Journal Entry: Meaning, Features, Advantages, Objectives, Narration

 

What is Journal Entry? Write its Meaning, Features, Advantages, Objectives and Narration.

(1) Meaning of Journal Entry

Journal word has been derived from the French word ‘jour’ means day; so, journal means daily.

Financial transactions are recorded daily in journal.

It is a book of original entry to record financial transaction in chronologically (in-order-of date).

It is also known day book because journal entries are recorded daily in the book of accounting.

 

MANUAL ACCOUNTING

In manual accounting or bookkeeping system, financial transactions are first recorded in a journal.

Each journal entry has debit and credit entry.

Debit transaction must be equal to credit transaction.

There must be short explanation of the financial transaction as narration.

Journal entries are the base of accounting.

 

COMPUTERIZED ACCOUNTING

In computerized accounting systems, there are two systems to record financial transactions.

First, accounting software

Create ledger and do journal entries in Tally or accounting software, then ledgers, trial balance, income statement, balance sheet, cash flow statement, ratio, sales invoices, issues checks to creditors, processes receipts from customers and so on are prepared automatically.

Second, banking software

Fill the amount in related boxes in banking software, then journal entries, ledgers, trial balance, income statement, balance sheet, cash flow statement, ratio, issues checks to customers, deposit of customers, loan investment, arrear interest and so on are prepared automatically.

 

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Click on link for YouTube videos topic wise :
Accounting Equation	http://tiny.cc/c89jkz
Basic Journal Entries in Nepali	http://tiny.cc/uaakkz
Basic Journal Entries	http://tiny.cc/8aakkz
Journal Entry and Ledger	http://tiny.cc/caakkz
Ledger Account	http://tiny.cc/haakkz
Subsidiary Book	http://tiny.cc/399jkz
Cash Book	http://tiny.cc/889jkz
Trial Balance and Adjusted Trial Balance	http://tiny.cc/c59jkz
Bank Reconciliation Statement (BRS)	http://tiny.cc/q59jkz
Depreciation	http://tiny.cc/ugakkz
Click on link for YouTube videos chapter wise:
Financial Accounting and Analysis (All videos)	http://tiny.cc/jlersz
Accounting Process	http://tiny.cc/mlersz
Accounting for Long Lived Assets	http://tiny.cc/plersz
Analysis of Financial Statement	http://tiny.cc/slersz

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(2) Features or Characteristics of Journal Entry

The major features of journal entry are as follows:

a.     Journal entry is the first step of the double entry system.

b.    Financial transaction is recorded first of all in the journal; therefore, it is known as the book of original entry.

c.     A transaction is recorded on the same day it takes place; therefore, journal is called day book.

d.    Transactions are recorded chronologically; therefore, journal is called chronological book

e.     For each transaction, two accounts are affected; they are debited and credited.

f.       This makes ledger-posting easy; therefore, it is known as assistant to ledger.

g.     Narration is written below each entry.

 

(3) Advantages of Journal Entry

The main advantages of journal entry are given below:

Instantly record

Each financial transaction is recorded as soon as it takes place.

Therefore, there is no possibility to omitted record.

Chorological order

Entire transactions are recorded in chronologically with narration.

Therefore, they can be easily ascertained when and why a transaction has taken place.

Dual effect

For each financial transaction, two accounts are affected.

They are debit and credit.

Therefore, there is no possibility of mistake in writing the ledger.

Narration

Each journal entry shows the narration.

It shows complete story of a transaction in one entry.

If there is any mistake in ledger, it can be easily detected with the help of journal entry.

 

(4) Objectives of Journal Entry

While recording financial transactions in journal entries, the following objects must be aimed:

Systematic record

Journal entry is prepared to keep systematic record of financial transaction.

Each transaction should be recorded in journal entry so clear that it should be understood without any difficult.

 

Chorological order

Journal entry shows financial transactions in chorological order (date wise).

Therefore, they can be easily found out when and why a transaction has taken place.

 

Base for ledger

Journal entries are the base for ledger accounts.

They help to prepare ledger.

 

(5) Narration of an Entry

Narration is the remark or short explanation of the financial transaction.

It is put below in every journal entry.

From journal entry, we understand about transaction.

In some countries, narration is written without prefix; in some countries, it is written with prefix ‘being’ or ‘for’.

Therefore, narration must be clear to understand the transaction.

But, it is not necessary in ledger.

 

Wrong entry for wages for installation of plant Rs 5,000:

Journal Entry

Date	Particulars		LF	Amount Dr	Amount Cr
	Wages account	Dr		5,000
	To Cash account				5,000
	Being: wage paid for installation of plant

If there is not narration, no one can say it is wrong entry.

 

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