Reviewed by Oct 05, 2020| Updated on
A journal is a comprehensive account which will record all monetary transactions of an organisation, which is going to be used later for reconciliation purpose and transfer to official records like the general ledger.
Journals would state the transaction date, the accounts that were affected, and the amount of money involved in the transaction, generally in the method of double-entry-book keeping.
For the purpose of accounting, journals are a physical record or digital documents that are maintained as books, spreadsheet (such as Microsoft Excel), or data maintained within an accounting software.
When business transactions are made, the person in charge to maintain the records will go on to enter the financial transactions as an entry into the journal. If the transaction is going to affect one or more accounts, then even those accounts would be recorded in the journal.
Journaling is an integral part of the record-keeping activities for businesses as it lets them review the records later, which is concise in nature and will record the transfer sometime later in the process of accounting. Journals are generally reviewed as a crucial part of audit and trade processes, in sync with the general ledger.
Double-entry bookkeeping is one of the most commonly used formats of accounting. It will directly affect the way in which journals are maintained, and entries are recorded. Each business transaction consists of exchanges among two accounts. That means that every journal entries are going to be recorded on two columns.
For instance, if the owner of an organisation is going to purchase an inventory of worth Rs 1 lakh in cash, then the person in charge to maintain the book of records will have to record two transactions in the journal entry. In this case, the cash entry would be reduced by Rs 1 lakh while the inventory account would be seeing a rise of Rs 1 lakh.