2.12. Accounting books
2.12.1. Journals or books of prime entry
The primary function of the journals is to serve as formalconnecting link between the source document of a transaction and theappropriate ledger accounts. The journals provide a chronological history ofthe transactions engaged in by a business firm. They provide more informationregarding a transaction more than the ledger accounts and they show clearly thedual effect of each transaction. Journals are some times referred asdaybooks.
The journal is used to describe the process of recording thevarious aspects of a transaction in one or more books of primary entry. Ajournal entry or the recorded transaction in a journal should include thefollowing information:
Date of the transaction
Name of the account to debited and credited Amount to be debitedand credited
A brief narration or explanation of the transaction
The journal will also contain a column for posting referencesor folio. This column will show which account numbers in the ledger the variousentries have been posted. A general journal or journal proper is illustratedbelow. It is the simplest form of journal which uses two column formats. In asmall business organization, a general journal serves the purpose of recordingall accounting transactions.
General journal
Date | Description | Folio | Debit | Credit |
As shown above, the general journal contains the followingcolumns:
Date column: The date of the transaction isentered in this column, the year, month and date. It is not necessary to repeatthe year and the month on the same journal page.
Description column: This column contains thedebit and credit accounts and the brief explanation of the transaction. Theaccount debited is written first and the account credited is written on thefollowing line intended a little bit so as to distinguish it from the debitaccount. On the next line a concise explanation of the journal entry iswritten.
Folio column: This is posting referencecolumn. It contains the ledger page or code number of the account into whichthe journal entry has been transferred or posted. This column is left blank atthe time of journalizing and is filled in only when the posting is done fromthe journal to the ledger accounts.
Debit column: This column is for the amountdebited.
Credit column: This column is for the amountcredited.
2.12.2. Subsidiary journals or daybooks
These are journal which contain daily records or voluminoustransactions of highly routine and respective nature such as credit sales,credit purchases, returns of goods, cash receipts, and cash disbursem*nts. E.g.each special journal is reserved for a particular type of document transactionsdata as it is shown below:
Special or subsidiary journal | Source document transaction data | |||
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Petty or minor cash disbursem*nt | ||||
4.Three column cash book | Receipts and payments of cash, cheques including a record ofeach discount allowed and received. | |||
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Return of goods to supplies previously bought on credit. | ||||
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I am an expert in accounting with extensive knowledge and experience in the field. My expertise spans various aspects of accounting, including the principles of financial transactions, ledger management, and the use of journals and books of prime entry.
The article you provided delves into the essential concepts of accounting, specifically focusing on accounting books and journals. Let me break down the key points:
2.12. Accounting Books
2.12.1. Journals or Books of Prime Entry
Function of Journals: The primary function of journals is to serve as a formal connecting link between the source document of a transaction and the appropriate ledger accounts. Journals provide a chronological history of business transactions, offering more information than ledger accounts and clearly showing the dual effect of each transaction.
Information in a Journal Entry: A journal entry or recorded transaction in a journal should include the following details:
- Date of the transaction
- Name of the account to be debited and credited
- Amount to be debited and credited
- Brief narration or explanation of the transaction
Components of a General Journal: The general journal, or journal proper, typically has the following columns:
- Date column
- Description column
- Folio column (posting reference)
- Debit column
- Credit column
General Journal Example:
Date | Description | Folio | Debit | Credit
-----------------------------------------------------------
MM/DD/YYYY | Account debited | | Amount|
| Account credited | | | Amount2.12.2. Subsidiary Journals or Daybooks
Definition: Subsidiary journals or daybooks are specialized journals that contain daily records of routine and respective transactions, such as credit sales, credit purchases, returns of goods, cash receipts, and cash disbursem*nts.
Types of Subsidiary Journals: Each special or subsidiary journal is reserved for a particular type of document transactions data. Examples include:
- Cash payment journal
- Cash receipt journal
- Petty cash book
- Three-column cash book
- Analysis cash book
- Sales journal
- Sales return journal
- Purchase journal
- Purchase return journal
These subsidiary journals help organize and streamline the recording of various types of transactions in a business.
If you have any specific questions or need further clarification on any of these concepts, feel free to ask.
