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Last updated date: 23rd Apr 2024
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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 before 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 general journal.


We will further know about Journals in the following sections.


Diving Deep To Understand the Concept of the Journal:

A journal is referred to as a digital document or physical record which is kept as a spreadsheet or data within the accounting software and used only for accounting. To understand this better let’s visit a bookstore: Suppose Shyam visits a bookstore to buy a book. He buys the book and proceeds towards the desk for transition then the bookshop owner makes a financial transaction as a journal entry of the book bought by Shyam in his accounting records.


But here if we consider that an expenditure made by the bookshop owner affected his business accounts then the journal entry will keep details about that as well.


Double-Entry Bookkeeping Journal:

This is one of the most generic forms of accounting. How the journal entries are recorded and how it affects the way journals are kept depends directly on the double-entry bookkeeping. The exchange between the two accounts marks the transactions made by the business. This thus clears that the two columns are used to record the journal entry. For example A business owner purchases \[$\] 2000 worth of merchandise with cash then the bookkeeper records two transactions in the journal making an entry of the same. Whereas, the cash account decreases by \[$\] 2000 and the merchandise account having the current asset is increased by \[$\] 2000.


Single-Entry Bookkeeping Journal:

In accounting and business generally, single-entry bookkeeping is used. It is more like a chequebook in which a single account is used for every journal entry thus making it one of the basic forms of accounting journals. It just keeps records about the cash outflow and cash inflow. For example A business owner purchases \[$\] 2000 worth of merchandise with cash, then a single entry is made in the journal about the \[$\] 2000 cash reduction in the cash mentioning the total ending balance below it. The entry is made about separate total income and separate total cash outflow in two columns in a business account to track the same and not just the aggregate ending balance.


The Use of Journals in Investing and Trading:

In the investment finance sector, a journal is used to keep records. It keeps the record of the tax, evaluation and auditing purpose of the investors’ account. This journal is a comprehensive one keeping a record of the trades that take place in the investor’s account more of a professional managerial account. To learn from the past successes and failures a quantifiable hierarchical journal is used by traders for their trading performance over time. However, a past performer generally doesn’t justify how the trader might perform in future. The journal helps you just get a quick look and review about how the traders may have chosen their strategy in the past even including the emotional element.


The Process of Making an Accounting Journal Entry:

Firstly, we need to record our transactions in daily life for creating our very own accounting journal. We need to look over invoices, purchased orders, receipts, cash register tapes and other data sources for detailed financial transactions.


These detailed financial transactions that we’ve derived are documented in chronological order in the journal. The journal entry made is about every transaction that we’ve listed in the journal. The following information is further registered in the ledgers. The double-entry bookkeeping method is used for these journal entries that are being made for recording the transaction entries. These are made in the two columns respectively under the names: debit and credit.


Functions of Journal

The basic book of accounting is known as the journal. The 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 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:

  • Analytical Function:

 At the time of recording a transaction in the journal, each transaction is analyzed into the debit aspect and the credit aspect. This helps in understanding how each transaction will affect the business. 

  • Recording Function: 

This is a business language that helps to keep the record of the transactions based on the principles. The recording entry is supported by a brief narration, which explains every transaction in a layman’s language. 

  • Historical Function: 

The Journal book contains a chronological record of the recording of transactions for future references. This will further help the business to analyze their past performance and chalk out their future possibility.


Advantages of the Journal

Journalizing the business transaction is done by the majority of businesses. Journal helps a business to keep a systematic record of its financial events. To know the advantages of maintaining the same, we can sum it in the following points:

  • Journal records all the financial transactions of a business in one place on a time and date basis.

  • The transactions are recorded, in support of a bill, to check the authenticity of each of these journal entries with their bills.

  • There is less chance to avoid transactions as in a journal we record 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 the deep analysis of the two accounts based on 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 original journal entry.


There are many options available for accounting journals and each one has a slightly different purpose. The general transactions are recorded under a general journal and they don’t fit into the other journals. The general journal is classified as a “catch-all” journal.

The one used to record inventory sales credit is known as a sales journal.

The receipts journals are the ones in which cash inventory is recorded.

The inventory that was once sold but later returned due to some issue is recorded in the sales return journal.

The inventory bought and the equipment purchased by the companies are registered or recorded in the purchases journal.

There are an infinite number of journals available in the market but only a few of them are used by the companies.

FAQs on Journal

1. What is the meaning of accounting?

Accounting is the process of recording the financial transactions of a business. The accounting process includes summarizing, analyzing and reporting these financial transactions to oversight agencies, the regulators and the tax collection entities.

Accounting is one of the key functions of almost any kind of business. The function of accounting may be handled by a bookkeeper or by an accountant at a small firm, or by a sizable finance department with a dozen employees in big companies.

2. What is a general journal?

As simply put on, the general journal refers to the book of original entries, where accountants and bookkeepers record the raw business transactions, in order of their date events.

3. What is debit and credit?

A debit is the recording of the increase in asset or expense accounts, and the decrease in the liability, revenue or equity accounts. While credit is always positioned on the right side of the entry. The credit increases the liability, revenue or equity accounts and decreases the asset or expense accounts.

4. What are ledgers?

Ledger is a permanent summary of all the amounts that are entered in the journal. All the transactions flow from a journal to one or more ledgers. The financial statement of the company is generated from summary totals in the ledgers.

5. Write the difference between a journal and a ledger.

1. A journal is a book in which we record all business transactions whereas a ledger is the one that saves the financial information of the financial statements.

2. Journal is used to prepare a ledger while a ledger is used for making final accounts and trial balance.

3. Journal entries are made in chronicle order. For ledger entry is made account-wise.

4. The debits and credits are recorded in columns in a journal while for ledger it has two different sides.LHS for debit and RHS for credit.

5. In journals balancing is not done whereas it is done in the ledgers of the accounts.