What is Journal?

 JOURNAL:

A Journal is a book in which transactions are recorded in the order in which they occur i.e. in Chronological order. A Journal is the primary book of account under which all the transactions are recorded with complete narration on the basis of three basic rules given for recording the transactions. The process of recording a transaction in a journal is called Journalizing.

An entry made in the journal is called a 'Journal Entry'. A journal entry is an analysis of all the effects of a single transaction on the various accounts, usually accompanied by an explanation. For each transaction, this analysis identifies the accounts to be debited or credited.

Note: The 'Ledger Folio column' is filled in at the time of posting into the ledger and not at the time of journalizing.

Advantages of Journal

• Chronological record:- It records the transactions in the order in which they occur.
• Explanation of transaction:- Each journal entry in the journal carries a narration that gives a brief explanation of the transaction.
• Recording both aspects:- Both the aspect (i.e. debit and credit) of a transaction are recorded in the journal. Since the amounts recorded in both the debit amount column and credit amount column must be equal, the possibility of accounting error is reduced and the detection of errors, if any committed becomes easy.

 

Limitation of the journal:- When the number of transactions is large, it is practically impossible to record all the transactions through one journal because of the following reasons.

• The system of recording all the transactions in a journal required (a) the writing down of the name of the account involved as many times as the transaction occurred, and (b) an individual posting of each account debited and credited and hence involves the repetitive journalizing and posting labor.
• Such a system does not provide the information on a prompt basis.
• Such a system does not facilitate the installation of an internal check system since the journal can be handled by only one person.              
• The journal becomes bulky and luminous.
• To overcome the shortcomings of the use of the journal only as a book of original entry, the journal is subdivided into special journals.

NARRATION:

The narration is the explanation of the entry and facilitates quick understanding. The length of the narration depends on the complexity of the transaction and whether management wants the journal itself to contain all relevant information. Most often narration is in brief.

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