GLORIOUS FIRST TREASURES ACADEMYIn our previous studies, we learned about source documents such as receipts, invoices, and vouchers. These documents are the first evidence that a business transaction has taken place. However, a business cannot simply keep a pile of papers; it needs a systematic way to record these transactions daily. This is where Journals come into play.
Journals serve as the first "home" for transactions after they leave the source documents. In this lesson, we will explore the meaning of journals, the different types available, and specifically focus on how to record credit sales in a Sales Journal.
A journal is often referred to as a Book of Original Entry or a Book of Prime Entry. It is a daily record where business transactions are first written down in chronological order (the order in which they happen) before they are transferred to the ledgers.
Think of a journal as a "business diary." Just as you might write down what you did each day in a personal diary, a business person writes down every sale, purchase, or expense in a journal. The information recorded in a journal is usually taken directly from source documents like invoices and receipts. By using journals, a business ensures that no transaction is forgotten and that there is a clear, organized history of everything that has happened financially.
https://upload.wikimedia.org/wikipedia/commons/b/b3/Accounting_Journal_Entry.jpg
Journals are vital in the accounting process for several reasons:
In a small business, one journal might be enough. However, in larger businesses with many transactions, we use Special Journals. These are journals designed to record specific types of transactions. The most common types include:
The Sales Journal, also known as the Sales Day Book, is a special journal used specifically to record credit sales of goods. It is very important to note that only goods intended for resale which are sold on credit are recorded here.
If a customer buys goods and pays immediately with cash or a cheque, that transaction is recorded in the Cash Book, not the Sales Journal. Similarly, if the business sells an old office chair (a fixed asset) on credit, it is recorded in the General Journal, not the Sales Journal. The Sales Journal is strictly for the "stock-in-trade" of the business sold on credit. The source document used to prepare the Sales Journal is the Sales Invoice.
https://www.picpedia.org/clipboard/images/sales-invoice.jpg
The Sales Journal is usually drawn with several columns to capture all the necessary information about a credit sale. The standard columns include:
Let us look at how a business owner, Mr. Okoro, would record his transactions for the first week of June 2023. Mr. Okoro runs a provision store and sells goods on credit to some regular customers.
Transactions:
Preparation of Sales Journal:
| Date | Particulars (Customer Name) | Invoice No. | Folio | Amount (₦) |
|---|---|---|---|---|
| 2023 | ||||
| June 2 | Mrs. Adebayo | 001 | SL 10 | 15,000 |
| June 4 | Musa & Sons | 002 | SL 15 | 40,000 |
| June 6 | Joy Ventures | 003 | SL 22 | 10,000 |
| Total | Transferred to Sales Account | 65,000 |
Step-by-Step Explanation:
In this lesson, we have defined a Journal as a book of original entry where transactions are recorded daily from source documents. We identified various types of journals such as the Sales, Purchases, Cash Book, and General Journal.
We focused specifically on the Sales Journal, which is used solely for recording the sale of trading goods on credit. We learned that the Sales Invoice is the source document for this journal and that it contains columns for Date, Particulars, Invoice Number, Folio, and Amount. Finally, we saw through an example that cash sales must never be included in the Sales Journal, as they belong in the Cash Book. Understanding these journals is the first step in mastering the art of bookkeeping and accounting.