BOOKS
OF PRIME ENTRY, SUBSIDIARY BOOKS
Books of Prime Entry
A journal is often referred to as
Book of Prime Entry or the book of original entry. In this book transactions are recorded in
their chronological order. The process
of recording transaction in a journal is called as ‘Journalisation’. The entry made in this book is called a
‘journal entry’.
Functions of Journal
1.
Analytical function: Each transaction is analyzed into the debit aspect
and the credit aspect. This helps to
find out how each transaction will financially affect the business.
2.
Recording function: Accountancy is a business language which helps to
record the transactions based on the principles. Each such recording entry is supported by a
narration, which explains the transaction in simple language. Narration means to narrate- i.e. to
explain. It starts with the word – being
….
3.
Historical function: It contains a
chronological record of the transactions for future references.
Advantages of Journal
The following are the advantages of a journal:
1.
Chronological Record: It records transactions as and when it
happens. So it is possible to get
detailed day-to-day information.
2.
Minimizing the possibility of errors: The nature of the transaction and
it effect on the financial position of the business is determined by recording
and analyzing into debit and credit aspect.
3.
Narration: It means explanation of the recorded transactions.
4.
Helps to finalize the accounts: Journal is the basis of ledger posting
and the ultimate Trial balance. The
trial balance helps to prepare the final accounts.
The specimen of a journal book is
shown below
|
Date
|
Particulars
|
Voucher Number
|
Ledger folio
|
Debit amount
|
Credit amount
|
|
dd-mm-yy
|
Name of the A/c to be debited
Name of the A/c to be credited
(narration describing the transaction)
|
---------
|
Reference of page number of the A/c in ledger
|
---------
|
---------
|
Explanation of Journal
1.
Date column: This column contains the date of the transaction.
2.
Particulars: This column contains which account is to be debited and
which account is to be credited. It is
also supported by an explanation called narration.
3.
Voucher number: This column contains the number written on the voucher of
the respective transaction.
4.
Ledger Folio (L.f): This column contains the folio (i.e.page no.) of the
ledger, where the transaction is posted.
5.
Dr. Amount and Cr. Amount: This column shows the financial value of each
transaction. The amount is recorded in
both the columns, since for every debit there is a corresponding and equal
credit.
All the columns are filled in at the time of entering the transaction
except for the column of ledger folio.
This is filled at the time of posting of the transaction to ‘ledger’.
This process is explained later in this chapter.
Example:
As per voucher no.31 of Roy Brother, on 10.05.2016 good sof Rs.50000 were
purchased, cash wash paid immediately.
Ledger folios of the purchse a/c and cash a/c are 5 and 17
respectively. Journal entry of the above
transaction is given below.
In the books of Roy Brothers
Journal entries
|
Date
|
Particulars
|
Voucher Number
|
Ledger folio
|
Debit amount
|
Credit amount
|
|
10.05.16
|
Purchased A/c Dr.
To Cash A/c
(Being goods purchased for cash)
|
31
|
5
17
|
50000
|
50000
|
Illustration: 1.
Let us illustrate the journal entries for the following transactions:
2014
April
1 Mr. Vikas and Mrs.Vaibhavi who are husband and wife start consulting
business by bringing in their personal cash of Rs.5,00,000 and 250000
respectively.
10 Bought office furniture of Rs.25000 for cash bill no.2014/f/3
11 Opened a current account with Punjab National Bank by depositing
Rs.100000
15 paid office rent of Rs.15000 for the monthby cheque to M/s Realtors
proprieties. Voucher No.3
20 Bought a motor car worth Rs.450000 fro Millennium Motors by making a
down payment of Rs.50000 by cheque and the balance by taking a loan from HDFC
bank. Voucher No.M/13/7
25 Vikas and Vaibhavi carried out a consulting assignment for Avon
Pharmaceuticals and raised a bill for Rs.1000000 as consultancy fees. Bill no.B13/4/1 raised. Avon Pharmaceuticals have immediately settled
Rs.250000 by way of cheque and the balance will be paid after 30 days. The cheque received is deposited into bank.
30 Sale of one receptionist @ Rs.5000 per month and one officer @
Rs.10000 per month. The salary for the
current month is payable to them.
Solution:
The entries for these transactions in a journal will look like:
|
Date
|
Particulars
|
Voucher Number
|
Ledger folio
|
Debit amount
|
Credit amount
|
|
01.04.14
|
Cash A/c
Dr.
To Vikas’s Capital A/c
To Vaibhavi’s Capital A/c
(Being capital brought in by the partners)
|
|
1
2
3
|
750000
|
500000
250000
|
|
10.04.14
|
Furniture A/c Dr.
To Cash A/c
(Being furniture purchased in cash)
|
2014/F/3
|
4
1
|
25000
|
25000
|
|
11.04.14
|
Punjab National Bank A/c Dr.
To Cash A/c
(Being current account opened with Punjab national bank by depositing
cash)
|
|
5
1
|
100000
|
100000
|
|
15.04.14
|
Rent A/c Dr.
To Punjab National Bank A/c
(Being rent paid to realtors properties for the month)
|
3
|
6
5
|
15000
|
15000
|
|
20.04.14
|
Motor Car A/c
Dr.
To Punjab National bank A/c
To Loan from HDFC Bank A/c
(Being car purchased from Millennium motors by paying down payment and
loan arrangement)
|
M/13/7
|
7
5
8
|
450000
|
50000
400000
|
|
25.04.14
|
Punjab National Bank A/c Dr.
Avon Pharmaceuticals A/c Dr.
To Consultancy Fees A/c
(Being amount received and revenue recognized for fees charged)
|
B13/4/1
|
5
9
10
|
250000
750000
|
1000000
|
|
30.04.14
|
Salary A/c
Dr.
To Salary Payable A/c
(Being the entry to record salary obligation for the month)
|
|
11
12
|
15000
|
15000
|
Illustration:2.
Journalize the following transactions in the books of Mr.Roy
2015 April
1 He started business with a capital of – Plant Rs.10000, Bank Rs.8000,
stock Rs.12000
2 Bought furniture for resale Rs.5000, Bought furniture for office
decoration Rs.3000
3 Paid rent out of personal cash Rs.2000
8 Sold furniture out of those for resale Rs.6000
12 Paid salary to Mr.X for Rs.1200
15 Purchased goods from Mr.Mukherjee for cash Rs.3000
18 Sold goods to Mr.Sen on Credit for Rs.8000
20 Mr.sen returned goods valued Rs.1000
22 Received cash from Mr.sen of Rs.6500 in full settlement
28 Bought goods from mr.Bose on credit Rs.5000
30 Returned goods to Mr.Bose of Rs.500 and paid to Mr.Bose Rs.4000 in
full settlement
In the books of Mr.Roy- Journal Entries
|
Date
|
Particulars
|
Ledger folio
|
Debit amount
|
Credit amount
|
|
April,
2013
1
|
Plant A/c
Dr.
Bank A/c
Dr.
Stock A/c Dr.
To Capital A/c
(Being plant, bank, stock introduced to the business)
|
|
10000
8000
12000
|
30000
|
|
2
|
Purchase A/c Dr.
To Bank A/c
(Being furniture purchased for resale)
|
|
5000
|
5000
|
|
|
Furniture A/c Dr.
To Bank A/c
(Being furniture purchased for office decoration
|
|
3000
|
3000
|
|
3
|
Rent A/c Dr.
To Capital A/c
(Being rent paid out of personal cash)
|
|
2000
|
2000
|
|
8
|
Cash A/c
Dr.
To Sales A/c
(Being furniture out of those meant for resale are sold)
|
|
6000
|
6000
|
|
12
|
Salary A/c
Dr.
To Bank A/c
(Being salary paid to Mr.X)
|
|
1200
|
1200
|
|
15
|
Purchase A/c Dr.
To Cash A/c
(Being goods purchased)
|
|
3000
|
3000
|
|
18
|
Mr.Sen A/c Dr.
To Sales A/c
(Being goods sold on Credit to Mr.Sen)
|
|
8000
|
8000
|
|
20
|
Returns Inward A/c Dr.
To Mr.Sen A/c
(Being goods returned from Mr.Sen)
|
|
1000
|
1000
|
|
22
|
Cash A/c
Dr.
Discount Allowed A/c Dr.
To Mr.Sen A/c
(Being cash received from Mr.Sen in full settlement)
|
|
6500
500
|
7000
|
|
28
|
Purchase A/c Dr.
To Mr.Bose
(Being goods purchased from Mr.Bose on credit)
|
|
5000
|
5000
|
|
30
|
Mr.Bose A/c Dr.
To Cash a/c
To Returns Outward A/c
To Discount Received A/c
(Being goods returned to Mr.Bose and paid cash in full settlement)
|
|
5000
|
4000
500
500
|
