Question

"The process of journalising involves certain steps". Explain these steps with the help of

examples.​

Answer 1

Answer:

Steps in Journalising:

Determine the two accounts involved in the transaction.

Classify the accounts into assets, liabilities, capital, expenses and incomes.

Apply the rules of debit and credit for the above two accounts.

Identify which account is to be debited and credited.

Answer 2

ANSWER :

Journalising is the process of the dual aspects of the transaction in journal. In other word, the process of recording of entries in the journal is known as journalising.

• The process of journalising means the steps to be followed for ascertaining the account heads to be debited or credited for a particular transaction. Hence, the process of journalising involves certain steps.

❖ There are three main steps involved in the process of journalizing a transaction explained below :-

• [1] Identification of Accounts or Account Heads affected by the transaction : The first step involved in the process of journalising is the identification of accounts or account hates affected by a particular transaction. As per the Double Entry System, each transaction has two aspects. So, in order to journalise the transaction, the accounts or account head affected by the transaction is to be identified.

• [2] Classification of Accounts or Account Heads : The next step involved in the process of journalising is the classification of the identified accounts or accounts heads. There are two approaches for classification : (i) Traditional or English Approach and (ii) Modern or American Approach. In this step, the identified accounts affected by the transaction are classified into different account groups on the basis of either Traditional (English) Approach or Modern (American) Approach.

• [3] Application of rules for Debit and Credit : The third step involved in the process of journalising is the application of debit and credit rules to the identified accounts (or account heads) affected by the transaction as per either Traditional (English) Approach or Modern (American) Approach. There are some rules for debit and credit of accounts under Traditional (English) Approach as well as under Modern (American) Approach. Therefore, in order to journalise the transaction, respective rules for debit and credit is applied in this step.

➣ Example :-

❖ The transaction to be journalised is "Started business with cash Rs. 100000".

• Step 1. Identification of accounts :- In this transaction, the business has received cash from the owner to start and carry out its business activities. Such amount brought in by the owner is termed as Capital and is recorded in Capital A/C. Again, the amount of Capital is brought in the form of Cash and the other account involved is Cash A/C.

• Step 2. Classification of accounts :- According to Modern Approach of classification, Capital A/C is taken as Capital Account and Cash A/C is taken as Assets Account.

• Step 3. Application of rules for Debit and Credit :- In the given transaction, when the cash is invested in the business in the form of Capital, the value of Capital in the business increases and hence the Capital A/C will be credited (As per the rule being capital increase). Again, Asset of the business also increases in the form of Cash and therefore, the Cash A/C will be debited (As per the rule being asset increase).

❖ The journal entry will be :-

$: \mapsto: \: \sf{ \large{Cash \: \: A/C \: \: Dr. \: \: \: \: \: \: \: \: Rs. \: 100000}} \: \: \: \: \: \: \: \: \: \: \: \\ \: \: \: \: \: \: \: \: \: \: \: \: \: \: \: \: \: \: \: \: \: \sf{ \large{To \: \: Capital \: \: Account \: \: \: \: \: \: \: \: \: \: \: \: \: Rs. \: 100000}}$