Journal Entry

The word Journal has been derived from French word “Jour”. Jour means day. So
Journal Entry means daily up to data record of economic transaction, all
transactions’ are recorder in order of their occurrences date wise (Chronological
order). Every Accounting Transaction affects two or more accounts. Under Double
Entry Accounting equal debit and credit entries are made for every economic
activity. Journal entry is made in the book of original entry. It is first recording step.
It records transactions in chronological order. Every transaction is to be recorded
in journal. Every organization has to maintain one journal book at least, and
general journal is general purpose book of prime entry. Entering transaction data
in the journal is known as journalizing. The journal makes three significant
contributions to the recording process:
•The journal discloses in one place the complete effect of a transaction
•The journal entry provides a chronological record of transactions
•The journal helps prevent or locate errors because the debit and credit
amounts for each entry can be readily compared
Parts of Journal Entry Format for Journal entry
Single record of the business transaction is
called entry. We use this term to describe record
transaction in Book of Accounts. There are three
parts of journal entry. First write in first line just
after date line is debit, second must write in
below line after indented ten spaces from data
line is credit and last part is narration which is
brief description of transaction write within
parenthesis.
Types of Journal Entry

There are two types of journal entry. First is simple

entry and second is compound entry. Simple Entry has
one Debit and one Credit while, Compound Entry has
more than on Debit or more than one Credit or more than
one Debit and Credit.
Styles of Journal Entry
There are four styles of journal entry. Following figure
describes:

Golden Rules of Accounting

Below Golden Rules of Accounting is based on Six
Pillars of Accounts. If we divide six Types of Accounts into
two groups. First group contains Assets, Drawing
and Expenses have ruled that increase will be Debited
and decrease will be Credited. The second group contains
Liabilities, Owner Equity and Revenue has ruled that
decrease will be Debited and increase will be Credited.
Now we would like to apply these rules one by one:
Discount
Discount is reduction in listed price. There are
two types i.e. Trade Discount and Cash
Discount (if not mention than also cash
discount). Trade Discount is not considering for
entry while entries are passed for cash discount.

Rules for Debit and Credit using modern equation

Balance (always Increase Decrease
have)
Drawings or Dividend Debit balance Debit (Dr.) Credit (Cr.)
Expenses Debit balance Dr. Cr.
Asset Debit balance Dr. Cr.
Liability Credit balance Cr. Dr.
Equity or Capital Credit balance Cr. Dr.
Revenue or Income Credit balance Cr. Dr.
 Definitions

Journal
Journal is a book of original entry, where all the transactions are recorded date wise, since inception/
beginning.

Ledger
The book in which all the transactions of a business are finally record in the concern account in a
summarized and classified form, is called ledger.

Trial Balance
A trial balance is a bookkeeping worksheet in which the balances of all ledgers are compiled into debit and
credit account column totals that are equal. The general purpose of producing a trial balance is to ensure
the entries in a company's bookkeeping system are mathematically correct.
 1. JOURNAL
Problem No. 1:
Date Particulars/Details L.F Debit Credit
Exercises Jan 1, Cash a/c 65,000
•On January 1, 2020, Business started with Cash 2020 Furniture a/c 20,000
Building a/c 100,000
Rs. 65,000, Furniture Rs. 20,000, and Building 185,000
Rs. 100,000. To Capital a/c
(Business started with cash, furniture, & building)
•On January 1, 2020, goods purchased from Asif
on credit Rs. 15,000. Jan1, Purchase a/c 15,000
To Asif a/c Goods
•On January 2, 2020, goods purchased on cash 2020 (purchase on credit from Asif) 15,000
Rs. 30,000.
Jan 2, Purchase a/c 30,000
•On January 3, 2020, goods sell to customer Rs. 2020 To Cash a/c Goods 30,000
(purchase on cash)
22,000 and cash received.
•On January 5, 2020, goods worth Rs. 14,000 Jan 3, Cash a/c 22,000
sell to Shahid. 2020 To Sale a/c 22,000
(Goods sold on cash)
•On January 8, 2020, office’ typewriter worth Rs.
8,000 bought on cash. Jan 5, Shahid a/c 14,000
•On January 10, 2020, office’ iron safe purchased 2020 To Sale a/c Goods 14,000
(sold on credit to Shahid)
on cash Rs. 4,000.
Requirements: Pass necessary journal entries; Jan 8, Office Equipment a/c 8,000
2020 To Cash a/c 8,000
prepare appropriate ledger accounts, and trial (Bought typewriter on cash)
balance. Jan Office Equipment a/c 4,000
10, To Cash a/c 4,000
2020 (Iron safe purchased on cash)
 1. JOURNAL 2. LEDGER
Cash Account
Date Particulars/Details L.F Debit Credit
Jan 1, Cash a/c 65,000 Date Particulars J.F Amount Date Particulars J.F Amount
2020 Furniture a/c 20,000 Jan1, Capital a/c 65,000 Jan 2, Purchase a/c 30,000
Building a/c 100,000 2020 2020
185,000
To Capital a/c
(Business started with cash, furniture, & Jan 3, Sale a/c 22,000 Jan 8, Office Equipment a/c 8,000
building) 2020 2020

Jan1, Purchase a/c 15,000

To Asif a/c
2020 Goods (purchase on credit 15,000 Jan 10, Office Equipment a/c 4,000
2020
from Asif)
Jan 2, Purchase a/c 30,000 Balance c/d 45,000
2020 To Cash 30,000 87,000 87,000
a/c Goods (purchase on
cash)
Jan 3, Cash 22,000
2020 a/c 22,000 Note:
To Sale a/c Debit balance - If Debit side is greater than Credit side.
(Goods sold Credit balance – If Credit side is greater than Debit side.
on cash)
Jan 5, Shahid a/c 14,000 Furniture Account
2020 To Sale 14,000
a/c Goods (sold on
credit to Shahid) Date Particulars J.F Amount Date Particulars J.F Amount
Jan 8, Office Equipment a/c 8,000 Jan1, Capital a/c 20,000 Balance c/d 20,000
2020 To Cash 8,000
a/c (Bought typewriter 2020
on cash)
Jan Office Equipment a/c 4,000 20,000 20,000
10, To Cash 4,000
a/c (Iron safe
2020 purchased on cash)
 1. JOURNAL 2. LEDGER
Date Particulars/Details L Debit Credit
. Building Account
F
Jan 1, Cash a/c 65,000 Date Particulars J.F Amount Date Particulars J.F Amount
2020 Furniture a/c 20,000 Jan1, Capital a/c 100,000 Balance c/d 100,000
Building a/c 100,000 2020
185,000
To Capital a/c 100,00 100,000
(Business started with cash, furniture, &
building)
Capital Account
Jan1, Purchase a/c 15,000
To Asif a/c Date Particulars J.F Amount Date Particulars J.F Amount
2020 Goods (purchase on credit from 15,000
Asif) Balance c/d 185,000 Jan 1, Cash a/c 65,000
Jan 2, Purchase a/c 30,000 2020 Furniture a/c 20,000
To Cash Building a/c 100,000
2020 30,000
a/c Goods (purchase on 185,000 185,000
cash)
Jan 3, Cash a/c 22,000 Purchase Account
2020 To Sale a/c 22,000
(Goods sold on
cash) Date Particulars J.F Amount Date Particulars J.F Amount
Jan 5, Shahid a/c 14,000 Jan 1, Asif a/c 15,000 Balance c/d 45,000
2020 To Sale 14,000 2020
a/c Goods (sold on credit Jan 2, Cash a/c 30,000
to Shahid) 2020
Jan 8, Office Equipment a/c 8,000
To Cash 45,000 45,000
2020 8,000
a/c (Bought typewriter on
cash)
Jan Office Equipment a/c 4,000
10, To Cash 4,000
a/c (Iron safe
2020 purchased on cash)
 1. JOURNAL 2. LEDGER

Date Particulars/Details L.F Debit Credit

Asif Account
Jan 1, Cash a/c 65,000 Date Particulars J.F Amount Date Particulars J.F Amount
2020 Furniture a/c 20,000
Building a/c 100,000 Balance c/d 15,000 Jan 1, Purchase a/c 15,000
185,000 2020
To Capital a/c
(Business started with cash, furniture, &
building) 15,000 15,000

Jan1, Purchase a/c 15,000

To Asif a/c
2020 Goods (purchase on credit 15,000 Sales Account
from Asif)
Jan 2, Purchase a/c 30,000 Date Particulars J.F Amount Date Particulars J.F Amount
2020 To Cash 30,000
a/c Goods (purchase on Jan 1, Balance c/d 36,000 Jan 3, Cash a/c 22,000
cash) 2020 2020
Jan 3, Cash 22,000 Jan 5, Shahid a/c 14,000
2020
2020 a/c 22,000 36,000 36,000
To Sale a/c
(Goods sold
on cash)
Shahid Account
Jan 5, Shahid a/c 14,000 Date Particulars J.F Amount Date Particulars J.F Amount
2020 To Sale 14,000
a/c Goods (sold on Jan 5, Sales a/c 14,000 Balance c/d 14,000
credit to Shahid) 2020
Jan 8, Office Equipment a/c 8,000 14,000 14,000
2020 To Cash 8,000
a/c (Bought typewriter
on cash)
Jan Office Equipment a/c 4,000
10, To Cash 4,000
a/c (Iron safe
2020 purchased on cash)
 1. JOURNAL 2. LEDGER

Date Particulars/Details L Debit Credit Office Equipment Account

.
F J.F Amount Particulars J.F
Date Particulars Date Amount
Jan 1, Cash a/c 65,000 Jan 8, Cash a/c 8,000 Balance c/d 12,000
2020 Furniture a/c 20,000 2020
Jan Cash a/c 4,000
Building a/c 100,000
10,
185,000 2020
To Capital a/c
(Business started with cash, furniture, & 12,000 12,000
building)
Jan1, Purchase a/c 15,000
To Asif a/c
2020 (Goods purchase on credit from 15,000
Asif) 3. TRIAL BALANCE
Jan 2, Purchase a/c 30,000
2020 To Cash a/c 30,000 Particulars L.F Debit Credit
(Goods purchase on cash)
Cash a/c 45,000
Jan 3, Cash a/c 22,000 Furniture a/c 20,000
Building a/c 100,000
2020 To Sale a/c 22,000 Capital a/c 185,000
(Goods sold on
cash) Purchase a/c 45,000
Asif a/c 15,000
Jan 5, Shahid a/c 14,000 Sales a/c 36,000
2020 To Sale a/c 14,000 Shahid a/c 14,000
Goods (sold on credit to
Shahid) Office Equipment a/c 12,000
Jan 8, Office Equipment a/c 8,000 Total 236,000 236,000
2020 To Cash a/c 8,000
(Bought typewriter on cash)

Jan Office Equipment a/c 4,000

10, To Cash a/c 4,000
(Iron
2020 cash) safe purchased on
 Homework
1. Write the definitions of Journal, Ledger and Trial balance.
2. Write down the format for Journal entry?
3. Explain the two types of journal entry?
4. Write the rules for Debit and Credit using modern equation.