What is Journal ~ Utility Of Journal

 Meaning of Journal:

Journal is the book of original entry in which, after following the rules of debit and credit, all business transactions are recorded in a chronological order. The word journal has been derived from the French word "jour", which means "a day". Thus, journal means a book which records all monetary transactions of a business on daily basis. The monetary transactions are recorded in chronological order i.e., in the order of their occurrence.

As the recording of transactions is done first in the journal, it is also called book of original entry or prime entry. Journalizing is defined as the process of recording transactions in the journal. After determining the particular account to be debited and credited, each transaction is separately recorded.

Utility of Journal

  (i) A primary book of original entry:

 As the first recording of a transaction is done in the journal, it is called book of original entry or prime entry. All business transactions first find place in journal and then only they are recorded in separate ledger accounts.

(ii) A fundamental book in line with the double entry book keeping:

 After determining the particular account to be debited and credited, each transaction is separately recorded. If we do not open journal in an enterprise, chances of maintaining books of accounts, as per the principles of double entry system are remote.

(iii) Transactions in chronological order:

All the transactions are recorded in the journal in chronological order. So, the chances of omitting any transactions in the books of accounts are very thin.

(iv) Complete information about business transactions:

All journal entries are supported with brief narrations. These narrations help to understand the meaning and purpose of the transaction in future date.

(v) Classification of all transactions becomes easier:

All journal entries are based on vouchers and are recorded in the journal as and when they occur. So, the transactions are classified spontaneously when they occur.

(vi) Helps in division of labour:

In large business, journal is sub-divided into more than one. This sub-division helps to record one type of transactions in that book. For example, sales book records only credit sales and purchase book records only credit purchases. These sub-journals are handled and controlled by different and separate persons. In such cases, naturally, that person acquires expertise which helps the enterprise to achieve its common goal efficiently and effectively.

(vii) Ensures arithmetical accuracy:

In journal, total of debit column and credit column should match and agree. Disagreement is a quick indication of commitment of some errors, which can be easily detected and rectified.