Understanding Journals: Definitions, Formats, and Purpose Unveiled

Meaning and Definition of Journal 

The first book in which the transactions of a business unit are recorded is called Journal. Here, business transactions are recorded in chronological order i.e. in the order in which they occur. Each record in a journal is called an entry. 

Simply we can say that a journal is the primary book of accounts in which transactions are originally recorded in the chronological manner. It is the book of original entry. Records are thereafter transferred to ledger. An entry made in journal is termed as a Journal Entry and the process is called journalising. The transfer of Journal entry is called Posting.

Definition of Journal 

As a journal is the first book in which entries are recorded, it is also known as a book of original entry.

1. According to M.J. Keeler, “A Journal is a chronological record of financial transactions of a business.”
2. According to Rowland, “The process of recording the transactions into journal is called Journalising.”

Purpose of Preparing Journal

1. It provides the date wise record of all the business transactions.
2. It gives complete information about a transaction at one place and also provides an explanation of the transaction.
3. It helps in the understanding of the principles of Double Entry System as entries in Journal are classified into Debit and Credit.
4. It is easier to post the entries of this book into ledger without any difficulty.

Journal Format

Journal

Date	Particulars	L.F. (Ledger Folio)	Debit ₹	Credit ₹
(1)	(2)	(3)	(4)	(5)
	(Narration)

Journal records each and every record by way of journal entry but to find out a transaction effecting a person, expense account or asset one has to turn over all pages of journal. Hence, transactions are posted from journal to particular pages of ledger, hence journal contain a column L.F. 

1. Date - This column records the date of each transaction with its month and year. The accounting year is written once at the top. Example: 2025, April 1
2. Particulars - It shows the accounts affected by a transaction.
• The debited account is written first with “Dr.” on the right.
• The credited account is written on the next line starting with “To”.
• A short narration explaining the transaction is added in brackets.
• Example:
• 2025   Rent A/c .......... Dr  
• April 1   To Cash A/c  
• (Rent paid in cash)
3. Ledger Folio (L.F.) - This column shows the page number of the ledger where the transaction is posted.
4. Debit Amount (₹) - The amount to be debited is written alongside the debited account.
5. Credit Amount (₹) - The amount to be credited is written alongside the credited account.

Characteristics of a Journal

1. It contains transactions in a chronological order.
2. It is the book of original entry in which transactions are analysed before posting in the Ledger.
3. Using double entry system of Book keeping, it records both the debit and credit aspects of a transaction.
4. It is a record that depicts the complete detail of a transaction in one entry.

Steps in Journalising

1. Determine what accounts are affected by a transaction.
2. Ascertain what is the nature of the account affected.
3. Applying the rules of debit and credit, ascertain which account is to be debited and which account is to be credited.
4. Ascertain the amount by which the accounts are to be debited and credited.
5. Write date, month and year in the ‘Date’ column.
6. In the ‘Particulars’ column, record the name of the account to be debited with abbreviation ‘Dr.’ in the same line. The amount to be debited is recorded in the ‘Debit Amount Columns.
7. Again, record the name of the account to be credited in the particulars column in the next line preceded by the word ‘To’ in the right. Amount to be credited should be written in the ‘Credit Amount’ column.
8. A brief description of the transaction (called narration) is written underneath in the next line in the ‘Particulars columns”
9. Draw a line across ‘Particulars’ column to separate one Journal entry from the other. 

Simple Entry and Compound Entry 

Simple entry 

Every transaction effect two accounts, one is debited and another account is credited. Thus, in recording a transaction in a journal one account is debited and another account is credited. This type of entry is called simple entry. For example, on 20.06.25 we bought computer from Sandeep. The entry is 

Date	Particulars	L.F.	Debit ₹	Credit ₹
20.06.25	Computer account             …. Dr		20,000
	To Sandeep account			20,000
	(being computer purchased on credit)

Compound entry 

The entry in which more than one account is debited or more than one account is credited, is known as compound entry. Three or more accounts are connected with a compound entry. For example, on 20.06,25 we paid is 10,000 on account of salaries and 5,000 on account of rent. For this the entry will be:

Date	Particulars	L.F.	Debit ₹	Credit ₹
20.06.25	Salary account ….                   Dr.		10,000
	Rent account ……                    Dr.		5,000
	To cash account			15,000
	(being Salaries and rent)

Here two accounts have been debited and the entry involves three accounts. Hence, it is a compound entry.

Basic Journal Entries for Beginners

Cash Sales - This entry records cash received from sales made directly to customers.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Cash (Asset)                    Dr.		XX
	To Sales Revenue (Revenue) A/c			XX
	(Being cash received from direct sales to customers recorded.)

Credit Sales - Records sales made on credit, where payment will be received later.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Accounts Receivable (Asset)    Dr.		XX
	To Sales Revenue (Revenue) A/c			XX
	(Being credit sales recorded, payment to be received later.)

Purchases of Inventory (Cash) - Records the purchase of inventory paid in cash.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Inventory (Asset)                  Dr.		XX
	To Cash (Asset) A/c			XX
	(Being inventory purchased and paid for in cash.)

Purchases of Inventory (Credit) - Indicates an obligation to pay the supplier later.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Inventory (Asset)                   Dr.		XX
	To Accounts Payable (Liability) A/c			XX
	(Being inventory purchased on credit recorded.)

Payment of Expenses - Records the payment of operating expenses like rent, utilities, or salaries.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Expense Account (Expense)    Dr.		XX
	To Cash (Asset) A/c			XX
	(Being payment made for operating expenses like rent, utilities, or salaries.)

Accrual of Expenses - Recognizes an expense incurred but not paid yet, reflecting the matching principle.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Expense Account (Expense)   Dr.		XX
	To Accounts Payable (Liability) A/c			XX
	(Being accrued expenses recorded as payable.)

Receipt of Cash from Accounts Receivable - Records cash received from customers for prior credit sales.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Cash (Asset)                 Dr.		XX
	To Accounts Receivable (Asset) A/c			XX
	(Being cash received from customers for credit sales.)

Payment to Suppliers - Reflects payment made to suppliers for credit purchases.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Accounts Payable (Liability)		XX
	To Cash (Asset) A/c			XX
	(Being payment made to suppliers for previous credit purchases.)

Depreciation Expense - Allocates the cost of tangible fixed assets over their useful lives.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Depreciation Expense (Expense)  Dr.		XX
	To Accumulated Depreciation (Contra-Asset) A/c			XX
	(Being depreciation charged on tangible assets for the period.)

Owner's Capital Contribution - Records assets contributed by the owner to the business.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Cash (Asset)     Dr.		XX
	To Owner’s Equity (Equity) A/c			XX
	(Being capital contribution made by the owner recorded.)

Withdrawal by Owner (Drawings) - Reflects withdrawals by the owner for personal use, reducing equity.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Owner’s Drawings (Equity)  Dr		XX
	To Cash (Asset) A/c			XX
	(Being cash withdrawn by the owner for personal use.)

Loan Taken - Records receipt of cash from a loan, creating a liability. 

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Cash (Asset)            Dr.		XX
	To Loan Payable (Liability) A/c			XX
	(Being loan amount received and liability recorded.)

Interest Expense on Loan - Recognizes interest on loans not yet paid.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Interest Expense (Expense)  Dr.		XX
	To Interest Payable (Liability) A/c			XX
	(Being interest accrued on loan recorded.)

Revenue Earned but Not Yet Received (Accrued Revenue) - Records earned revenue not yet billed.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Accounts Receivable (Asset)   Dr.		XX
	To Revenue (Revenue) A/c			XX
	(Being revenue earned but not yet billed recorded as accrued revenue.)

Unearned Revenue - Records cash received for services not yet performed.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Cash (Asset)             Dr.		XX
	To Unearned Revenue (Liability) A/c			XX
	(Being cash received in advance for services to be rendered recorded.)

Sales Returns - Reflects returned goods, reducing revenue.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Sales Returns (Contra-Revenue)  Dr.		XX
	To Accounts Receivable or Cash (Asset) A/c			XX
	(Being goods returned by customers recorded as sales returns.)

Revaluation of Assets - Records an increase in asset value due to revaluation.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Asset (Asset)         Dr.		XX
	To Revaluation Surplus (Equity) A/c			XX
	(Being increase in asset value due to revaluation recorded.)

Insurance Expense Prepaid - Records payment for future insurance coverage.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Prepaid Insurance (Asset)   Dr.		XX
	To Cash (Asset) A/c			XX
	(Being insurance premium paid in advance recorded.)

Provision for Income Tax - Recognizes estimated tax liability for the period.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Income Tax Expense (Expense)  Dr.		XX
	To Income Tax Payable (Liability) A/c			XX
	(Being provision for income tax liability recorded.)

Year-End Closing Entries - Transfers net income or loss to owner’s equity, closing temporary accounts.

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Income Summary (Equity)      Dr.		XX
	To Revenue Accounts (Revenue) A/c			XX
	(Being revenue accounts closed at year-end.)

Date	Particulars	L.F.	Debit ₹	Credit ₹
DD/MM/YYYY	Expense Accounts (Expense)  Dr.		XX
	To Income Summary (Equity) A/c			XX
	(Being expense accounts closed at year-end.)

FAQ's

What is a journal in accounting?

A journal is the first book of original entry where business transactions are recorded in chronological order before they are posted to the ledger. Each entry includes the date, particulars, debit and credit amounts, and a brief narration.

Why is a journal important in accounting?

A journal ensures accuracy in financial records by systematically recording every transaction. It helps identify errors early and forms the foundation for preparing ledgers, trial balances, and final accounts.

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