BOOK KEEPING

JOURNAL ENTRY:

Recording a transaction in a Journal is called Journal Entry or Journalizing.

LEDGER ENTRY:
Recording a transaction from, Journal to the concerned account ·in Ledger is called
Ledger Entry. It is also known as Ledger posting.

NARRATION:
A short explanation of each transaction is written under each entry which is called
Narration. The subject matter of the transaction can be ascertained through n a r r a t i o n .
Besides this, if there be any mistake in determining debit or credit aspect of a
transaction, it can be easily detected from narration.
"A Journal entry is not complete without narration".

CHARACTERISTICS:
Journal has the foll owing features:
(] ) ,Journal 1s the first successful step of the Double Entry system . A transaction is
recorded first of all in the journal. So, Journal is called the book of Original
Entry.
(2) A transaction is recorded on the same day it takes place. So, Journal is also
called a Day Book.
(3) . Transactions are recorded chronologically. So, Journal is called Chronological
Book.
(4)' For each transaction the names of the two concerned accounts indicating which
is debited and which is credited, are clearly written in two consecutive lines.
This
makes ledger-posting easy. That is why Journal is called "Assistant to Ledger" or
"Subsidiary Book".
(5) Narration is written below each entry.
(6) The amount is written in the last two columns - debit amount in Debit
column and credit amount in Credit column.

ADVANTAGES: .
The following ng are the advantages of ,Journal:
(1) Each transaction is recorded as soon as it takes place. So there is no possibility
 of any transaction bei ng omitted from the books of accou nt. '
(2) Since the transactions are kept recorded in Journal chronologically with
narration. it can be easily ascertained when and why a transaction has taken place.·
(3) For each and every transaction which of the two concerned accounts will be
I debited and which account credited , are clearly written in Journal. So, there is
no possibility of commuting any mistake i n writing the Ledger.
(4) Since all the details of transactions are recorded in ournal , it is not necessary to
repeat them in Ledger. As a result Ledger is kept tidy and brief.
05 ) ,Journal shows the complete story of a transaction in one entry.
(6) Any mistake in Ledger can be easily detected with the help of ,Journal.

FORMAT OF THE JOUR NAL

ILLUSTRATION NO. 1 L
Jour nalise the follow;ing transactions:
FollowiI1g steps should be kept in mind before jou rnalising the transactions:
(1) Which are the two aspects of each transaction?
:-&. (2) Which accou nts are concer ned?
(3) Concerned accounts belong to w hich category'?
(4) Which rule of 'debit and credit' is applica ble?
1992 Rs.
Feb. 3 X commenced business with a capital of 5,000
5 Pu rchased goods 2,000
7 Pu rchased goods on cred it from Sarwar & Co. 1,000
10 Pu rchased fu rnitu re 800
11 Sold goods 1,300
15 Sold goods on credit to Dilawa r Bros. 750
20 Paid salaries 320
25 Received commission 25
26 Retu rned goods to Sarwa r & Co. 200
27 Retu r ned goods by Dilawa r Bros. 150
28 R eceived from Dilawa r Bros. 500
Pa id to Sarwar & Co. 600.
X withd rew from busi ness 300
 Cha rged depreciation on furni tu re 80
Bor rowed from Shafiq 500

1. DATE:
The d ate of transaction is written in this column in two lines - ii1 the first
line, the year and in the second line, first the name of month and thereafter the
actual date.
2. DETAILS:
In this column the names of the two connected accounts are written in two
consecutive · lines - in the first line the name of Account debited and in the
second line the name of Account credited , While the name of Account debited
always placed close to the left-hand margin line. the name of Accou nt credited is
commenced a short distance a way. from t he margin line. This arrangement will
show clearly which accou nt is debited a nd which creditted. This also shows that
Credit Amount is placed on the right side of Debi t amount. The word "Dr'" 1s used at
the end of the nam e of Accou nt. d ebited . I t 1s not necessa ry to place
the word "Cr" rlftel' tht• n am e of Cnocl ited Accou n t. beca use if one accou nt i s Dr. i t follmn' t
hat the othe r accou nt m ust he Cr. Bel ow the qames of the t\vn Accou nts. i .e. .i n t he third
l11w Na r ration i s w ri tten usu:-il l y withi n a bracket. According to trad i tion , narra tion i.-o wri
tte n starti ng

ILLUSTRATION NO. 2 .S L ·
Amir stated business on 1st January 1991 with Rs. 20,000 as capital.
Below mentioned are the transactions which took place in the month of
January. He requests you to enter these in his Journal.
Jan. 91
2 9
3 10
.:... _.I.."
7 12

7 18

8
 30
2/1/91 Opened Bank Accou nt with Rs. 15,000.
3/1/91Goods are pu rchased from Rehman on credit for Rs. 7,000.
31 Purchased second hand duplicati ng machine for cash for Rs. 2.000.
31 Sold goods on credit to Munir worth Rs. 1.,500.
3f · Purchased goods on cash for Rs.

\
1,000. Cash sales to Farooq worth Rs.
1,000.
Machinery purchased payment made by cheque Rs. 6700.
Borrowed Rs: 3,000 from Tufail.
Fire occurred in the business and goods worth Rs. 700 were
destroyed.
Paid rent to Waris Rs. 100 for the building in which business is
situated.
Paid salary to clerk Rs. 150.
Received Rs. 1,450 from Munir in full settlement of his accou nt.
Paid Rs. 3,000 to Rehman in part-payme.nt of the amou nt due to
him.

31· Amir withdrew Rs. 500 for his personal use.

31Bank credited his account for interest Rs. 50.