- In the preceding pages, you learnt about debits and credits and observed how transactions affect accounts.
- This process of analysing transactions and recording their effects directly in the accounts is helpful as a learning exercise.
- However, real accounting systems do not record transactions directly in the accounts.
- The book in which the transaction is recorded for the first time is called journal or book of original entry.
- The source document, is required to record the transaction in the journal.
- This practice provides a complete record of each transaction in one place and links the debits and credits for each transaction.
- After the debits and credits for each transaction are entered in the journal, they are transferred to the individual accounts.
- The process of recording transactions in journal is called journalising.
- Once the journalising process is completed, the journal entry provides a complete and useful description of the event’s effect on the organisation.
- The process of transferring journal entry to individual accounts is called posting.
- This sequence causes the journal to be called the Book of Original Entry and the ledger account as the Principal Book of entry.
- In this context, it should be noted that on account of the number and commonality of most transactions, the journal is subdivided into a number of books of original entry as follows:
(a) Journal Proper
(b) Cash book
(c) Other day books:
(i) Purchases (journal) book
(ii) Sales (journal) book
(iii) Purchase Returns (journal) book
(iv) Sale Returns (journal) book
(v) Bills Receivable (journal) book
(vi) Bills Payable (journal) book
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