Resources » Articles/Knowledge Sharing » Education

Rules of Journal


Posted Date: 31-Oct-2009  Last Updated:   Category: Education    
Author: Member Level: Gold    Points: 20






Journal is derived the French word ‘jour’ which means a day. Journal means daily record. It is a book of original record where every transaction is recorded in the first instance and then it is posted to the ledger. The form in which it is recorded is called journal entry and recording or entering a transaction in the journal is known as journalizing.

Rules of journalizing

Rules of debit and credit have already been discussed in the provision chapter but in order to recapitulate, these are given again:

Based on accounting equation
1. Increase in assets are debits, decrease are credits.
2. Increase in liabilities are credits, decrease are debits.
3. Increase in capital are credits, decrease are debits.
4. Increase in profits are credits, decrease are debits.
5. Increase in expenses are debits, decrease are debits.

Based on traditional approach
1. Debit the receiver, credit the giver.
2. Debit what comes in, credit what goes out.
3. Debit all expenses and losses, credit all incomes and gains.

Points to be noted before journalizing

1. Capital account: - If the proprietor has introduced cash or goods or property in business, it is known as capital. It should be debited to cash/ stock of goods/ property accounts are credited to the proprietor, capital account.
2. Drawings account: - If the proprietor has withdrawn cash or goods from the business for his personnel or domestic use, it is called drawings.
3. Cash/credit transaction: - When goods are our chased or sold for cash, it is known as cash transaction. If the goods are purchased or sold on credit i.e. the payment will be made or received after some times, it will be credit transaction.
4. Casts and carry forward: - When journal entries extend to several pages of the journal, the totals are cost at the end of each page. At the end of each page the words total carried forward are written in the particular column against the debit and credit totals.
5. Goods given away as charity: - If some goods from the business are given away as charity to a particular person or institution, it should be debited to charity account and credited to purchase account.
6. Compound journal entry: - If there are two or more transaction of a similar nature occurring on the same day and either debit and credit account is common, such transaction can be conveniently recorded in the form of one journal entry instead of making a separate entry for each transaction. Such entry is known as compound journal entry.
7. Opening entry: - The balances of the previous year are brought forward in the beginning of the years by means of an entry in a going concern. Such entry is made on the basis of accounting equation i.e. by debiting all assets and crediting liabilities and capital account.
8. Cash discount: - This discount is allowed by a creditor to a debtor when the latter pays the amount of goods purchased by him either immediately or within a specified period.
9. Trade discount: - It is a dedication on the gross value or list price of goods allowed by the manufacturing to the wholesaler or a whole sale to a retailer in order to enable them to sell the goods further at list price to the consumer and yet earn profit.
10. Interest due on loans: - When a loan is taken from a customer because of his insolvency or otherwise, it is a loss for the business.


Did you like this resource? Share it with your friends and show your love!




Responses to "Rules of Journal"
Feedbacks      

Post Comment:




  • Do not include your name, "with regards" etc in the comment. Write detailed comment, relevant to the topic.
  • No HTML formatting and links to other web sites are allowed.
  • This is a strictly moderated site. Absolutely no spam allowed.
  • Name:   Sign In to fill automatically.
    Email: (Will not be published, but required to validate comment)



    Type the numbers and letters shown on the left.


    Submit Article     Return to Article Index

    Awards & Gifts
    Active Members
    TodayLast 7 Daysmore...

    ISC Technologies, Kochi - India. Copyright © All Rights Reserved.