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C H A P T E R

Journal

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Journal It is the primary book of account in which transactions are first recorded
in a chronological order (i.e., as they take place).
2. Book of Original Entry It is the book in which a transaction is first recorded. Hence, it is a Book of
Original Entry.
3. Journalising Recording of transactions in the Journal is called Journalising.
4. Account It is a summary of transactions of one nature or transactions relating to a
particular head at one place.
5. Bad Debts It is the amount which is not recoverable and hence, written off.
6. Bad Debts Recovered It is the amount that was earlier written off as Bad Debt and is later
recovered, in full or in part.
7. Discount There are two types of discount that are allowed to customers:
(i) Trade Discount It is a discount allowed to the purchaser of goods when goods are purchased
in large quantity. Purchases and Sales are recorded in the books of account
at net of Trade Discount.
(ii) Cash Discount It is a discount allowed on receipt of amount promptly, i.e., by the due
date. Cash Discount allowed or received is recorded separately as expense
and income respectively.
8. Rebate It is allowed because of reasons other than for which trade
discount and cash discount is allowed. For example, rebate may be
allowed for poor quality of goods sold or goods being not as per
specification, etc.
9. Simple Journal Entry It is a Journal entry in which only two accounts are affected, i.e., one
account is debited and another account is credited.
10. Compound Journal Entry It is a Journal entry in which more than two accounts are affected, i.e., one
or more accounts are debited and/or credited.
11. Opening Entry It is the first entry passed in the Journal book incorporating the closing
balances of previous year.
12. Ledger Ledger is an accounting book in which various accounts are maintained
in classified form.

CHAPTER SUMMARY

• An account is a summarised record of relevant transactions at one place relating to a particular head. It
records not only the amount of transactions but also their effect and direction.