Journal Entries

Learn how business transactions are recorded in the Journal with simple examples

📘 What is a Journal?

A Journal is the book in which business transactions are recorded in chronological order, that is, in the order in which they occur.

It is also known as the Book of Original Entry because transactions are first recorded in the Journal before they are transferred to the Ledger.

✍️ How to Record a Journal Entry?

Every transaction affects at least two accounts. To record a transaction, we identify the accounts affected and determine which account should be debited and which should be credited.

The basic rule is:

Debit the account that receives the benefit.

Credit the account that gives the benefit.

📊 Format of Journal

A simple Journal format contains the following columns:

1. Date
2. Particulars
3. L.F. (Ledger Folio)
4. Debit Amount
5. Credit Amount

💡 Example 1 – Started Business with Cash

Suppose Ravi started a business with ₹50,000 cash.

Two accounts are affected:

• Cash Account – receives cash → Debit
• Capital Account – gives the capital → Credit

Journal Entry:

Cash A/c    Dr.   ₹50,000
    To Capital A/c   ₹50,000

💡 Example 2 – Purchased Goods for Cash

Purchased goods for ₹10,000 cash.

• Purchases Account – receives goods → Debit
• Cash Account – gives cash → Credit

Journal Entry:

Purchases A/c   Dr.   ₹10,000
    To Cash A/c   ₹10,000

⭐ Key Points to Remember

• Every transaction has at least two effects.
• Total Debit must always equal Total Credit.
• Journal is the Book of Original Entry.
• Transactions are recorded in chronological order.
• Journal entries are later posted to the Ledger.

📝 Practice Question

Question: Purchased furniture for ₹20,000 in cash. Prepare the Journal Entry.

Try to identify the two accounts and decide which account should be debited and which should be credited.

Next: Ledger →