1. JOURNALISING PROCESS
Mrs. Pooja Kumar
Faculty
IMS, RU
Ranchi

2. MEANING OF JOURNAL
• Journal is a book of accounts in which all day to day
business transactions are recorded in a chronological order
i.e. in the order of occurrence.
• Transactions when recorded in a journal are known as
‘entries’.
• It is the book in which transactions are recorded for the
first time .
• Journal is also known as ‘Book of Original Record’ or ‘Book
of Primary Entry’.
• The process of recording transactions in the journal is
known as ‘Journalizing’.

3. •Small business units generally maintain one journal
in which all the business transactions are recorded.
•But big business houses having large number of
transactions are divided into various books which
are called special journals.
•example of special journals: all credit sales of
goods are recorded in Sales Book, all credit
purchases of goods are recorded in Purchase Book
and Cash transactions in Cash Book and so on.

4. 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.

5. Performa of journal

6. Column 1 (Date): The date of the transaction on which it takes place is
written in this column.
Column 2 (Particulars): In this column, the name of the accounts to the
debited is written first, then the names of the accounts to be credited
and lastly, the narration (i.e. a brief explanation of transaction) are
entered.
Column 3 (L.F.): L.F. stands for ledger folio which means page of the
ledger. In this column are entered the page numbers on which the
various accounts appear in the ledger.
Column 4 (Dr. Amount): In this column, the amount to be debited against
the ‘Dr.’ Account is written along with the nature of currency.
Column 5 (Cr. Amount): In this column the amount to be credited against
the ‘Cr.’ Account is written along with the nature of currency.

7. PROCESS OF RECORDING
Identification
of financial
transaction
Analysis of
transaction
Applying rules
of debit and
credit
Recording in
journal

8. Illustration 1…discussed in double entry system
January 1: Tarun started business with cash 1,00,000
January 2: Goods purchased for cash 20,000
January 4: Machinery Purchased from Vibhu 30,000
January 6: Rent paid in cash 10,000
January 8: Goods purchased on credit from Anil 25,000
January 10: Goods sold for cash 40,000
January 15: Goods sold on credit to Gurmeet 30,000
January 18: Salaries paid. 12,000
January 20: Cash withdrawn for personal use 5,000

9. Tabular Analysis of Business Transactions

13. Combined Entries
• Entries that affect more than two accounts are
called compound or combined entries.
• A simple journal entry contains only one debit
and one credit. But if an entry contains more
than one debit or credit or both, that entry is
known as a compound journal entry.
• combination of two or more simple journal
entries.

14. Two simple journal entries are as :

15. Compound entries are made in the following
cases:
(a) When two or more transactions occur on
the same day.
(b) One aspect i.e. either the Debit account or
Credit account is common.

16. Example of compound entries
1. Bad debt:
When a debtor fails to pay the full amount due to him, the
unpaid amount is known as bad debt.
For example, A business concern receives Rs 8000 of Rs10,000
due from Harish. He is unable to pay the balance amount,
thus, the remaining amount becomes a bad debt for the
business.
Bank A/c Dr. 8000
Bad Debts A/c Dr. 2000
To Harish’s A/c 10,000
(Receipt of Rs8000 from Harish and remaining due amount of
Rs2000 is treated as bad debts)

17. Example of compound entries
2. Discount Received:
Creditor A/c Dr.
To Bank A/c
To Discount A/c
3. Discount Allowed:
Bank A/c Dr.
Discount A/c Dr.
To Debtors A/c

18. Illustration 2

19. Solution

21. SPECIAL TRANSACTIONS RELATED TO
GOODS
S. NO. TRANSACTIONS JOURNAL ENTRY
1. Withdrawal of goods by owner for personal
use
Drawings a/c Dr.
To Purchases a/c
2. Goods given as charity Charity a/c Dr.
To Purchases a/c
3. Goods distributed as free samples Advertisement a/c Dr.
To Purchases a/c
4. Goods lost by fire/ flood/theft etc. Loss by fire/theft a/c Dr.
To Purchases a/c

22. TRANSACTIONS RELATED BANKS
TRANSACTIONS JOURNAL ENTRY
1. Cash deposited into the bank Bank a/c Dr.
To Cash a/c
2. Cash withdrawn for office use Cash a/c Dr.
To Bank a/c
3. When cheque is received from customer and
deposited into bank same day
Bank a/c Dr.
To Customer’s personal a/c
4. When cheque is received from customer and
not deposited into bank same day
Cash a/c Dr.
To Customer’s personal a/c
5. When above cheque (Point 4) is deposited
later into bank
Bank a/c Dr.
To Cash a/c
6. When payment is made through cheque Personal a/c Dr.
To Bank a/c
7. When expenses is paid through cheque Expense a/c Dr.
To Bank a/c
8. When interest is allowed by the bank. Bank a/c Dr.
To Interest a/c
9. When Bank charges for the services provided Bank Charges a/c Dr.
To Bank a/c

23. Adjustment / Special Entries
S.
NO.
TRANSACTIONS JOURNAL ENTRY
1. Bad Debts (when customer is declared
insolvent and amount is irrecoverable from
him).
Cash a/c Dr. (If
partial amount is recovered)
Bad Debts a/c Dr. (the
irrecoverable part)
To Personal a/c (the due
amount)
2. Bad debts recovered earlier written off as bad
debts.
Cash a/c Dr.
To Bad debts recovered a/c
3. Outstanding Expenses (expenses due but not
paid yet).
Expenses a/c Dr.
To Outstanding Expenses a/c
4. Prepaid Expenses (Expenses not due but paid
in advance).
Prepaid expenses a/c Dr.
To Expenses a/c
5. Accrued income (income due but not received
yet)
Accrued Income a/c Dr.
To Income a/c

24. Adjustment / Special Entries……
S.
NO.
TRANSACTIONS JOURNAL ENTRY
6. Unearned Income (Income not due but received
in advance).
Income a/c Dr.
To Unearned Income a/c
7. Depreciation provided on fixed assets. Depreciation a/c Dr.
To Related asset’s a/c
8. Interest on Capital provided. Interest on capital a/c Dr.
To Capital a/c
9. Interest on Drawings charged. Drawings a/c Dr.
To Interest on Drawings
a/c

25. Some basic transactions with their Journal Entries
S. NO. TRANSACTIONS JOURNAL ENTRY
1. Purchase of goods on credit Purchases A/c Dr.
To Supplier A/c
2. Sale of goods of credit Customer's A/c Dr.
To Sales A/c
3. Cash purchase of assets Sundry Assets A/c Dr.
To Cash A/c
4. Started business with capital Cash A/c Dr.
To Capital A/c
5. Collection of cash/cheque from customers (and
discount allowed, if any)
Cash/Bank A/c (Net
amount) Dr.
Discount Allowed A/c
(Discount) Dr.
To Customer's A/c
6. Goods purchased for cash Purchases A/c Dr.
To Cash A/c

26. Some basic transactions with their Journal Entries………
S. NO. TRANSACTIONS JOURNAL ENTRY
7. Cash sales Cash A/c Dr.
To Sales A/c
8. Opening a Bank Account Bank A/c Dr.
To Cash A/c
9. Recovery of Bad Debt Cash A/c Dr.
To Bad Debt
Recovered A/c
10. For payment of cash/cheque to suppliers (and
discount received, if any)
Supplier Dr.
To Cash/Bank A/c (Net
Amount)
To Discount Received
A/c (Discount)
11. Bad Debts Bad Debts A/c Dr.
To Customer's A/c
12. Distribution of goods as free Samples Free Samples A/c Dr.
Advertisement A/c Dr.
To Purchases A/c

27. Some basic transactions with their Journal Entries………
S. NO. TRANSACTIONS JOURNAL ENTRY
13. Purchase of machinery for cash Machinery A/c Dr.
To Cash A/c
14. Depreciation charged on fixed assets Depreciation A/c Dr.
To Asset A/c
15. Withdrawal of cash from bank for business Cash A/c Dr.
To Bank A /c
16. Sale or disposal of any old asset at a profit Cash A/c Dr.
To Asset A/c
To Profit on Sale of
Asset A/c
17. Giving goods or cash in charity Charity A/c Dr.
To Cash A/c
To Purchases A/c
18. Goods returned to the supplier Supplier‘s Dr.
To Returns Outward A/c

28. Some basic transactions with their Journal Entries………
S. NO. TRANSACTIONS JOURNAL ENTRY
19. Sale or disposal of any old asset at a loss Cash/Bank A/c Dr.
Loss on Sale or Assets A/c Dr.
To Asset A/c
20. Goods returned by the customer Returns Inward A/c. Dr.
To Customer's A/c

29. Illustration3

30. Solution

33. Illustration 4
Journalise the following transactions for the month of January 2006:
2006
Jan.1 Invested in shares of Tata Cotton Mills Ltd. and paid for the same in cash Rs. 2,000.
Jan. 2 Placed on order with Mr. Shah for goods to be received a month later Rs. 1,500.
Jan. 3 Invoiced goods to Mr. Love worth Rs. 1,000 and allowed a trade discount of 2 per cent.
Jan. 4 Carriage Rs. 25 and freight Rs. 70 were paid by the proprietor for the above goods but
which are to be charged to Mr. Love Account.
Jan. 5 Paid rent to landlord of office premises- Rs. 150, in the form of goods and not cash.
Jan. 6 Goods valued at Rs. 700 were delivered to Ahmedabad Merchants under instructions
from Mr. Gobind. They were to be charged to the latter’s Account.
Jan. 7 Mr. Love paid Rs. 500 due from him, and the same was spent on purchasing goods
from Mr. Deepu.
Jan. 8 Sold one old motor car belonging to the proprietor for Rs. 5,000 and the amount was
invested in the business.
Jan. 9 The proprietor paid Rs. 180 in full settlement of Mr. Manpreet for goods worth Rs. 200
purchased by him for personal use.
Jan. 10 Mr. Gobind was declared insolvent and paid Rs. 450 in full settlement. The balance Rs.
250 was written off as a bad debt.
Jan. 11 Mohinder our debtors, on our advice, directly paid Narinder, our creditor Rs. 2,000.

34. Solution