Importance of Journal

The primary book of account in which financial transactions are first recorded in chronological order, i.e., in the order in which they are entered, is called the journal. The accounting voucher, which is created on the basis of source documents such as cash memos, invoices, purchase bills, and so on, is used to record transactions in the Journal book.

Format of a Journal

Date      Particulars                                                         L.F.            Dr. ( ₹)             Cr.( ₹)

Date-The date, month, and year of the transaction are given in this column.

Particulars- The names of the accounts in which the debit and credit amounts are to be entered are written in this column. A brief explanation of the transaction is also written as a narration.

Ledger Folio (L.F.)- The number of the Ledger page to which the account is posted is given in this column.

Debit Amount- The amount debited is written in this column.

Credit Amount- The amount credited is written in this column.

Examples of Common Journals

A double-entry accounting system, which normally requires the use of both a general ledger and a general journal, is the accepted, standard practice for accounting. It may also involve the use of special journals for transactions that occur often within a specific category.

General Journal

A general journal is a book containing raw commercial transactions arranged by date in chronological order. It’s the primary place where a transaction is kept track of. The amounts are subsequently transferred to the appropriate accounts, such as receivables, cash, or asset accounts.

Special Journal

Special, or specialized, journals comprise of frequent transactions within a specified category and are typically used in manual bookkeeping to help organizations locate specific types of transactions. Sales and purchase journals, for example, collect sales to various customers and purchases from suppliers in one place. Modern accounting software eliminates the need for separate journals by making it simple to organize transactions and search for granular details.

Importance of Journal

• Since a transaction is recorded as soon as it occurs, the chances of it being excluded are very low. Journal makes sure that all entries are recorded irrespective of the size of the entity.
• The accounting journal records all transactions in a chronological order. As a result, accessing information about a certain transaction on a specific date becomes easy.
• Not only are transactions documented, but they are also written in a precise manner that gives the entire story of a financial event.
• All transactions are segregated into debit and credit categories, and for each debit entry, an equivalent amount of monetary value is assigned to the corresponding credit item. This guarantees that your accounting procedure is mathematically correct.
• Since journal entries include all of the details, they do not need to be added to the ledger again. This is quite useful for keeping your ledger neat and simple.
• Any inconsistencies or errors in the ledger or trial balance can be rectified using a journal. As a result, the accounting journal also serves as a source of information for financial statements.

What are Debits and Credits?

Credits add to liability, revenue, and equity balances and subtracts to expense and asset accounts, whereas debits add to expense and asset accounts and subtract from liability, revenue, and equity balances.

The basic principle in accounting is the same: An adjusting journal entry to account for the accruing interest on a bank loan will debit the Interest account and credit the Outstanding Interest  account.

Conclusion

Journal is the primary books of accounts. All transactions in a journal are recorded in a chronological order, that is, exactly when they occur. The journal is the most important books of entry as the correctness of all other accounting process depend on their accuracy. It not only reduces the chances of excluding a transaction but also makes it easier to correct data if mistakes are made. Since all journal entries are written with explanations it becomes easier to fully understand the financial event later.