Recording Transactions - CS

Procedure of Journalising

The process of accounting includes many important steps such as identifying, analyzing and recording transactions. In order to perform these functions, we need to understand journalising first. This step basically involves recording transactions as accounting entries as and when they occur. This is the very first step from which accounting begins. In order to do this efficiently, we need to understand the fundamentals and procedure of journalising.

Procedure of Journalising

Meaning of Journalising

A journal is basically a book in which we record every transaction before posting it into a ledger. Accountants record every single transaction in it chronological order on a day-to-day basis. In other words, this is the very first instance in which we have to record a transaction.

Journalising is nothing but the process of recording these transactions in a journal. Previously, accountants used to journalize in physical books. However, these days they can use software programs like Tally. This has made the procedure of journalising very simple and effective.

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Format of a Journal

A typical journal contains the following columns:

i) Date: In this column, we have the write the date on which each transaction takes place. Generally, we can write the year on the top of the page. Thus, we just need to mention the month and date unless the year also changes.

ii) Particulars: This column contains the journal entries for each transaction. It shows which account is debited and which one is credited in the entry. We write the debit account’s name on the left side along with the abbreviation “Dr.” in front of it. Below that, we write “To” followed by the credit account’s name. There can also be multiple debit and credit accounts for a single transaction.

iii) L.F. (Ledger Folio): This column just mentions the page number of the ledger in which we are posting accounts from the Particulars column.

iv) Debit Amount: In this column, we mention the debit amount opposite the debited account.

v) Credit Amount: In this column, we mention the credit amount opposite the credited account.

Procedure of Journalising

The procedure of journalising comprises of the following steps:

1) Firstly, we have to analyze which accounts a particular transaction will affect. For example, purchasing goods with cash will affect the Purchase A/c and the Cash A/c. In order to do this, we need to know the nature of the transaction, i.e. personal, nominal or real.

2) Sometimes a transaction may require a compound entry, i.e. it will affect more than two accounts. In this case, we need to ensure that the total debit and credit amounts are equal.

3) After identifying the necessary entry, we should record it in the Particulars column along with its relevant date. Each entry must also state the debit and credit amounts opposite the debit and credit accounts.

4) In case journal entries extend to more than one page, we have to mention the sum total of the debit and credit columns in the end. On the next page, we have to begin entries by first bringing forward the total amounts from the previous page.

5) After recording all the journal entries, we have to write the grand totals of debit and credit columns. In case these two amounts are not equal, there is an error in recording entries which we must check and rectify.

Solved Question on Journalising

Analyze the following transactions and record it as per the procedure of journalising:

a) Purchased a car worth Rs. 5 lakhs and paid by cheque on 11 June 2019.

b) Sold goods worth Rs. 10,000 for cash on 13 June 2019.

Answer:

Date Particulars L.F. Debit Amt. (Rs) Credit Amt. (Rs)
2019
11 June Car A/c                                            Dr.
To Bank A/c
5,00,000 5,00,000
13 June Cash A/c                                          Dr.
To Sales A/c
10,000 10,000
TOTAL 5,10,000 5,10,000

 

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