What is a Journal – Books of Original Entries

 

As derived from a French word, journal means daily from its root word Jour which means day. These Journals are called Books of Original Entries or Subsidiary Books or Prime Books.

A book of original entry is an accounting journal that records the specifics and documentation of business transactions before posting or transferring them to the relevant ledger.

The writing of a ledger cannot begin until the book of original entry is filled with proof of business activities.

 

How is the Book of Original Entry Used?

Daily business transactions involving invoices, cash, vouchers, and other forms of evidence must be documented in the original entry book.

Credit and debit transactions are first recorded in the diary, along with their descriptions.

Essentially, the accounts associated with a commercial transaction are reflected in the book of initial entry. Entries are vouchers, invoices, currency, and other accounts kept in a book, list, notebook, diary, or leaflet.

An entry is the act of accurately recording the facts and details of a business transaction in a suitable book, such as a diary or a notebook.

Advantages of Journal:

The advantages of a journal are;

• Transactions are recorded daily and at the moment they take place, this reduces the chance for omission of record or transaction.
• Transactions are outlined in a chronological order making it easy for them to be easily ascertained when being transferred into the ledger.
• Each item in a journal has a narration under it, making the easy detection of mistakes in the record possible.
• All the details of a transaction are contained in a journal.
• Debit and credit accounts are included in a journal, this reduce the possibility of mistake when posting them into a ledger.

Disadvantages

• The journals are bulky and have lots of volumes which make handling the data very difficult.
• It’s not easy to find a particular transaction unless the person knows the date of the transaction.
• The post-booking of all the transactions into the individual ledger takes a lot of time.

Apart from the General journal mentioned and explained above, there are other journals such as:

 

1. Sales Journal for recording credit sales
2. Purchases Journal                         for recording credit purchases
3. Return inward Journals for recording returns from customers
4. Return Outward Journals             for recording returns to suppliers

 

SALES JOURNAL

This is a subsidiary book that records credit sales of goods to customer in detail. Sales journals are usually entered from the sales invoice. Another name for sales Journal is Sales Day Book.

PURCHASES JOURNAL

This is a subsidiary book that records credit purchase of goods from suppliers in detail. Purchase journals are usually entered from purchase invoice. Another name for purchases Journal is Purchases Day Book

RETURN INWARD JOURNALS

This is the subsidiary books that records returns of good sold on credit to the customers. It is also referred to as Sales Returns Journals. A Credit Note is usually issued or sent by the seller to the customer as evidence of sales returns.

RETURN OUTWARD JOURNALS

This is the subsidiary books that records returns of goods bought on credit to the suppliers. It is also called Purchases Return Journals. A Debit Note is usually received by the suppliers as an evidence of return.

 

Basic Components of Books of Original Entry or Books of Prime Entry or Day Books

Entries in the books of original entry normally consist of the following

• Date of transaction
• Details relating to transactions, i.e., the second aspect of transactions, e.g., name of trade receivable in the sales journal
• Monetary amount of the transactions
• References to the relevant ledger account (often called folio)
• References to original source documents, e.g., invoice number

POSTING TRANSACTIONS FROM SUBSIDIARY BOOKS TO THE LEDGER

Sales Journals or Sale Day Books

1. Debtors Account (individually in the sales ledger amount sold to him or her)
2. Sales Account (with the total sale relating to these debtors as at the end the given period)

 Purchase Journals or Purchases Day Book

1. Purchase Account (with the total value of the purchase for the period)
2. Creditor Account (individually with the value of the purchases made from each of them).

Return Inward Journal or Sale Return:

The sales journals records return of sales made on credit to customers previously. Thus, it is in this wise a reversal of sales.

1. Sales Returns Account (periodically with the total amount of sale returns)
2. Debtors Account (individually with the amount of sales return)

Return Outward Journal or Purchases Return Journal:

The purchases Return Journal record the credit Purchase Returned to the supplier. It is therefore a reversal of purchases.

1. Creditors (individually with the amount returned)
2. Purchases Return Account (with the total amount returned periodically)

 

SALES JOURNAL OR SALES DAY BOOK

ILLUSTRATION 1

From the following transaction of MTN NIG. LTD, write up the sale journal for the month of March 2016 and post to ledger.

Mar. 2                          Sold to S. Bello

2 cartons of Apple        @      N1000 per cartons

5 cartons of Gala           @      N400

Mar 5                           Sold to M. Adisa

10 crates of Shapman   @       N500

2 dozens of peak milk  @       N400

5 Crates of eggs           @       N300

 

 

 

 

 SOLUTION             

MTN NIG LTD

SALES JOURNAL

DATE	NAMES AND PARTICULARS	FOLIO	DEATAILS	AMOUNT
Mar. 2	S.BELLO 2 cartons of Apple @N1000 (2XN1000) 5 cartons of Gala @N400 (5X N400)	F001	2,000 2,000	4,000       7,300
Mar. 5	M. ADISA 10 crates of Shapman @ N500 (10X 500) 2 dozens peak milk @ N400 (2X400) 5 Cratesof eggs @ N300 (5X N300)	F002	5,000 800 1,500
Mar. 5	Transfer to credit side of sales account			11,300

 

DR                                                      S. BELLO ACCOUNT                                            CR

Date	Particular	F	Amount	Date	Particulars	F	Amount
Mar. 2	Sales		₦ 4,000				₦

 

DR                                          M. ADISA ACCOUNT                                            CR

Date	Particular	F	Amount	Date	Particulars	F	Amount
Mar. 5	Sales		₦ 7,300				₦

 

DR                                          SALES  ACCOUNT                                                            CR

Date	Particular	F	Amount	Date	Particulars	F	Amount
			₦	Mar 5	Sundries		₦ 11,300

 

PURCHASES JOURNAL

ILLUSTRATION 2

Record the following transaction in purchases journals the books for KFC LTD and post to ledger.

Sept. 2             Bought of Chucks Int’l.

                        5 kg of Turkey                        @        N100

10 Cartons of Gala      @        N1000

7measures of beans     @        N200

Sept. 6             Bought of Chibuzo Ltd

                        2 Measures of Rice     @        N800

5 litres of g/nut oil       @        N800

Less: 10% trade discount

 

KFC LTD

PURCHASES JOURNAL

DATE	PARTICULARS	FOLIO	DETAIL	TOTAL
Sept. 2	CHUCKS INT’L 5kg of Turkey@ N100 (5 X N100) 10 cartons of Gala@ N1,000 (10 X N1,000) 7 measures of beans@ N200 (7 X N200)		₦ 500.00 10,000.00 1,400.00	₦     11,900.00
Sept 6	CHIBUZO LTD 2 measurs of Rice @ N800 5 liltres of G/nut oil @ N800 Less 10% trade discount		1,600.00 4,000.00 (560.00)	5,040.00
Sept 10	Transfer to the debit side of purchases account			16,940.00

 

DR                                                      CHUCKS INT’L  ACCOUNT                                            CR

Date	Particular	F	Amount	Date	Particulars	F	Amount
			₦	Sept 2	Purchases		₦ 11,900.00

 

DR                                                      CHIBUZO LTD ACCOUNT                                              CR

Date	Particular	F	Amount	Date	Particulars	F	Amount
			₦	Sept. 6	Purchases		₦ 5,040.00

 

DR                                          PURCHASES ACCOUNT                                                  CR

Date	Particular	F	Amount	Date	Particulars	F	Amount
Sept. 10	Sundries		₦ 16,940.00				₦

 

RETURN OUTWARD JOURNAL                      

 ILLUSTRATION 3

From the following transactions write up the Return Outward Books of MUFARA and post the transaction to the ledger.

Jan 4               Returned to Coca Kola ltd

                        6 crate of coke            @        N200

10 crates of Fanta       @        N200

Trade discount on 10%

Jan. 9              Returned to PZ ltd

                        15 bags of flour           @        N100

20 Canoe soaps           @        N500

Trade discount                        @5%

 

MUFARA

RETURN OUTWARD JOURNALS

DATE	PARTICULARS	FOLIO	DETAIL	TOTAL
Jan. 4	COCA KOLA LTD 6 crates of coke @ N200 10 Crates of Fanta @ N200 Less 10% Trade Discount ( N3,200 X 10/100)		₦ 1,200.00 2,000.00 (320.00)	₦     3,168.00
Jan. 9	PZ LTD 15 bags of flour @ N100 20 Canoe soaps@ N500 Les Trade discount of 5% (N11,500 X 5/100)		1,500.00 10,000.00 (575.00)	56,925.00
Jan.10	Transfer to the credit side of Returns outward Account			60,093.00

 

DR                              RETURN OUTWARD ACCOUNT                      CR

Date	Particular	F	Amount	Date	Particulars	F	Amount
			₦	Jan. 10	Sundries		₦ 60,093.00

 

 

DR                              COAO KOLA ACCOUNT                                     CR

Date	Particular	F	Amount	Date	Particulars	F	Amount
	Return outward		₦ 3,168.00				₦

 

DR                                          PZ ACCOUNT                                                         CR

Date	Particular	F	Amount	Date	Particulars	F	Amount
	Returns outward		₦ 56,925.00				₦

 

ILLUSTRATION 4

Write up the sales Returns Book of DADA and sons for the Month of July 2016 and post to ledger account.

July 7              Returned Goods from Chisom Ltd

                        2 bags of rice               @        N500

3 plates                        @        N100

July 10            Returned from Mukaka and sons

10 shoes                      @        N600

5 packet of sweet        @        N120

Less 2% trade discount

 

DADA & SON

 

RETURN INWARD JOURNAL

DATE	PARTICULARS	FOLIO	DETAIL	TOTAL
July 7	CHISON LTD 2 bags of rice@ N500 3 plates @ N100		₦ 1,000.00 300.00	₦   1,300.00
July. 10	MUKAKA AND SONS 10 shoes @ N600 6 packets of sweet@ N120 Less 10% Trade Discount (N6,720.00 X 10/100)		6,000.00 720.00 (67.20)	6,652.80
July 10	Transfer to the Debit side of Return Inward Account			7,952.80

 

DR                                          RETURNS INWARD ACCOUNT                                    CR

Date	Particular	F	Amount	Date	Particulars	F	Amount
July 10	Sundries		₦ 7,952.80				₦

 

DR                                                      CHISON LTD ACCOUNT                                     CR

Date	Particular	F	Amount	Date	Particulars	F	Amount
			₦	July 7	Return Inward		₦ 1,300.00

 

DR                              MUKAKA  &  ACCOUNT                                     CR

Date	Particular	F	Amount	Date	Particulars	F	Amount
			₦	July. 10	Return Inward		₦ 6.652.80

 

Definition of account

An account can be defined as a record in a double entry system that is kept for each class of asset, liability, revenue and expenses.

Classification of Accounts

Accounts are classified into two main classes namely:

1. Personal
2. Impersonal

PERSONAL ACCOUNTS

These are accounts for the names of individuals, firm and business enterprises. Examples: Stephen Account, Rhoda Nigeria Ltd Account, Debtors and Creditors Accounts, Capital Account, Drawing Account, Loan Account, Bank Account, etc.

ILLUSTRATION: Mr. Andrew is given a cheque of N5, 000.00 by L. Deborah.

Two Accounts are opened:

Debit:                          Mr. Andrew’s Bank Account           that receives

Credit:                        L. Deborah Account              that gives out.