Note on Journal Entries

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Different kind of business transaction is recorded in the journal in sequential order. When the journal transaction is recorded in the journal it becomes journal entries. Journal entries are the systematic order record of the financial transaction in the journal. Journal entries consist of the name of debit and credit involved in the financial transaction with a brief narration. It is the basis of making ledger. There is example of two transactions and their journal entries:

Baisakh 10 Cash of Rs. 10000 received from ram.

Baisakh 11 Paid for the salary of Rs. 5000 and rent Rs. 5000.

Journal Entries

Date Particular L.F Debit Rs. Credit Rs.
Baisakh 10 Cash a/c.............................Dr. 10,000
To Ram's a/c 10,000
(Being cash received from Ram)
Baisakh 11 Salary a/c....................................Dr. 5000
Rent a/c......................................Dr. 5000
To Cash a/c 10,000
(Being paid for salary and rent)
Total 20,000 20,000

Simple and compound journal entry

Simple journal entry is composed of one debit and another credit account. The journal entry of Baisakh 10 shown above is the simple journal entry.

Compound journal entry is the combination of two or more than two simple journal entries. It contains two or more than two accounts either in debit or in credit. In fact, two or more simple entries can be combined and passed one compound entry if the data and an account of these entries are common.The journal entry of Baisakh 11shown above is the compound journal entry.

Journaling simple transactions

Example 1

Chaitra 1: Hari started a business with cash of Rs. 55,000.

Chaitra 5: Hari deposited cash of Rs. 45000 in the bank as his additional capital.

Chaitra 7: Hari withdrew cash of Rs. 2000 from the business as his additional capital.

Chaitra 8: Hari withdrew cash of Rs 3000 from the bank for his personal use

Chaitra 9: Hari Withdrew goods of Rs.4000 from the business for his personal use.

Journal Entries

Date Particular L.F Debit Rs. Credit Rs.
Chaitra1 Cash a/c.............................Dr. 55,000
To Capital a/c 55,000
(Being business started with cash)
Chaitra5 Bank a/c....................................Dr. 45000
To Capital a/c 45000
(Being the owner deposited cash in the bank as his additional capital)
Chaitra7 Drawing a/c................................Dr. 2000
To Cash a/c 2000
(Being cash withdrew from business for personal use)
Chaitra8 Drawing a/c...................................Dr. 3000
To Bank a/c 3000
(Being cash sales)
Chaitra9 Drawing a/c...................................Dr. 4000
To Purchase a/c 4000
(Being goods withdrew from the business for personal use)
Total 1,09000 1,09000

Example 2:

  1. Goods purchased for cash Rs. 2500
  2. Cash sales made for Rs. 1500
  3. Goods purchased from Krishna on credit for Rs. 6000
  4. Purchased goods from MeghaCenter for rs. 8000
  5. Returned goods to Megha Center of rs 500 being defective
  6. Sold goods to Barsha Centre for rs 6000
  7. Returned goods by Barsha Center of Rs. 300 being damaged.
Date Particular L.F Debit Rs. Credit Rs.
a Purchase a/c.............................Dr. 2500
To Cash a/c 2500
(Beinggoods purchase for cash)
b Cash a/c....................................Dr. 15000
To Sales a/c 15000
(Being goods sold for cash)
c Purchase a/c................................Dr. 6000
To Krishna a/c 6000
(Being goods purchased from krishna on credit)
d Purchase a/c...................................Dr. 8000
To Megha center a/c 8000
(Being good purchased from Megha center on credit)
e Megha Center a/c...................................Dr. 500
To Purchase a/c 500
(Being goods returned to Megha Center)
f. Barsha Center a/c...................................Dr. 6000
To Sales a/c 6000
(Being goods sold Barsha Center on Credit)
g Sales return a/c............................Dr. 300
To Barsha Center a/c 300
(Being goods return by Barsha Center)
Total 37,300 37,300

Example 3:

Pass journal entries of the following transaction:

  1. Purchased furniture for cash Rs. 10,000
  2. Purchased a machine from Mahakali Stationary Ltd. for Rs. 75000
  3. Sold an old computer for rs. 5000

Journal Entries

Date Particular L.F Debit Rs. Credit Rs.
1. Furniture a/c.............................Dr. 10,000
To Siddhi's a/c 10,000
(Being purchased furniture)
2. Machinery a/c....................................Dr. 75000
To Mahakali Stationary Ltd a/c 75000
(Being machine purchased from Mahakali Stationary Ltd.)
3. Cash a/c................................Dr. 5000
To office equipment a/c 5000
(Being cash paid to siddhi)
Total 90,000 90,000

Journaling compound transactions

Transaction of same data having a common account in one aspect are compound transactions. A single entry is passed for such compound transaction, which is known as compounded journal entry.

Example 1:

  1. Received cash of Rs. 950 from Mikal and allowed discount of Rs.50
  2. Paid cash of Rs.750 to Anuradha and received discount of Rs.50
  3. Received cash of Rs.950 from Tritha in full settlement of his account Rs. 1000
  4. Paid cash of Rs. 95 to Usha in full settlement of her account Rs.1000

Journal Entries

Date Particular L.F Debit Rs. Credit Rs.
1 Cash a/c.......................................Dr. 950
Discount allowed a/c.......................Dr. 50
To Mikal's a/c 1000
(Being cash received from Mikal and allowed discount)
2 Anuradha's a/c....................................Dr. 800
To Discount received a/c 50
To Cash a/c 750
(Being cash paid to Anuradha and received discount)
3 Cash a/c........................................................Dr. 950
Discount allowed a/c........................................Dr 50
To Tirtha's a/c 1000
(Being cash received from Tritha and allowed discount)
4 Usha's a/c...................................Dr. 1000
To Discount received a/c 50
To Cash a/c 950
(Being cash paid to usha and received discount)
Total 3800 3800

  • When the journal transaction is recorded in the journal it becomes journal entries. 
  • Journal entries consist of the name of debit and credit involved in the financial transaction with a brief narration.
  • Simple journal entry is composed of one debit and another credit account.
  • Compound journal entry is the combination of two or more than two simple journal entries. It contains two or more than two accounts either in debit or in credit. 
.

Very Short Questions

Journal entries

Date

Particulars

LF

Debit Rs.

Credit Rs.

a).

Bank a/c ……………………………Dr.

1,00,000

To capital a/c

1,00,000

(Being business started with bank balance.)

b).

Purchase a/c............................Dr.

10,000

To Suvam's a/c

4,000

To bank a/c

6,000

(Beinggoods purchased from Suvam and paid by cheque in part.)

c).

Cash a/c ……………….Dr.

5,000

To sales a/c

5,000

(Being cash sales made.)

d).

Interest a/c………………………..Dr.

3,000

To cash a/c

3,000

(Being interest paid.)

e).

Cash a/c ………………………Dr.

1,000

To sales a/c

1,000

Being good sold to Binayak on cash.)

f).

Binayak's a/c…………………………..Dr.

500

To purchase return a/c

500

(Being goods returned by Binayak.)

Journal entries

Date

Particulars

LF

Debit Rs.

Credit Rs.

a).

Cash a/c ……………………………Dr.

60,000

To capital a/c

60,000

(Being business started with cash.)

b).

Purchase a/c............................Dr.

7,000

To Sandesh's a/c

7,000

(Being goods purchased from Sandesh.)

c).

Cash a/c ……………….Dr.

7,000

To sales a/c

7,000

(Being cash sales made.)

d).

Bikash's a/c………………………..Dr.

2,500

To sales a/c

2,500

(Being goods sold to Bikash.)

e).

Cash a/c ………………………Dr.

2,500

To Bikash's a/c

2,500

(Being cash received from Bikash.)

Journal entries

Date

Particulars

LF

Debit Rs.

Credit Rs.

a).

Cash a/c ……………………………Dr.

60,000

To capital a/c

60,000

(Being business started with cash.)

b).

Bank a/c …………………Dr.

50,000

To cash a/c

50,000

(Being cash deposited into bank.)

c).

Purchase a/c ……………….Dr.

10,000

To Bank a/c

3,000

To Ramesh’s a/c

7,000

(Being goods purchased from Ramesh and paid through cheque.)

d).

Cash a/c………………………..Dr.

800

To sales a/c

800

(Being cash sales made.)

e).

Salary a/c ………………………Dr.

4,000

Rent a/c…………………………Dr.

2,000

To cash a/c

6,000

Being paid for salary and rent by cheque.)

f).

Cash a/c…………………………..Dr.

2,500

To commission received a/c

2,500

(Being commission received.)

0%
  • When capital is invested to start a business, ______ the business.

    cash goes from


    person comes in


    cash comes in


    person goes out from


  • If the owner withdraws cash from the business for his personal use, he becomes ______.

    receiver


    giver


    liable


    none


  • When the goods are purchased on credit, purchase account is debited and the ______ account is credited.

    consumer's


    drawing


    sales


    supplier’s


  • The business returns goods to its supplier if the goods are ______.

    found damaged


    found defective


    inferior in quality


    all the options are correct


  • When the business sells goods on cash, ______

    goods comes in


    cash goes out


    machinery comes in


    cash comes in


  • Journal entries are the systematic order record of financial transaction in the ______.

    subsidiary books
    journal
    trial balance
    ledger
  • good purchased for cash2500 journalise it

    cash a/c to purchase
    bank a/c to purchase
    goods a/c to purchase
    purchase a/c to cash
  • You scored /7


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DISCUSSIONS ABOUT THIS NOTE

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Rakesh bhujel

The last journal entry of Q.1 is incorrectIts case of sales return not purchase return please correct it.


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sneha bhandari

purchased goods of Rs60000 from hari and paid cash Rs40000 in part


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prabin shrestha

goods lost by theft of rs 2000its journal entry


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