of
accounts in which transactions are originally
recorded in a chronological order, i.e., as they
occur.
An entry made in the journal is called a journal
Entry.
The process of recording a transaction in a
journal is known as journalizing.
The transfer of journal entry to a Ledger account
is called Posting.
 Characteristics of a Journal
1. A journal contains day-to-day transactions in a
chronological order.
2. It is a basic book of original entry in which transaction
are analyzed before they are posted in the ledger.
3. It records both the debit and credit aspects of a
transaction by using the Double Entry System of Book
Keeping.
4. A Journal is a record which shows the complete detail of
a transaction in one entry.
5. Journalizing means recording a transaction in the
Journal and the form in which it is recorded is known as
a journal entry.
DateParticulars L.F. Dr. Amount Cr. Amount
 Steps in Journalising
The following steps are involved in Journalising:
1. Ascertain what accounts are affected by a
transaction
2. Ascertain what is the nature of the account
affected.
3. Ascertained which account is to be debited
and which account is to be credited.
Entries in a journal may be divided into two
groups:
1. Simple Entry: A simple entry is one in which
only two accounts are affected ,viz , one
account is debited and another is credited
with an equal amount.
2. Compounded Entry: A compound entry is
one in which two or more accounts are
debited and one or more accounts are
credited or vice versa.
Entries of some specific Transaction
1. Bad Debts:
a. When the amount is irrecoverable
Bad Debts A/c Dr.
To Debtors Personal A/c

b. When a part of the bad debt is recoverable:

Cash/Bank A/c Dr.

Bad Debts A/cDr.
To Debtors Personal A/c
2. Bad Debts Recovered:

Cash/Bank A/c Dr.

To Bad Debts Recovered A/c

3. Cash Withdrawn or goods taken by proprietor for

Personal use:

Drawing A/c Dr.

To Cash A/c (if cash is withdrawn)
To Purchase A/c (If goods are taken by proprietor for
Personal use)
4. Goods given as charity:
Charity A/c Dr.
To Purchase A/c

5. Discount
a. Trade discount: Trade discount is a part of purchases and
therefore, is deducted from the amount of purchases. It
is not shown separately in the book of account.
Ex. Purchased goods from Ram on which he allowed 10%
trade discount
Purchased A/c (Rs. 10,000- 10% of 10,000) Dr. 9,000
To Ram Cr. 9,000
b. Cash discount: Cash discount ,received or allowed , is
recorded separately in the books.
i) Received Rs. 975 from Hari in full settlement of his
account for Rs. 1000.
Cash A/c Dr.975
Discount allowed A/c Dr. 25
To Hari 1,000
ii) Paid Rs. 1,400 to shyam in cash in full settlement of
his account for Rs. 1,500.
Shyam A/c Dr. 1,500
To Cash A/c 1,400
To Discount Received A/c 100
6. Outstanding expenses: outstanding expenses
are the expenses that relate to the current year
but not paid till the year end.
Ex. Wages for the year ending 31st March, 2012
are Rs. 6,000. out of this, Rs. 500 for the month
of March,2012 has been paid in April 2009.
since, Rs. 500 as on 31st March,2012 is yet to be
paid it should be recorded in the books by
passing the following Journal entry:

Wages A/c Dr. 500

To Outstanding wages A/c Rs. 500
7. Distribution of goods as free sample:

Advertisement A/c Dr.

To Purchase A/c

8. Loss by theft of fire:

Loss by theft or fire A/c Dr.
To Purchase A/c
i) In case goods were insured
Insurance Co. Dr.
To Loss by theft or fire A/c
ii) When the full amount of claim is received
from the Insurance co.
Bank A/c Dr.
To Insurance Co.

iii) When the Insurance company does not

accept full claim:
Bank A/c Dr.
P & L A/c Dr.
To Insurance Co.
9. Prepaid Expenses:
Prepaid Expenses A/c Dr.
To Insurance Premium A/c