Daybooks

DAY BOOKS (JOURNALS)

Journals or daybooks are used to record transactions on a daily basis and usually before those transactions are posted into the ledger accounts. The main advantage is to summarize transactions before they are entered into the ledger accounts. They are also called daybooks, subsidiary books, books of original entry, prime books, etc. They are seven in all as follows:

  

1.      Purchases Journal: This is a journal that is used to record all credit purchases. The source document for recording transactions in this journal is the invoice received from credit suppliers. The format may be as follows:

                                    PURCHASES JOURNAL

Date	Narrative / Details	Ledger Reference	Invoice Details	Amount	Note that the journals can also be prepared on columnar basis to analyze the various transaction by column.
				$

Note: There are several formats for presenting the journals. The format used depends on the volume of details the business wants to show.

2.      Sales Journal: This is a journal that is used to record all credit sales. The source document for recording transactions in this journal is the invoice issued to credit customers. The format may be as follows:

                                    SALES JOURNAL

Date	Narrative / Details	Ledger Reference	Invoice Details	Amount
				$

3.      Returns Inwards Journal: This is a journal that is used to record all credit sales that are returned by customers. It is also called Sales Returns journal. The source document for recording transactions in this journal is credit note issued to the customer. The format may be as follows:

              

RETURNS INWARDS JOURNAL

Date	Narrative / Details	Ledger Reference	Invoice Details	Amount	Note that the journals can also be prepared on columnar basis to analyze the various transaction by column.
				$

4.      Returns Outwards Journal: This is a journal that is used to record all credit purchases that are returned to suppliers. It is also called Purchases Returns journal. The source document for recording transactions in this journal is debit note issued to the supplier. The format may be as follows:

                   

                       RETURNS OUTWARDS JOURNAL

Date	Narrative /  Details	Ledger Reference	Invoice Details	Amount	Note that the journals can also be prepared on columnar basis to analyze the various transaction by column.
				$

5.      Cash Book: This is used to record all cash transactions of the business. Cash means cash in hand and cash at bank. The cash book can be a single column type, double column type or three column type. Note that the cash book is both a journal and ledger. The various formats or the cash book are as follows:

                                  

  SINGLE COLUMN CASH BOOK

Date	Narrative / Details	Ref	Amount	Date	Narrative/ Details	Ref	Amount
Jan 1 Jan 3	Balance Sales		$ 600 950	Jan 11	Salaries	GL 2	$ 500

                                                                DOUBLE COLUMN CASH BOOK

Date	Narrative	Ref	Cash	Bank	Date	Narrative	Ref	Cash	Bank
Jan 1 Jan 3 Jan 10	Balance Sales T. Bow	b/f           GL 3 SL 11	$ 10	600 420 590	Jan 11 Jan 20	Salaries Gecko Ltd.	GL2 GL5	$ 40	390 990

                                                               THREE COLUMN CASH BOOK

Date	Narrative	Ref	Discount	Cash	Bank	Date	Narrative	Ref	Discount	Cash	Bank
Jan 1 Jan 3 Jan 10	Balance Sales T. Bow	b/f           GL 3 SL 11	$ 12 10	420	600 590	Jan 11 Jan 20	Salaries Gecko Ltd.	GL2 GL5	$ 40	390	990

6.      Petty Cash Book: This is used to record all minor (petty) cash transactions of a business. It may take several formats. One of these may be as follows: The initial amount given to the petty cashier is called cash float. The IMPREST system where the petty cashier is given an initial amount called cash float to be used on small expenses so that reimbursement is made where necessary.

                                                               

                                                                         PETTY CASH BOOK

Receipt	Date	Narrative	Voucher No.	Total	Analysis
					Electricity	Water	Stationery	Transport	Others
$ 1,000	Jan 1 Jan 3 Jan 10	Balance Grow Ltd, T. Bow	10 11	$ 420 590	$   20	$ 400	$	$ 590	$

7.      General Journal: This is used to record all other transactions that cannot be recorded in the other journals. Example of such transactions are;

·         Sale and Purchases of fixed assets on credit;

·         Correction of errors;

·         Transfers from one ledger account into another;

·         Recording of opening and closing entries of assets and liabilities; etc.

·         Sales and Purchases of a business

All transactions entered in the journal are narrated.

 The format is as follows:

General Journal

Date	Narrative	Reference	Debit	Credit
Jan 14	Motor Vehicle GL Motors Motor vehicle bought on credit		$ 2,500	$ 2,500

NB:   The type of discount recorded in the cash book is cash discount but not trade discount. The difference between the two is that, cash discount is given on prompt payment or on settlement of account while trade discount or quantity discount is given on bulk purchases.

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