JOURNAL and LEDGER
WHAT IS A JOURNAL ?
When any transaction occurs. It has to be recorded in
a book first. This book is called as a journal. Thus we can say that journal is
a book in which the entry is done first. In other words we can say that the
initial entry passed in a book is called as a journal.
A journal has five columns. The first column is the
‘Date’, Second column is Particulars, Third column is Ledger Folio, Fourth and
fifth column are the Amount column, one is Debit and the last one is Credit.
HOW TO PASS
JOURNAL ENTRIES ?
Journal
is a book in which the entry of the books is made first. When any transaction
occurs it has to be recorded in the Journal first.
Steps to pass any
journal entry
Decide
the accounts effected in the transaction.
See
the types of accounts whether they are Personal, Real or Nominal.
Once
the type is decide apply the rules and decide the Debit or Credit to the
respective accounts.
In
the traditional method of passing journal entries, handwritten ledgers and
journals are typically used. Here's how you would do it:
1. Date the Entry: Write down the date of the transaction in the first column of the journal.
2. Write the Account Titles: In the next column, write the titles of the accounts to be debited and credited. Start with the account to be debited, followed by the account to be credited.
3. Enter Debit and Credit Amounts: In the respective debit and credit columns, enter the amounts for each account. Debit amounts are typically listed in the left column, and credit amounts in the right column.
4. Write a Brief Description: In the last column, provide a brief description or explanation of the transaction.
5. Balance the Entry: Ensure that the total debits equal the total credits. If they do not balance, review the entries for errors.
6. Post to Ledger Accounts: Transfer the amounts from the journal entry to the respective ledger accounts. Debit amounts are recorded on the debit side of the ledger account, and credit amounts are rcorded on the credit side.
7. Prepare Trial Balance: Periodically, prepare a trial balance to ensure that the total debits equal the total credits in the ledger accounts.
Journal
|
Date |
Particulars |
L.F. |
Debit
(Rs.) |
Credit(Rs.) |
|
|
Cash
A/c…….Dr. To Sales A/c. |
|
1,000 ---- |
1,000 ---- |
This journal entry would be recorded in the general journal. Then, the amounts would be posted to the Cash account and Sales account in the ledger. The process ensures that each transaction is accurately recorded and summarized in the company's financial records.
After
recording journal entries, the next step in the accounting process is to post
these entries to the ledger accounts. Here's how you can do it:
1. Identify Ledger Accounts: Each journal entry affects at least two accounts. Identify the accounts involved in the entry. For example, if a transaction involves cash and sales, you'll need to post to the Cash account and the Sales account.
2. Open Ledger Accounts: If ledger accounts for the identified accounts don't exist already, you need to open them. Write the account title (e.g., Cash, Sales) at the top of a new page in the ledger book.
3. Locate Journal Entry: Find the journal entry you want to post in the general journal.
4. Determine Debit and Credit Amounts: Identify the debit and credit amounts for each account mentioned in the journal entry.
5. Post Debit Amounts: Locate the ledger account that needs to be debited. Enter the date of the transaction in the date column of the ledger account. Write down the debit amount in the debit column. If the ledger account is already debited, write the new amount below the previous entry and calculate the updated balance.
6. Post Credit Amounts: Similarly, locate the ledger account that needs to be credited. Enter the date of the transaction in the date column of the ledger account. Write down the credit amount in the credit column. Again, if the ledger account is already credited, write the new amount below the previous entry and calculate the updated balance.
7. Balancing the Ledger Account: After posting all entries related to a particular account, calculate the total debits and credits. The total debit balance should equal the total credit balance. If they don't match, review the entries for errors.
8. Repeat for Other Entries: Repeat this process for all journal entries that need to be posted to ledger accounts.
9. Cross-Referencing: Optionally, you can cross-reference ledger entries with their corresponding journal entries by writing the journal entry number in the ledger account and vice versa. This helps in easy reference and tracing of transactions.
10. Trial Balance: Once all entries are posted, prepare a trial balance to ensure that the total debits equal the total credits in the ledger accounts.
In this way one can post journal entries to the ledger accounts.
