1. Chapter 2
Journal

2. Learning Objectives
After studying this chapter, you should be able to:
Students are able to understand the concept of Journal.
Students are able to understand the Rules of Debit and Credit.
Students are able to understand the Simple entry and Compound Entry.

3. The Accounting System to record transactions
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4. Journal
Definition:
“Journal is a book of original entry in which business transactions are recorded chronologically” (I.e. time & date wise).
The word “Journal” has been derived from the French word “Jour” which means day. So Journal means daily. Transactions are recorded on daily basis in Journal.

5. Journal SOME OTHER NAMES OF JOURNAL: Journal is also known as:
Day Book
Chronological Book
Book of original entry
Book of first entry
Primary book

6. Advantages of Journal
It show all information about a transaction as it takes place and also provide an explanation of the transaction.
It helps in locating errors.
There is no possibility of transactions as each transaction is recorded immediately.
It provide a chronological record of all transactions which is helpful to locate a transaction relating to a particular date.

7. SUB DIVISION OF JOURNAL:
In large business where transactions are numerous, it is very difficult to record all transactions in one journal. So journal is sub divided into several books. Each separate book is known as subsidiary book or special journal. The nature of operations and size of business transactions in a particular business determine the number and types of journals needed. However the followings are the types of journals usually maintained by a medium size business concern.

8. For Liabilities Account
Rules of Debit & Credit
Types of Account
Rules for Debit
Rules for Credit
For Assets Account
Increase
Decrease
For Liabilities Account
For Capital Account
For Revenue Account
For Expenses Account

9. Remember: Just ask! Debit Credit + A = Assets - L = Liabilities
I = Income*
C = Capital
E = Expenses
* Really, this is revenues, but “r” just doesn’t fit in!

10. = + Normal Balances Liabilities Equity Assets + - - + - + Normal
Debit Credit
Debit Credit
Debit Credit
Normal
Balance
Normal
Balance
Normal
Balance

11. Rules of Debit and Credit
Owner’s Equity
Debit Credit
Assets
Debit Credit
Libilities
Debit Credit
Expenses
Debit Credit
Revenues
Debit Credit

12. Format of General Journal
Transaction Date
Accounts Affected
Journal L.F Page 1
Date
Description
Debit
Credit
Jul 1

13. Rules of Debit and Credit
ENTRY:
Record of each business transaction in concerned book of accounts is called an entry.
SIMPLE JOURNAL ENTRY:
An entry in which only one account is debited and only one account is credited is known as simple journal entry.

14. EXAMPLE SIMPLE JOURNAL ENTRY
Transaction # 01:
Owner Mr. Farooq invested the cash in Business Rs.10, 000 on Jan.1, 2009.
Analysis:
In this transaction two accounts involved.
1) Cash
2) Capital
Increase in cash Rs: 10,000 (Increase in Asset Debit)
Increase in Capital Rs: 10,000 (Increase in Capital Credit)

15. General Journal Transaction Date Accounts Affected Date Jul 1
Journal Ref Page 1
Date
Description
Debit
Credit
Jul 1
Cash
10,000
Capital
Investment from owner
Explanation of transaction
Dollar amount of debits and credits

16. Journal COMPOUND JOURNAL ENTRY:
An entry in which more than one accounts are debited or more than one accounts are credited is called compound journal entry.

17. Journal Transaction # 02:
On July 10, 2009 purchase Land for Rs.25,000 paying cash Rs.5,000 & remaining amount is payable after 60 days.
Analysis:
In this transaction three accounts involved.
1) Land
2) Cash
3) Accounts payable

18. General Journal Transaction Date Accounts Affected Date Jul 10
Journal Ref Page 1
Date
Description
Debit
Credit
Jul 10
Land
25,000
Cash
5,000
Accounts payable
20,000
Investment from owner
Explanation of transaction
Dollar amount of debits and credits

19. Exercise 2-5 Cash 4000 Paid Rent for cash Paid Rent for Rs. 4000:
Cash is decreasing
Expenses is Increase
Decrease an asset with a credit
GENERAL JOURNAL
DATE
DESCRIPTION
REF
DEBIT
CREDIT
Cash
4000
Paid Rent for cash
Jun 2 Rent Expense 4,000

20. IN CLOSING…