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    Financial Management & Cost Accounting: Lesson 6 Introduction To Journal

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    Amit Kr Godara
    1. The document discusses key accounting terminology used in journal entries such as debtors, creditors, journal, capital, drawings, and compound journal entries. 2. It provides an example of various business transactions with their analysis including starting a business, receiving and paying cash, earning commission, and purchasing assets. 3. The preparation of journal entries is explained with five columns - date, particulars, ledger folio number, debit amount, and credit amount. Journal entries for the sample transactions are recorded to demonstrate the journalization process.

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    Financial Management & Cost Accounting: Lesson 6 Introduction To Journal

    Uploaded by

    Amit Kr Godara
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    1. The document discusses key accounting terminology used in journal entries such as debtors, creditors, journal, capital, drawings, and compound journal entries. 2. It provides an example of various business transactions with their analysis including starting a business, receiving and paying cash, earning commission, and purchasing assets. 3. The preparation of journal entries is explained with five columns - date, particulars, ledger folio number, debit amount, and credit amount. Journal entries for the sample transactions are recorded to demonstrate the journalization process.

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    ES-2_ Lesson 6

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    1. The document discusses key accounting terminology used in journal entries such as debtors, creditors, journal, capital, drawings, and compound journal entries. 2. It provides an example of various business transactions with their analysis including starting a business, receiving and paying cash, earning commission, and purchasing assets. 3. The preparation of journal entries is explained with five columns - date, particulars, ledger folio number, debit amount, and credit amount. Journal entries for the sample transactions are recorded to demonstrate the journalization process.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    31 views4 pages

    Financial Management & Cost Accounting: Lesson 6 Introduction To Journal

    Uploaded by

    Amit Kr Godara
    1. The document discusses key accounting terminology used in journal entries such as debtors, creditors, journal, capital, drawings, and compound journal entries. 2. It provides an example of various business transactions with their analysis including starting a business, receiving and paying cash, earning commission, and purchasing assets. 3. The preparation of journal entries is explained with five columns - date, particulars, ledger folio number, debit amount, and credit amount. Journal entries for the sample transactions are recorded to demonstrate the journalization process.

    Copyright:

    © All Rights Reserved
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    Download as pdf or txt
    of 4

    1/27/2015 ES­2: 

    Lesson 6. INTRODUCTION TO JOURNAL

    FINANCIAL MANAGEMENT & COST ACCOUNTING
      ◄ Jump to... ►

    B. Tech. (Dairy Technology) ► ES­2 ► Resources ► Lesson 6. INTRODUCTION TO JOURNAL  

    Module 2. Accounting procedure

    Lesson 6
    INTRODUCTION TO JOURNAL 

    6.1 Some Basic Terminology used in Accounting
    Illustration 6.1
    6.2 Preparation of Journal
    6.3 Compound Journal Entry

    6.1 Some Basic Terminology used in Accounting
    1. CREDITORS
    The  persons  to  whom  the  company  owes  money  in  return  of  the  benefit  (goods,  services,  cash,
    etc) provided by them.
    2. DEBTORS
    They are persons who owe money to the company, in return of, the benefits received by them. The
    benefits may be in the form of goods, services, cash etc which is provided to him by the company.
    3. JOURNAL
    Journal is the ‘’book of first entry’’. All the financial transaction of the firm are first recorded in a
    journal in a date wise (chronological) manner. It also records which account is to be debited and
    which  is  to  be  credited.  It  is  records  a  brief  statement  regarding  the  particular  transaction,  this
    statement is called Narration.
    4. CAPITAL
    The amount with which the trader starts his business i.e. the amount which has been invested in
    the business, is called capital.
    5. DRAWINGS
    Drawings represent the withdrawals of money (cash) or money’s worth (goods) by the proprietor
    from the business from capital for his personal use.
    6. COMPOUND JOURNAL ENTRY
    If  two  or  more  transactions  can  be  combined,  and  shown  in  a  single  journal  entry  (without
    changing the meaning of the transaction), it is called a combined journal entry.
    One thing to be noted here is, whether it is a single journal entry or a compound journal entry, the
    total debit should be equal to total credit.
    7. SALES

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    1/27/2015 ES­2: Lesson 6. INTRODUCTION TO JOURNAL

    Selling  of  goods  in  the  normal  course  of  business  is  called  sales.  It  may  be  cash  sales  or  credit
    sales.
    8. CURRENT LIABILITIES
    Those  liabilities  which  are  to  be paid  within  one year  are  called  current liabilities. For example
    trade creditors, Bills payable etc.
    9. CURRENT ASSETS
    Those  assets  which  are  meant  for  conversion  into  cash  as  soon  as  possible  eg.  stock  of  goods,
    debtors etc.
    10. GOODS
    The commodities bought for the purpose of resale are termed as goods. A Cloth merchant deals in
    cloth, therefore for him cloth – represents goods. Similarly for rice – Merchant “Rice” is “goods”.
    Examples of some common Business Transactions (along with their analysis)
    Illustration 6.1
     Consider the following transactions
    Date Particulars
    March 1 Started business with Rs. 1000.
    2 Received Rs. 50 From Mr. B.
    3 Received Rs. 250 as commission.
    4 Paid rent Rs. 50
    5 Purchased a machine Rs. 500.
    6 Purchased machine worth Rs. 1000 from AB and Co.
    7 Proprietor with draws cash Rs. 80 for personal use.
    8 Good returned to Mahesh Worth Rs. 200.
    9 Goods worth Rs. 100 returned by Shyam.

    Analysis
    Date Folio Accounts Type of Rule Explanation A/c to be A/c to be
    Transa­ no. Involved Account applied for Debited Credited
    ction Dr. and Cr. (Dr.) (Cr.)
    Number
    1 Cash a/c Real (Dr) comes Cash comes Cash a/c Capital a/c
    Personal in credit the in the Rs. 1000 Rs. 1000
    giver business and
    Capital a/c Proprietor is
    the giver of
    cash
    2 Cash a/c Real Comes in Cash in Cash a/c Mr. B’s a/c
    Personal (Dr) received from Rs. 50 Rs. 50
    Mr. B. a/c
    Giver * (Cr) Mr. B.
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    1/27/2015 ES­2: Lesson 6. INTRODUCTION TO JOURNAL

    3 Cash a/c Real Dr. What Cash a/c Commission


    Nominal comes in Rs. 250 a/c Rs. 250
    Commission
    Cr. All
    a/c
    incomes
    Note:
    In cash transaction Always omit personal accounts.
    In credit transaction Always omit cash account.

    6.2 Preparation of Journal
    A typical journal contains five columns ­
    1. Date : The date of transaction.
    2. Particular : Details of transaction along with Narration.
    3. L.F. : Ledger folio Number / page number all which the various
    accounts appear in the ledger
    4. Amount (Dr): Amount to be debited.
    5. Amount (Cr): Amount to be Credited.
    In addition to the above information, there is also a small narration of the transaction being recorded.
    Narration always appears in parentheses and always starts by the word “Being”. In journal entries a
    prefix “To” is applied before the account which is to be credited.

    Journal Entries for the Transactions Mentioned in illustration 6.1
    Date Particular L. F Amount Amount
    (Dr) (Cr)
    2005
    March 1 Cash a/c Dr 1000
    1000
    To capital A/c
    (Being the business Started with
    cash)

    2 Cash a/c Dr 50 50
    To Mr. B’s a/c
    (Being the money received from Mr.
    B.)
    3 Cash a/c Dr. 250 250
    To commission a/c
    (Being the Commission – earned)
    4 Rent a/c Dr. 50 50
    To cash A/c.
    (Being the rent paid)
    5 Machine A/c Dr. 500 500
    To cash a/c
    (Being the purchase of machine)
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    6 Machine A/c Dr. 1000 1000


    To AB and Co. a/c
    (Being Machine purchased on credit
    from AB and Co.)
    7 Drawing A/c Dr. 80 80
    To Cash a/c
    (Being the withdrawal of cash for
    personal use by proprietor)
    8 Mahesh’s A/c Dr. 200 200
    To Purchase return a/c
    (Being the goods returned to
    Mahesh)
    9 Goods A/c Dr. 100 100
    To Sales return a/c
    (Being the goods returned by
    Shyam)
    6.3 Compound Journal Entry
    Many times it is possible to pass entry a single journal entry for two or more transaction, (of same
    date)  instead  of  repeating  the  accounts  and  passing  separate  entries.  Generally  opening  and  closing
    entries in a Journal are compound entries. The example of a compound entry is:
    Transaction : “Started business with Rs. 10,000/­Cash and stock worth Rs. 10,000/­
    The Journal Entry is:
    Cash A/c Dr. 10,000/­
    Stock A/c Dr. 10,000/­
    To capital A/c 20,000/­
    Another Example : “Purchased Machinery from K. K. and Co., worth Rs. 25,000 and paid Rs.
    10,000 cash.”
    The journal Entry is
    Machinery a/c Dr. 25,000/­
    To cash a/c 10,000/­
    To K. K. and co. a/c 15,000/­

    Last modified: Wednesday, 15 May 2013, 11:27 AM

     
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