Meaning And Uses Of Principal Journal

A journal is a book of prime or original entry where transactions are recorded on daily basis, then will be classified into Debit and Credit before been posted to the ledgers. Both aspects of all transactions in journals are recorded in a chronological order. Journal entry accounting is the first step in the accounting cycle.

What Is Journal Entry?

A journal entry is a record of all daily business transactions in the books of account. A properly kept journal entry  accounting consists of the correct date, amounts to be debited, amount to be credited, description of the transaction and a unique reference number of each transactions.

FEATURES OF A JOURNAL
  1. It is a subsidiary book, which is used in addition to the ledger.
  2. Ledger has five columns which include: Date, particulars, Folio, Debit (Dr), Credit (Cr).
  3. It shows the account to be debited and credited with the amount of money.
  4. It also narrates the transaction.
  5. Entries will be posted to the ledgers.
LAYOUT OF THE PRINCIPAL JOURNAL

NARRATION: The narration is the short explanation of the description of the transaction, which should always be given before the close of the journal.

USES OF DIFFERENT PARTS OF JOURNAL

The format of a journal entry is as follows:

Meaning And Uses Of Principal Journal

1. DATE: The date is used for the purpose of recording the date in which the transaction takes place.

2. PARTICULARS: The particular column shows the details of transactions which occured.

3. FOLIO: This shows the page of a ledger to which a transaction is posted.

4. AMOUNT: The financial value of the transaction will be displayed in this column.

Also Read:
CLASSES OF ENTRIES IN A JOURNAL

Journal entries can be divided into two, they are;
  1. Simple entry
  2. Compound entry
We will explain the two classes of entries below.

SIMPLE ENTRY

In a simple entry, one account will be credited and another will be debited with the same amount.

COMPOUND ENTRY

Three things happens in compound entry, they are:
  • One account may be debited and several accounts will be credited.
  • So many accounts are debited and several others are credited.
  • Several accounts are debited only one account is credited.
USES OF JOURNAL ENTRY

A journal is used for the following;
  1. It is used for recording of disposal of fixed assets.
  2. It can be used for correction of errors.
  3. Double entry transactions.
  4. Can be used for recording opening entries
  5. It can be used to transfer items between accounts.
  6. Journals are used for recording transactions that do not occur regularly.
  7. They are used when assets are purchased on credit.
  8. It is used for recording acquisition of a new business.
  9. It is used for recording closing balance of entry.
Accounting Journal Entry Examples

We will illustrate the use of Journal entries with Examples.

1. DISPOSAL OF ASSETS ON CREDIT

Example: Sales of equipment for N350 to Aina.

Meaning And Uses Of Principal Journal

2. CORRECTION OF ERRORS

Errors can be corrected through the use of Journal. Example: Sales of goods to Okon was posted to Okonkwo.

Meaning And Uses Of Principal Journal

3. DOUBLE ENTRY TRANSACTIONS

Cash sales N1500.

Meaning And Uses Of Principal Journal

4. FOR RECORDING OPENING ENTRIES

When a business commences, a set of books of account must be opened. The assets, liabilities and capital of the business must be recorded.

Example: Osinulu's book shows the following balances for the month of August.
ASSETS: Land and Building N5,000, Furniture and fittings N6,000, Motor van N950, Plant and machinery N1,735, Cash N880, Bank N220, Debtors N550.
LIABILITIES: Bills payable N4,500, N1,500, Creditors N3,050.

Meaning And Uses Of Principal Journal
Meaning And Uses Of Principal Journal

5. TRANSFER OF ITEMS BETWEEN ACCOUNTS

Example: Mr Esan, a debtor could not pay N300 he owe us but he brought equipment to settle his debt.

Meaning And Uses Of Principal Journal

6. FOR RECORDING TRANSACTIONS THAT DO NOT OCCUR REGULARLY

Example: Purchases of shares and debentures.
On 1st January 1990, Koleosho Ltd makes an issue of 10,000 ordinary shares of N3 each at par and the shares were allotted.

Meaning And Uses Of Principal Journal

7. PURCHASES OF ASSETS ON CREDIT

Example: Purchases of motor car N1,550 from Okonkwo on credit.

Meaning And Uses Of Principal Journal
Meaning And Uses Of Principal Journal