What Do You Mean by Journal?
In the process of accounting and book-keeping, a journal is a record of financial transactions where transactions of a business are ordered by date. A journal is defined as the book of original entry while the definition is more appropriate when the transactions were written in a journal prior to manually posting them to their respective accounts. There are a variety of journals like the sales journal, purchases journal, cash receipts journal, cash disbursements journal, and a general journal.
We will further know about Journals in the following sections.
Functions of Journal
The basic book of accounting is known as the journal. Precisely journal is said to be the book of prime entry which means day book where the trader records his total daily transactions in the book. The process of recording the accounting transactions into this journal is called ‘Journalizing’.
Journal may be described as the book in which the transactions are recorded in the order of their occurrence i.e. in the chronological order. This is called a book of prime entry or the original entry as all business transactions are entered first and in priority in this book.
The main functions of Journal are as follows:
At the time of recording a transaction in the journal, each transaction is analysed into the debit aspect and the credit aspect. This helps in understanding how each transaction will affect the business.
This is a business language which helps to keep the record of the transactions based on the principles. Recording entry is supported by a brief narration, which explains every transaction in a layman’s language.
Journal book contains a chronological record of the recording of transactions for future references. This will further help the business to analyse their past performance and chalk out their future possibility.
Advantages of the Journal
Journalizing the business transaction is done by the majority business. Journal helps a business to keep a systematic record of their financial events. To know the advantages of maintain the same, we can sum it in the following points:
Journal records all the financial transactions of a business in one place on the time and date basis.
The transactions are recorded, in support with a bill, to check the authenticity of each of these journal entries with their bills.
There is a less chance to avoid transactions as in a journal we record each and every transaction on a date basis.
The accountant writes each journal entry’s narration below every journal entry, so that another auditor can audit it without any confusion.
In a journal, we record these transactions which help in deep analysis of the two accounts on the basis of a double entry system, and this prevents a minimum chance of mistake in the journal.
Journal posts the transactions in their respective ledger accounts. Without making this journal, an accountant will be unable to make the ledger accounts.
In case of a mistake in the ledger accounts, this can be easily rectified with the help of a journal or by passing a rectified journal entry in the journal.
All the opening journal entries, closing journal entries and all other transactions which cannot be recorded in any other subsidiary books, can be recorded in the journal proper.
Even in accounting software, journals are required. Accounting software can make an auto system of posting the journal entries to the ledger by their automatic processing system.
There is a single column of ledger folio, which is very helpful for checking the reference of each account’s posting with its own original journal entry.