Journal or Day book; Journal word is derived from the Latin-French word “Jour”. Jour means day and journal means daily. This is the first step of accounting. Here in the day book, every transaction of the day is entered as per classification of accounts, on the basis of it ledgers are maintained. Later on the basis of closing balances of ledgers profit and loss account and trial balance (Balance sheet) prepared.
As per Walter Grierson: a book assisting to the ledger.
In the Journal, the main concern is recording entry on daily basis, a transaction occurred it should be entered in the book of Journal/Day book with the dual concept along with short narration. You may also be called seed of accounting of day book.
Features of Journal/ Daybook
- Classified and summaries entry of every transaction
- Updated book, as updated on daily basis.
- Closing balance of any account type could not be traced, For that need to update ledgers
- Simple format and easy to update
Process of Day Book
- A business transaction occurred (all transaction must relate to the business only)
- Voucher is prepared (A proof of the transaction and for reference of Journal Entry)
- Enter into the Journal / Daybook
Format of Daybook
- Date: When the transaction occurred
- Detail: Summary of Transaction, What is debit and Credit and description of the entry
- Ledger Folio: Reference to the ledger, where day-book entry is posted in the ledger. This is for tracking and auditing purpose. Usually, ledger page number is posted in Day book entry, after updating the ledger
- Debit Amount, first enter debited Entry account type and enter the amount in Debit column.
- Credit Amount: Then Credit amount is updated as per dual concept, with relevant account type.
- Description; A brief description then posted at the end of the transaction.
Furniture is purchased for $5000 from the shop for business use on cash at dated 28 Jan 2017. After purchasing the Furniture, an amount paid and a voucher is received (Proof of payment). Then Day book is updated with the date of 28-Jan, 2017. Furniture (asset) is debt and amount $5000 entered in the debit column. As it was purchased on the basis of Cash so Cash is credit with $5000 in the credit column. At the end, a description is entered that Furniture purchased on cash.