What Journal Entries and What is its Rules?

Journal entries will accompany you throughout your commerce topic. Because, journal entries is one the most important chapter entire commerce. Also in 11th or graduation or post-graduation will be with you. If you do not have the knowledge of journal entries, then you do not know anything.

So friends, today we are going to discuss only about journl entries in this article. We would like to complete your basic information in this article. We will understand the concept by understanding its meaning.

What does journal mean?

You know that when keeping records in accounting, all financial transactions are written properly to maintain them. Many customers come in business. They have the maximum number of cash shoppers. So some also shop in borrowings. Apart from this, raw material is also purchased in that business, which is sometimes in cash or sometimes in borrowings.

Not only this, if you are a businessman then you pay an electric bill. Stationary bills pay. Take a loan from a bank. Transporting expenses have to be filled. Apart from this, there are many similar transactions. So friends, will you be able to remember all these transactions. No! Then you have to write this transaction in the excel of a paper or computer.

What will you do for it?

You will write all these transactions by date or in cronological order. You write all these transactions in a basic book. The source you have to write in it is a bill of lading. So through those source documents, you pass a Fair Entry for the first time. It is called a journal entry.
There are some basic rules of journal entries.

You know that every transaction is two impact. In other words, everything has two effects. Similarly, one account is debit and the other is credit. Now if you want to write in journal form then how will you write. To understand this, you have to understand its basic concept.

Before that we would like to give you some more information. Any business has its own identity. In addition, the business owner also has a different identity. Now two things are coming out of it. First – the business does not record its transaction itself, its transaction record is done by owner. Second – the owner records his transaction himself.

How would you record a transaction in this situation? Here you have to keep in mind that whatever transaction you record, only keeping in mind the business.

The format of journal entries is as follows: –
  1. Date: The date in which the transaction took place. Write it in order.
  2. Particulars: It contains complete details. What did you buy and sell. If debited from your account, then credit was also make to other account. If there was credit in your account, then debit in someone else’s account. While doing it The related amount should be write in the debit and credit columns.
  3. Ledger Folio or L. F .: In this, write the ledger folio number. You will be able to write the ledger folio number when you create the ledger account.
  4. Debit Amount or Dr .: The amount from which the account is withdrawn is the amount.
  5. Credit Amount or Cr. : In whose account money comes, it writes the amount in it.

Suppose, if you have bought any item, your item came, but the money is gone. Conversely, if you sold goods, your goods went, but the money came. So every transaction will have two effects. In other words, your account runs through a double entry system.

L.F. in column number 3 in the journal entries. Or what is Ledger Folio?

Friends, when you write journal entries, they write by date. It happens here that many times you keep transacting with the same institution or person, which is its journal entry on different dates. When you want to get information about the total transactions of that institution or person then it will be very difficult to get this information.

So, you create an account separately in the name of that institution or individual. Further, the date on which they have been transacted. He writes from one source of journal entries at one place, he is name Ledger. Also, the page number on which the ledger is write. It is the folio number. This ledger folio writes in the journal entries in the folio of that institution or individual. This shows that the record of this ledger is in this journal folio.

Journal entries contain three basic rules:

1. Real Account: It records entries related to basic assests.
Rules: Debit whats comes in
Credit what goes out

If something has come up, debit it. Also, if something is gone, he has to credit it.

2. Personal Account: Under this, personal entries are recorded. It consists of both natural personal and artificial personal. Artificial personal here means company and organization.

Rules: Debit the receiver
Credit the giver

Here, the one who has to receive has to debit and if the giver is, credit his account.

3. Nominal Account: It includes expenses, income, losses and gains.
Rules: Debit all Expenses & Losses
Credit all Income & Gains

While making entries in such an account, all the Expenses & Losses have to be entered in the debit side. Also, all Income & Gains have to be credited.

Friends, now we will try to explain these three rules with examples.

First of all, we explain to you about Real Account:

for example:

  1. Machinery purchased for cash 1,00,000.
  2. Furniture purchased for cash 50,000.
  3. Furniture sold for cash 50,000.
  4. Machinery sold for cash 1,00,000.

Friends, in this example you are seeing that only the assets are bought and sold. Because, both machinery and furniture are assest and assets are a real account. Thus, you have purchased machinery and furniture. In return, money has been transferred from your account to another account. In other words, the assets that has come to you. You paid for it. So that money was debit from your account. On the other hand who gave you goods and took money in return. Therefore, he got credit in his account.

Like, when you sold goods and took money, the same situation happened. And so will debit or credit. See the journal entries of these four transactions in the image above.

Friends, in fact, whenever you deal in business, it is dealing in two ways – in Cash and Credit.

Suppose you sold something. If the buyer paid the value of the goods at the same time, it was transaction in cash. If he is buying goods by saying that he will pay the value of the goods after a few days or months, then this type of transaction comes under lending. In other words, both these types of sales are cash sell and credit sell.

How would you wear both these types of sell? So for this you have to understand the transaction first.

For example:
  1. Goods sold for cash 25,000
    So, it is clear in this transaction that cash has been transacted.
  2. Goods sold to X for cash 25,000
    It is also clearly mention in this transaction that X has been sale in cash.
  3. Goods sold to X 25,000
    In this transaction, only the name is write and it is not write that the transaction has been done in cash. This means that this transaction has taken place in borrowings. Therefore, keep in mind that a transaction in which only the name is write and the cash is not write, is then sell or purchase on credit. If cash is write with the name, then it was transaction in cash.

Now you know about Personal Account:

For this you will see two more examples:

  1. Cash paid to Aman 500.

Aman was given cash in this transaction, but why it was given has not been given. The rules for personal acount are – Debit the receiver and Real account rules – Whats goes out. What went So the money went away.

So its entry will be as follows –

Aman’s A / c Dr. 500 (Personal a / c)
To Cash A / c 500 (Real a / c)
(Being cash paid to Aman)

  1. Cash received from Aman 500. Cash has also been received in this transaction. But, why was received. Its information has not been given. The rule of real account is – whats come in. That means what came, then cash came. Therefore it will be debit. On the other hand, the rule of personal acount is – Credit the giver.

So its entry will be as follows –

Cash a / c Dr 500 (Real a / c)
To Aman’s a / c 500 (Personal a / c)
(Being cash received from Aman)

Now we will understand the third rule Nominal account.

We will also understand this with two examples –

  1. Salary paid Rs. 20,000.
  2. Salary Received Rs. 20,000.

In this transaction, the salary has been paid. This means that expenses were incurred. Here, expenses is the nominal account. For those who got salary, there is also income.

  1. Salary A / c. Dr. 20,000
    To Cash A / c 20,000

(Being salary paid for cash)

  1. Cash A / c Dr. 20,000
    To Salary A / c 20,000

(Being salary received)

Friends, here, getting salary or paying salary is in cash only. So while entering for such a transaction, do not forget that cash is not written here.

Important things regarding Goods:

Friends, goods are what a businessman deals with. In other words, Finished goods, Raw-material goods. Like – you prepare a cloth. So cloth is goods. But, if you buy machinery to prepare cloth, then it is machinery, it is not goods. Similarly, if you have furniture for the office, then it is only furniture that is not goods. In other words, what your product is is the goods you buy and sell.

So, you Goods purchase or goods sales
How will I enter? Let’s understand:

  1. Purchased A / c. Dr. 15,000
    To Cash A / c 15,000
    (Being purchased for cash)
  2. Cash A / c Dr. 15,000
    To Sales A / c 15,000
    (Being sold for cash)

Keep in mind that if only the name is given in the transaction, it is done in the transaction. Also, cash is write with the name or only cash is write, there is a cash transaction.

Read more articles related to this article: Accounting andĀ its Feature, Function, Objectives and Requirements

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