FINANCIAL ACCOUNT
Chapter-8 Journal
MEANING :-
Journal is a book of primary entry or a book of original entry in which transactions are first recorded in chronological order from the accounting vouchers that are prepared on the basis of source documents, i.e., cash memo, invoices, purchase bills, etc.
The transactions can be recorded in one Journal. Alternatively, separate Journals may be maintained to record particular type of transactions, e.g., credit purchases may be recorded in Purchases Journal; credit sales in Sales in Sales Journal, purchases return in Purchases Return Journal, and so on. These separate Journals are called Special Journal or Special Purpose Books and often called as Subsidiary Books.
Definitions :- "The basic book of accounting is called Journal. Precisely it is the book of prime entry which means -Day Book . Trader records his total daily transactions in it . The process of recording the transactions into Journalising.
Very Short Answer Type Questions :-
Q.1. What is a Journal?
Ans. Journal is a primary book of account in which transactions are first recorded in a chronological order.
Q.2. What is Journalising ?
Ans. Journalising is a process of recording a transaction in a Journal.
Q.3. What is a Simple Journal Entry?
Ans. Simple Journal Entry means a Journal entry in which only two accounts are affected i.e., one account is debited and another account is credited.
Q.4 What is Compound Journal Entry? Give an example.
Ans. Compound Journal Entry is the entry in which more than one account is debited or credited. For example, following is a compound entry.
Rs. Rs.
Stationery A/c ...Dr. 2,500
Rent A/c ...Dr. 5,000
Salary A/c ...Dr. 10,000
To Cash A/c 17,000
(Being the purchase of stationery and payment of rent and salary)
Q.5. Why is the Journal called a book original entry?
Ans. Journal is called a book of original entry because all business transactions are recorded first in this book.
Q.6. What is meant by Posting?
Ans. Posting means transferring the entries from the Journal to the Ledger Accounts.
Q.7. What is Trade Discount?
Ans. Trade Discount is the discount allowed when the goods are sold to the purchaser for resale to the ultimate consumer or when the goods are purchased in large quantity.
Q.8. What is Cash Discount?
Ans. Cash Discount is the discount allowed to the debtor for making prompt payment or for making payment before the due date.
Q.9. What are the advantages of allowing Traded Discount? (Two points)
Ans. Advantages of Trade Discount are:
(i) It improves sales as purchaser is encouraged to buy large quantity.
(ii) It reduces purchase cost for purchaser and thus, improves profit margin.
Q.10. What are the advantages of allowing cash Discount?
Ans. Two advantages of Cash Discount are:
(i) Seller gets the due amount within the due date.Thus, his liquidity remains good.
(ii) Purchaser gets Cash Discount thus, it increases the profits.
Q.11. Distinguish Trade Discount from Cash Discount . (Two points)
Ans. Two points of difference between Trade Discount and Cash Discount are:
(i) Trade Discount is allowed to encourage large purchases whereas Cash Discount is allowed to encourage prompt payment.
(ii) Trade Discount enables the retailer to sell goods at list price and earn better profit. Cash Discount will improve the cash flow.
Q.12. What is Trade Discount recorded in the books of account?
Ans. Trade Discount is recorded in the Purchases Book and Sales Book but isn't recorded in the Ledger Accounts. In the Ledger, only net amount of purchases and sales are entered.
Q.13. What is meant by 'Rebate'?
Ans. Rebate is the discount allowed for reasons other than those for which 'Trade Discount and Cash Discount are allowed. Say for poor quality of goods.
Q.14. What is an Opening Entry?
Ans. Opening Entry is the Journal entry through which the closing balances of the previous year are brought forward in the current year's books of account.
Q.15. Give Two advantages of a Journal.
Ans. Two advantages of a Journal are:
(i) It reduces the possibility of error.
(ii) It provides an explanation of the transactions.
Q.16. Which column in a Journal is mot filled at the tome of Journalising?
Ans. The column 'Ledger Folio' is filled at the time of posting into ledger and not at the time of Journalising.
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