A book where transactions are recorded from the source document in a chronological order is known as Journal.
Some of the features of journal are that transactions are recorded first time, each day’s transactions are recorded on same day, transactions are recorded in a chronological order, records both debit and credit transactions, more than one transaction can be recorded in a single journal entry, etc.
Advantages of journal are: easy to locate a particular transaction when required, minimum possibility of omission of a transaction, facilitates cross checking of ledger accounts when Trial Balance does not agree, etc.
Limitations of journal are difficult to record when number of transactions are large, does not provide required information rapidly and cash transactions need not be recorded in journal.
Journal is needed for the following aspects: for convenient recording of the transactions, for maintaining and preserving the identity of the transactions, for ascertaining the true nature of transactions, for maintaining permanent record of information, etc.
Double entry system is the system which recognises and records both aspects of a transaction. If one side of the scale is increased or decreased, the same weight must be correspondingly added to or removed, from the other side. Debit is left side of an account. Balance resting on debit side is said to be a credit balance. Balance resting on credit side is said to be a debit balance.
According to traditional classification, accounts can be real, personal or nominal. Real account is related to assets of the firm.
Rule of the real account is: Debit what comes in and Credit what goes out.
Personal account is related to persons and organisations. Rule of personal account: Debit the receiver and Credit the giver.
Nominal account is related to incomes, gains, expenses and losses. Rule of nominal account: Debit all Expenses or Losses and Credit all Profits and Gains.
As per Modern classification,accounts are classified as assets, liabilities, capital, revenue and expenses.