Describe the term journal in accounting.

Journal is called as book of original entry. Journal is a detail record of business transactions that are made in a date. The word JOUR means a day, so it is a day book or daily book of accounting.

Journal entry has following structure −

  • A header line (journal entry number and entry date).
  • First column includes account number and account name (credited).
  • Second column to enter debited amount.
  • Third column to enter credited amount.
  • A footer line (brief description of entry).

Features of the journal are −

  • Book of primary entry.
  • Daily record book.
  • Chronological order.
  • Dual aspect of transactions.
  • Use of explanation.
  • Different columns.
  • Subsidiary book.

Rules in journal are as follows −

  • Debit the account when assets and expenses are increase.
  • Debit the account when liabilities and revenues decreases.
  • Credit the account when assets and expenses decreases.
  • Credit the account when liabilities and revenues increase.

Types of journal entries are as follows −

  • Adjust entry − Used in month end to alter financial statements with respect to accounting frame works (GAAP, IFRS)

  • Compound entry − Used to record multiple or complex transactions at once

  • Reversing entry − Used to reverse the entry as of the beginning of the following period.

Advantages of journal are −

  • Detail description of transaction.
  • Increases efficiency in accounting tasks.
  • Minimise errors.
  • Used as future reference.
  • Rectification of errors.
  • Subsidiary journals are maintained which makes handling easy.
  • Information can be known easily.