You may have heard of journals used as diaries by people to help them remember daily events. The accounting Journal is similar except that it doesn't record just text but includes figures and must comply with the double-entry principle.
What are Journal Entries?
Journal entries are subsidiary books used to record business transactions in a chronological order. The Journal is the most famous primary book in bookkeeping and accounting. It has stood the test of time. In the invention of accounting software, it is the only subsidiary book that is visible in most software.
By subsidiary book, we mean the book in which transactions are initially entered before being posted to their corresponding ledger accounts. They help prevent excessive transactions in the ledger. Therefore, only an end-of-day/month transaction goes into the ledger book.
The Journal records business transactions in chronological order. This means that as the transactions occur they are recorded in the Journal just as an individual will record the day's event in his diary as they occur. This helps to avoid missing out on any transaction.
Business transactions are daily events that happen in an entity. This includes sales of goods/services, payment of electricity bills, cash movement to the bank, and so on. It can be in the form of cash or bank transactions.
Journal entries and the double-entry principle
One reason that makes the Journal unique is that the double-entry principle can be applied to it. Unlike other books of original entry, Journals have debit and credit columns. There are also columns for date, name of account, and reference number.
Below are some transactions and their journal entries.
June 6: Starts business with N25 million in the bank.
June 10: Acquire furniture and fittings for N2 million.
June 11: Paid for office rent for N3.6 million
June 12: Purchase goods for resale for N6 million.
June 14: Sold goods for N2 million and lodged it to the bank.
Solution
| Date | Particulars (Account Names) | Debit (N) | Credit (N) |
|---|---|---|---|
| June 6, 2025 |
Bank Capital Account Being capital introduced into the business |
25,000,000 | 25,000,000 |
| June 10, 2025 |
Furniture and Fittings Bank Being purchase of furniture via bank |
2,000,000 | 2,000,000 |
| June 11, 2025 |
Rent Expense Bank Being payment for office rent |
3,600,000 | 3,600,000 |
| June 12, 2025 |
Purchases Bank Being purchase of goods for resale |
6,000,000 | 6,000,000 |
| June 14, 2025 |
Bank Sales Being cash sales lodged into the bank |
2,000,000 | 2,000,000 |
| TOTAL | 38,600,000 | 38,600,000 | |
Explanation
June 6: The accounts involved are capital and bank accounts. The account receiving value is debited and the account giving out value is credited. The bank is definitely receiving the money from capital.
Debit Bank a/c,
Credit Capital a/c
With N25 million
June 10: There is furniture and bank accounts. Same rule as above, the bank is giving out some value.
Dr: Furniture and fittings
Cr: Bank
With N2 million
June 11: The two accounts for office rent are the bank account and the office rent account.
Dr: Office rent
Cr: Bank A/c
With N3.6 million
June 12: The goods purchased will be paid for with the money in the bank. So banks give out value and purchases receive the value.
Dr: Purchases
Cr: Bank
With N6 million
June 14: One of the accounts is a sales account. Which gives out the value to receive cash that was later lodged to the bank on the same day.
Dr: Bank
Cr: Sales a/c
With N2 million
In summary, the Journal is used to post entries from daily business transactions. It applies the double-entry principle which makes it unique from other subsidiary books. Furthermore, it is the only surviving book of original entries in the realm of bookkeeping.