JOURNAL TO TRIAL BALANCE Course Lecturer: Md. Mizanoor Rahman Email:
[email protected]
Journal Introduction An accounting process may e considered to e composed o! t"o parts: #i$ Recording phase and #2$ %ummarizing phase. &ournal is the !irst step o! recording transactions. 'his lesson "ill deal "ith di!!erent aspects o! (ournal as to recording transactions therein. )n !act accurate accounting statements can e prepared only i! transactions t ransactions ha*e een recorded properly.
Books of Original Entry and Journalizing Transactions A) Wat is a Journal! 'he oo+ in "hich the in!ormation aout each usiness transaction is initially recorded is called (ournal. 'hus it is a chronological #day,y,day$ record o! usiness transactions. 'he (ournal is a permanent chronological record o! the deits and credits resulting !rom transactions- together "ith all necessary eplanations o! the transactions. %o- the in!ormation recorded in (ournal relates to the dates o! transactionstransactions- the deit and credit change in speci!ic speci!ic /Ledger accounts/ and a rie! eplanation eplanation o! the transaction. %ince the (ournal is the accounting record in "hich transactions are !irst recorded- it is also called the oo+ o! original entry or prime entry. B) Wy to Us" Journal 'echn 'echnica ically lly it is possi possile le to record record transa transactio ctions ns direct directly ly to Ledger Ledger.. ut due to some some speci! speci!ic ic ad*antages- as detailed elo"- usiness !irms +eep oo+s o! original entry called (ournal. i) Complete information as to transaction )n (ournal the deit and credit o! a transaction is recorded together ut "hen transactions are recorded directly in ledger- the deits and credits are recorded in di!!erent accounts. 1urther- in (ournal a rie! eplanation as to transaction is recorded. ii) Chronological record )n (ournal transactions are recorded in day to day chronological order. 1uture and past re!erence thus ecomes help!ul. iii) Prevention of Errors )! transactions are recorded direct in the ledger errors may creep into "hich may e di!!icult or time consuming to detect. ut in (ournal- since the o!!setting deits and credits !or each transaction appearsuch errors are less li+ely to e occurred and i! occur can e detected easil y. C) Journalizing 'he process o! recording a transaction in a (ournal is called (ournalizing. 'he procedure and steps in (ournalizing can e summarized as !ollo"s: i) Recording the Dates #a$ ear ear in inserted at top column o! each page meant !or date ecept "hen the year changes. #$ Month is inserted on !irst line o! 3ate column o! each page- ecept "hen the month changes. #c$ 3ay is inserted in second line o! 3ate column used !or each transaction- regardless o! numer o! transactions during the day. ii) Recording The Debit 'itle o! account to e deited is inserted at etreme le!t o! the 3escription column and amount is entered in the 3eit column along that line. iii) Recording the Credit 'itle o! account to e credited is inserted elo" the account deited- moderately indented- and the amount is entered in the Credit column against that line. iv) Ledger Folio (L.F) 'he ledger !olio column to the right o! the description column- is not !illed in "hen transactions are recorded. )n the ledger "hen deits and credits are posted !rom (ournal- the page numer o! the ledger in "hich these accounts are appearing are listed in this column. v) Writing Writing eplanation i.e. !arration
A rie! eplanation is "ritten elo" each entry. %ome accountants pre!er that the eplanation e omitted i! the nature o! the transaction is o*ious. A specimen o! (ournal is sho"n elo": Journal 3ate 3escription Ledger 3eit Credit 1olio '+. '+.
E#a$%l" &ournalize the !ollo"ing transactions in the oo+s o! 45 Ltd. !or the month o! &anuary- 2000. 2000. &anu &anuar ary y %tar %tarte ted d us usin ines esss "it "ith h '+. '+.22-00 00-0 -000 00 in cash cash as capi capita tall / 2 3eposited to an+ '+.-20-000 / 7 ought 8!!ice 1urniture !or '+.20-00 9 aid che;ue / 7 ought go good "i "ith '+ '+.70-000 ca cash 9 '+. %old goods !or cash '+.27-000 / 0 %old good on credit to Ali '+.?0-000 / 2 aid =ai on account '+. Recei*ed !rom Ali '+.7-000 / ?0 aid %alary y che;ue '+.20-000 &olution' (* Ltd+ Journal ,at" 2000 &an.
/
/
/
/
/
2
7
7
>
0
2000 &an.
2
/
?
-articulars
Cash Capital Cash rought as capital an+ Cash Cash deposited in to an+ 1urniture an+ ought !urniture and payment made through che;ue urchase Cash Accounts ayale #=ai$ urc urcha hase se o! good good '+.7 '+.700-00 000 0 in cash cash and and in cred credit it '+.0 !or income and > to 00 !or epenses etc.
&u/2di3ision of t" L"dg"r %o !ar as a small usiness is concerned- it "ould not e di!!icult to accommodate the "hole o! the transactions o! the usiness in one Ledger. ut "ith the increase o! usiness acti*ities and !inancial transactions- as the transactions ecome *oluminous- the Ledger "ill ha*e to e su,di*ided and the su,di*ision may e made in the !ollo"ing manner. 'hus- there may e:, #a$ A Debtors' Ledger or Customers' Ledger or Sales Ledger to +eep records o! the accounts o! customers only #$ A Creditors' Ledger or Suppliers' Ledger or Purchases Ledger to contain accounts o! suppliers o! goods
#c$ An Impersonal Ledger or a Nominal or General Ledger "hich "ould co*er all accounts other than those o! customers and suppliers and #d$ A Priate Ledger "hich contains Capital Account and 3ra"ings Account o! the proprietor or each o! the partners. 'his ledger emodies accounts o! pri*ate nature. E#a$%l" 1rom the !ollo"ing particulars o! AC Ltd. prepare &ournal entries and Ledger accounts o! the company !or the period. ear 2000 April : 2 %tarted usiness "ith '+.-00-000- paid into an+ '+.70-000 ? ought 1urniture in cash '+.0-000 7 ought goods !or '+.?0-000 > %old goods !or cash '+.6-000 7 ought 'ype "riter !rom R 9 Co. '+.>-000 20 ought goods !rom 3 9 rothers '+.27-000 27 %old goods to 45 Ltd. '+.2
>-000
0
27-000
27 0G
2-000
27-000
2 ?0 ?0
-articulars
R"f+
Capital
7
%ales an+ ADR, 45 Ltd.
0G 02 27
May, alance D!
A$ount ,at" 'a+a 2000 -00-000 April , 2 6-000 ? 20-000 7 26-000 2G 2> 2> ?0 62-000
-articulars
R"f+
an+
02
1urniture urchase Ad*ertisement Rent %alaries alance cDd
0? 0 2 ? <
R"f+
0
A$ount 'a+a 70-000
,at" -articulars 2000 April Cash ?0 ?0 alance cDd
R"f+
0
May, alance D!
?0-000
.urnitur" Account R"f+
0
A$ount 'a+a 0-000
,at" -articulars 2000 April alance cDd ?0
R"f+
0-000 May, alance D!
0-000 R"f+
A$ount 'a+a >-000
,at" -articulars 2000 April alance cDd ?0
R"f+
>-000 May, alance D!
Code, 0< A$ount 'a+a >-000
>-000
>-000
&al"s Account ,at" -articulars 2000 April alance cDd ?0
Code, 0? A$ount 'a+a 0-000 0-000
Ty%" Writ"r Account ,at" -articulars 2000 April ayale !or 'ype riter 7
Code, 02 A$ount 'a+a 20-000 ?0-000 70-000
70-000
,at" -articulars 2000 April , Cash ?
0-000 ?0-000 7-000 0-000 20-000 ?G-000 -62-000
?G-000
Bank Account ,at" -articulars 2000 April , Cash 2
Code, 0 A$ount 'a+a 70-000
R"f+
A$ount 'a+a 70-000
,at" -articulars 2000 April, Cash > 27 Account recei*ale ,45
R"f+
0 27
Code, 0G A$ount 'a+a 6-000 2
70-000 Code, 0 A$ount 'a+a 77-000
77-000
Ad3"rtis"$"nt Account ,at" -articulars 2000 April Cash 2G
0-000
-aya/l" for Ty%"4rit"r 5R 6 Co+) Account R"f+ A$ount ,at" -articulars 'a+a 2000 >-000 April 'ype"riter 7 >-000
May, alance D!
-00-000
R"f+
Code, > A$ount 'a+a >-000 >-000 >-000
Account -aya/l" 5, 6 Brots) Account Code, ,at" -articulars R"f+ A$ount ,at" -articulars 2000 'a+a 2000 April alance cDd 27-000 April urchase ?0 20
R"f+
0
27-000
27-000 May, alance D!
Account r"c"i3a/l" (* ,at" -articulars R"f+ A$ount 2000 'a+a April %ales 0G 2-000 ?-000 Att"ntion' )n this illustration accounts ha*e een coded as: alance items assets 0 !or cash- 02 !or an+- etc. Li+e "ise re*enue 9 ependiture items ha*e een coded as 0G !or sales- 0 !or purchase- 2 !or ad*ertisement and the li+e. 'hus in &ournal post re!erences ha*e een sited against the accounts and in Ledger these ha*e also een sho"n. 'his is !ound in practice.
%ummary )llustration o! &ournalizing and osting E#a$%l" 8n st 8ctoer- Mr. &ohn entered into a usiness. 'ransactions !or the month "ere as !ollo"s: 8ctoer : &ohn in*ests '+.0-000 cash in an ad*ertising *enture to e +no"n as the oineer Ad*ertising Agency. / : 8!!ice e;uipment costing '+.7-000 is purchased y signing a ?,month- 2I '+.7-000 note payale. / 2: '+.-200 cash ad*ance is recei*ed !rom R. Jno+ a client- !or ad*ertising ser*ices that are epected to e completed y 3ecemer ?. / ?: 8!!ice rent !or 8ctoer is paid in cash- '+.00 / . aid cash !or rene"al o! property )nsurance '+.7-000 . Cash %ale '+.00- #*$ 3epreciation @ 7I on uilding 9 0I on 1urniture is re;uired. #*i$ Hoods costing '+.700 "as ta+en y Mr. Roin !or personal use #*ii$ 'he stoc+ at the end included goods "orth ta+e 2-000 !or "hich the ill neither has een recei*ed and nor accounted !or. .
1ollo"ing are the transactions o! 5era enterprise !or the month o! May- 2000. Enter these in the oo+s o! 8riginal entry o! the enterprise assuming that it +eeps %pecial and Heneral (ournal: 2000 May : urchase !rom 4 Ltd. Hoods "orth '+.70-000 : 3ra"n !rom an+ '+.70-000 2: %old goods in cash '+.: urchase o! Computer in cash '+.: aid 4 Ltd. '+.0 tins o! %un %oaeen @ '+.227 per tin . aid miscellaneous epenses '+.-G70 2. Returned portion o! supplies purchased on &une < to the supplier- recei*ing !ull credit !or the cost '+.
