Journal entries concept
Business transaction that can be measure in terms of money Will be recorded in the book of accounts on the basis of evidence such as bills of purchase, sales invoices, debit and credit notes etc. These books of accounts are majorly classified into two categories 1. Journal and 2. Ledger.
Journal is a book in which transaction are recorded in the order in which they entered i.e. chronological order. All business transaction are first recorded in journal and after that it posted to the ledgers account.
Ledger is known as principal book of accounts and all the important data and information can be obtained from this book.
Definition
According to "cropper", A Journal is a book, employed classify or sort out transaction in a form convenient for their user subsequent entry in ledger."Characteristics or features of a journal
1. Journal is book where original entry are first made before sending them to ledger accounts.
2. It is book where all the business transaction are recorded.
3. Journalising is process of recording a transaction in the journal and the form in which it is recorded is known as a journal entry.
4. Day to day transaction are recorded in a journal in chronological order.
5. It operates transaction in both debit and credit aspects using double entry system.
Limitations of journal
1. Unsuitable for large volume of transaction
2. Not a simple system of recording because it includes both debit and credit aspects.
3. Not a substitute of ledger.
The Golden Rules of accounting
These rules help to make journal entries and tells which account is affected by the transaction.
1. Debit the receiver and credit the giver
2. Debit what comes in and credit what goes out.
3. Debit all the expenses and losses, credit all the incomes and profits.
Comments
Post a Comment