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Steps in Journalizing

  • Analyze the transaction and identify the two accounts (single entry and compound entry) that are being affected by the transaction.
  • Ascertain the nature of the accounts involved as real, personal or nominal.
  • Determine which rule of debit and credit is applicable for each of the accounts involved.
  • Ascertain the account to be debited and the account to be credited.
  • Write the name of the account to be debited along with the abbreviation “Dr.” on the same line against the name of the account in the particulars column and the amount to be debited in the debit column against the name of the account.
  • Write the name of the account to be credited in the next line preceded by the word “To” at a few spaces towards the right in the particulars column, and the amount to be credited in the credit column against the nature of the account.
  • Write the narration (a brief description of the transaction) within brackets in the next line in the particulars column.

Example: Let us consider a transaction, Bought furniture for cash ₹12,000 –

 

Furniture A/c

Tangible aspect/Asset

Real A/c

Coming in

Debit

[Debit what comes in]

Cash A/c

Tangible aspect/Asset

Real A/c

Going out

Credit

[Credit what goes out]


Once we decide which account is to be debited and which is to be credited, writing the journal entry amounts to placing each element in its place within the format and recording the relevant amount.

 

 

Journal in the books of M/s______

 

Date Particulars L.F. Debit ( ₹) Credit ( ₹)
June 15 Furniture a/c             Dr.   12,000  
   To Cash a/c
[ Being the amount paid towards furniture purchased from M/s ____vide bill no.:___ dated:__ ]
    12,000


 

 

Note: Simple Entry- It is a journal entry involving only two account heads. Compound Entry- It is a journal entry involving more than two account heads. It is a journal entry derived by compounding two or more simple journal entries.

 

Example: Rahim’s A/c               Dr.
                 To Discount received A/c
                 To Bank A/c

Illustration-2

Journalise the below transactions in the books of Mr. Rajath

 

On 01/01/2012 - Purchased goods for cash ₹1,000

 

On 03/01/2012 - Bharat was paid ₹500

 

On 04/01/2012 - Paid Salary to Chanda ₹1,000

 

On 05/01/2012 - ₹500 was received from Devi

 

On 06/01/2012 - ₹300 was received from Devi as Commission

 

On 08/01/2012 - ₹1,000 was received from Amar in full settlement against the amount due which was, ₹1,050

 

On 09/01/2012 - ₹960 was paid to Bharat in full settlement of ₹1,000

 

On 13/01/2012 - The Proprietor of Rajath Enterprises withdrew goods worth ₹600 for domestic use

 

On 14/01/2012 - Cartage was paid on the behalf of the customer, Mr. Yogesh ₹100

 

On 15/01/2012 - The supplier, Mr. Zafar, paid cartage ₹100 on our behalf
 

Solution:

Accounts involved Account type Rule
Purchase Account real account Debit what comes in
Cash Account real account Credit what goes out
 
  Particulars L.F. Debit ( ) Credit ( )
1 jan 2012 Purchases A/c               Dr.   1,000  
   To Cash A/c
[Being goods purchased for cash]
    1,000
 
 
Accounts involved Account type Rule
Bharat Account Personal account Debit the receiver
Cash Account Real account Credit what goes out
 
Date Particulars L.F. Debit ( ) Credit ( )
3 jan 2012 Bharat’s A/c               Dr.   1,000  
   To Cash A/c     1,000
 
Accounts involved Account type Rule
Salary Account Nominal account Debit the expense
Cash Account Real account Credit what goes out
 
Date Particulars L.F. Debit ( ) Credit ( )
4 jan 2012 Salary A/c               Dr.   1,000  
   To Cash A/c     1,000
 
Accounts involved Account type Rule
Cash Account Real account Debit what comes in
Devi’s Account Personal account Credit the giver
 
Date Particulars L.F. Debit ( ) Credit ( )
4 jan 2012 Cash A/c               Dr.   1,000  
   To Devi’s A/c
[Being cash received from Devi]
    1,000
 
 
Accounts involved Account type Rule
Cash Account Real account Debit what comes in
Commission Account Nominal account Credit the incomes
 
Date Particulars L.F. Debit ( ) Credit ( )
6 jan 2012 Cash A/c               Dr.   300  
   To Commission A/c
[Being cash received from Devi]
   

300

 

 
Accounts involved Account type Rule
Cash Account Real account Debit what comes in
Discount Allowed Account Nominal Account Debit the expence
Amar Account Personal Account Credit the giver
Date Particulars L.F. Debit ( ) Credit ( )
8 jan 2012 Cash A/c                                 Dr.
Discount allowed A/c                Dr.
 

1,000

50

 
   To Amar’s A/c
[Being cash received from Amar and discount allowed to him]
   

300

 

 
Accounts involved Account type Rule
Bharat Account Personal Account Debit the receiver
Cash Account Real Account Debit what comes in
Discount received Nominal Account Credit the incomes
 
Date Particulars L.F. Debit ( ) Credit ( )
9 jan 2012 Bharat’s A/c               Dr.  

1,000

 
   To Cash A/c
   To Discount received A/c
[Being cash paid to B and a discount received]
   

960
40

 
Accounts involved Account type Rule
Drawings Account Personal account Debit the receiver
Purchases Account Real account Credit what goes out
 
Date Particulars L.F. Debit ( ) Credit ( )
9 jan 2012 Drawings A/c              Dr.  

1,000

 
   To Purchases A/c
[Being withdrawal of goods for personal use]
   

960
40

 
Accounts involved Account type Rule
Yogesh Account Personal account Debit the receiver
Cash Account Real account Credit what goes out
 
Date Particulars L.F. Debit ( ) Credit ( )
14 jan 2012 Yogesh’s A/c                                                        Dr.  

100

 
   To Cash A/c
[Being cartage paid on behalf of our customer, Yogesh]
   

100
 


Cartage account will not be involved as it is not an expense of Mr. Rajath.
 
Accounts involved Account type Rule
Cartage Account Nominal account Debit the expenses
Zafar Account Personal Account Credit the giver
 
Date Particulars L.F. Debit ( ) Credit ( )
15 jan 2012 Cartage A/c                       Dr.  

100

 
   To Zafar’s A/c
[Being cartage paid by Zafar]
   

100

 

 

Note: Cash account will not be involved as there is no out flow of cash in Mr. Rajath’s books.





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