Daily Routine Of Journal Entries in Accounting | Make a Journey or Take a Journey | Rules of Journal Entry | Keep three things in mind while making journal entries | Method of entry in journal | Journal Entries Related to Assets | Journal Entries Related to Expenses | Income related journal entries | Bought an Assets | Sell an Assets | Credit Purchase An Assets | Sold on Credit an Assets | Paid Of Expenses | Received Expenses Bills | Received From Income | Bank related Journal Entries | Transfer Money Another Bank Account | Deposit in Bank | Withdrawal From Bank | Journal Entries Related to Purchase | Journal Entries Related to Sales | Cash Purchasing | Cash Selling
A journal is a book. In which whenever any transaction is done in business, it is written at that time. This is very important to run the business properly. After writing in the journal, they are divided into different parts. Which is called Ledger. And writing the things written in the journal at different places is called Ledger Posting. Along with this, profit/loss account and balance sheet are prepared from the balance of those Ledgers at the end of the year. By which the status of the business is known whether the business is giving profit or loss.
But to write in all these, some rules have to be followed and it is important to know about them.
Rules of Journal Entry
Journal is based on double system of entry. In which there are two parts, one side of deposit and the other of name. Because just as in this world one has to lose something to gain something. But it is also important to find out what you have gained or lost. Similarly in business, when something comes, something also goes. To find out what comes in and what goes out of your business, we need to know the rules of the transaction. Which we call Ledger/Account. There are three types of accounts.
Personal Account:- Accounts which are related to any person or institution. On which this rule for journal entry applies. Debit the person or organization that is taking and credit the person or organization that is giving.
Real Account:- Accounts which are related to the object. This rule will apply for journal entry on this account. Debit the item as it arrives. And credit whatever goes.
Nominal Account:- Accounts which are not related to anything tangible. That is, which does not happen in reality. But they have to be paid. This rule will apply for journal entry on this account. Debit all expenses and losses and credit all profits and income.
Keep three things in mind while making journal entries
Identifying both the transactions taking place i.e. Identifying the accounts.
Applying rules of related Journal Entries on accounts.
Write Debit at the top and Credit at the bottom.
Method of entry in journal
- The date is written in the first field. The day the transaction took place.
- In the second column, accounting is done as per the rules. Whatever happened in business.
- That number is written in the third box. In which number of accounts the transactions have been kept.
- The amount of deposit is written in the fourth field.
- The amount of Credit is written in the fifth field.
Journal Entries Related to Assets
The following Journal Entry is made on purchasing any type of Assets (Fan, AC, Building, Furniture, Computer, Chair, Machinery, Bike, Car etc.).
Bought an Assets
For example – Bought a fan worth Rs 1,500 on 28 September 2023.
First of all we have to identify the accounts according to the rules of Journal Entries. There were two transactions in this, one was cash and the other was a fan.
Cash and fan both are goods. This means that both are related to the Real account. In this, by targeting any one object, Real Account rules can be applied on it.
Like - cash is going and fan is coming. That's why there will be cash credit and fan debit.
Dr. (By) and Cr. After (To) is known, Debit is written at the top and Credit is written at the bottom. As given in the table below.
Date Particular L.F Debit Credit
28 September 2023 Fan A/c Dr. 1,500
To Cash A/c 1,500
Sell an Assets
Similarly, on selling any type of Assets (Fan, AC, Building, Furniture, Computer, Chair, Machinery, Bike, Car etc.), the following Journal Entry is made.
For example – Sold AC worth Rs 35,000 on 30 September 2023.
First of all we have to identify the accounts according to the rules of Journal Entries. There were two transactions in this, one was cash and the other was AC.
Cash and AC both are Objects. This means that both are related to the Real account. In this, by targeting any one object, Real Account rules can be applied on it.
Like - if AC is going then cash is coming. That's why there will be AC Credit and Cash Debit.
Dr. (By) and Cr. After (To) is known, Debit is written at the top and Credit is written at the bottom. As given in the table below.
Date Particular L.F Debit Credit
30 September 2023 Cash A/c Dr. 35,000
To AC A/c 35,000
Credit Purchase An Assets
Similarly, if any type of Assets (Fan, AC, Building, Furniture, Computer, Chair, Machinery, Bike, Car etc.) Is purchased on credit. So the following Journal Entry is made.
For example - Bought a building worth Rs 1,55,050 from Ramesh on 1 October 2023.
Identification of accounts:- There were two transactions in this, one was Ramesh and the other was Building.
Ramesh is a person i.e. He is an Personal account whereas the building is an object. This means it is related to the Real account. In this, by targeting any one object, rules of personal or real account can be applied on it. Here we see from both the rules
Ramesh Building is going to give on targeting personal account i.e. Credit will be given.
Building is coming on targeting real account i.e. Debit will happen
Dr. (By) and Cr. After (To) is known, Debit is written at the top and Credit is written at the bottom. As given in the table below.
Date Particular L.F Debit Credit
1 October 2023 Buliding A/c Dr. 1,55,050
To Ramesh A/c 1,55,050
Sold on Credit an Assets
Similarly, if any type of Assets (Fan, AC, Building, Furniture, Computer, Chair, Machinery, Bike, Car etc.) Is sold on credit. So the following Journal Entry is made.
For example – Sold furniture worth Rs 52,600 to Mohan on 2 October 2023.
Identification of accounts:- There were two transactions in this, one was Mohan and the other was furniture.
Mohan is a person i.e. It is a personal account whereas furniture is a thing. This means it is related to the Real account. In this, rules of personal or real account can be applied by targeting any one person. Here we see from both the rules
Targeting Personal Account means Mohan is going to take the furniture i.e. There will be debit
Furniture is going to target real account i.e. Credit will be given
Dr. (By) and Cr. After (To) is known, Debit is written at the top and Credit is written at the bottom. As given in the table below.
Date Particular L.F Debit Credit
2 October 2023 Mohan A/c Dr. 52,600
To Furniture A/c 52,600
Journal Entries Related to Expenses
The following Journal Entry is made for any type of expenses (Rent, Commission, Interest, Salary, Electricity Bill, Telephone Bill, Water Bill etc.).
Paid Of Expenses
For example – Rent of Rs 15,000 was paid on 3 October 2023.
There were two transactions in this, one was cash and the other was Rent.
Cash is a commodity. That is why it is related to an Real account. Whereas paying rent is a name, that is, it is related to a Nominal account. In this too, you can target anyone and apply rules on him. Either on Real Account or Nominal Account
For example, if cash is going, then there will be cash credit and the expenditure on paying rent will be there. That's why Rent Paid will be Debit.
Dr. (By) and Cr. After (To) is known, Debit is written at the top and Credit is written at the bottom. As given in the table below.
Date Particular L.F Debit Credit
3 October 2023 Rent A/c Dr. 15,000
To Cash A/c 15,000
Received Expenses Bills
For example, on October 4, 2023, an electricity bill of Rs 4,234 was received.
There were two transactions in this, one was cash and the other was electricity bill.
Cash is a commodity. That is why it is related to an Real account. Whereas electricity bill is a name, that is, it is related to a Nominal Account. In this too, you can target anyone and apply rules on him. Either on Real Account or Nominal Account
For example, if cash is going, there will be cash credit and electricity bill is being spent. That is why the electricity bill will be debited.
Dr. (By) and Cr. After (To) is known, Debit is written at the top and Credit is written at the bottom. As given in the table below.
Date Particular L.F Debit Credit
4 October 2023 Electricity A/c Dr. 4,234
To Cash A/c 4,234
Income related journal entries
The following Journal Entry is made for any type of income (Rent, Commission, Interest, Salary, Electricity Bill, Telephone Bill, Water Bill etc.).
Received From Income
For example – On October 5, 2023, interest of Rs 1,750 was received in the bank account.
There were two transactions in this, one with the bank and the other with interest.
Bank is an institution. That is why it is related to personal account. Whereas interest is a name, that is, it is related to a Nominal Account. In this too, you can target anyone and apply rules on him. Either on Personal Account or Nominal Account
For example, if the bank is receiving then the bank will be debited and income is being received from interest. That is why interest will be credited.
Dr. (By) and Cr. After (To) is known, Debit is written at the top and Credit is written at the bottom. As given in the table below.
Date Particular L.F Debit Credit
5 October 2023 Cash A/c Dr. 1,750
To Interest Rec. A/c 1,750
For example – received a salary of Rs 45,230 on 6 October 2023.
There were two transactions in this, one was cash and the other was salary.
Cash is a commodity. That is why it is related to an Real account. Whereas salary is a name, that is, it is related to a Nominal Account. In this too, you can target anyone and apply rules on him. Either on Real Account or Nominal Account
For example, if cash is coming then cash debit will happen and salary is being received. That's why salary will be credited.
Dr. (By) and Cr. After (To) is known, Debit is written at the top and Credit is written at the bottom. As given in the table below.
Date Particular L.F Debit Credit
6 October 2023 Cash A/c Dr. 45,230
To Salary Rec. A/c 45,230
Bank related Journal Entries
The following Journal Entry is made to deposit or withdraw cash in the bank.
Deposit in Bank
For example – Deposit Rs 45,000 in PNB Bank on 7th October 2023.
There were two transactions here, one was cash and the other was PNB bank.
Cash is a commodity. That is why it is related to an real account. Whereas Bank is an institution. This means that it is related to a personal account. In this also, by targeting one person, you can apply the rules of Real Account or Personal Account on him.
For example, if cash is going out then the amount is being deposited in the bank. That is why there will be Cash Credit and PNB Bank Debit.
Dr. (By) and Cr. After (To) is known, Debit is written at the top and Credit is written at the bottom. As given in the table below.
Date Particular L.F Debit Credit
7 October 2023 PNB Bank A/c Dr. 45,000
To Cash A/c 45,000
Transfer Money Another Bank Account
For example, on October 8, 2023, Rs 35,000 was transferred from PNB Bank to Axis Bank through UPI.
Here also two transactions took place, one with PNB Bank and the other with Axis Bank.
Both banks are one institution. This means that both of them are related to personal accounts. In this, rules can be applied by targeting any one.
For example, Axis Bank is receiving the amount and PNB Bank is withdrawing the amount. That is why Axis Bank will be debit and PNB Bank will be credit.
Dr. (By) and Cr. After (To) is known, Debit is written at the top and Credit is written at the bottom. As given in the table below.
Date Particular L.F Debit Credit
8 October 2023 Axis A/c Dr. 35,000
To PNB Bank A/c 35,000
Withdrawal From Bank
For example – Withdraw Rs 23,000 from Axis Bank on 9 October 2023.
Here also two transactions took place, one was cash and the other was Axis Bank.
Cash is a commodity. That is why it is related to an real account. Whereas Bank is an institution. This means that it is related to a personal account. In this also, by targeting one person, you can apply the rules of Real Account or Personal Account on him.
For example, cash is coming and money is going out from the bank. Therefore Cash will be debit and Axis Bank will be credit.
Dr. (By) and Cr. After (To) is known, Debit is written at the top and Credit is written at the bottom. As given in the table below.
Date Particular L.F Debit Credit
9 October 2023 Cash A/c Dr. 23,000
To Axis Bank A/c 23,000
Journal Entries Related to Purchase
For example – Purchased goods worth Rs 1,15,000 from Rajlakshmi Shoes Store on 10 October 2023.
Rajlakshmi Shoes Store is an institution. So personal account
Goods purchased are a commodity hence real account
For example, if the goods are coming then Rajlakshmi Shoes Store is giving them. Therefore, goods purchased will be debit and Rajlakshmi Shoes Store will be credit.
Date Particular L.F Debit Credit
10 October 2023 Purchase A/c Dr. 1,15,000
To Rajlakshmi Shoes Store. A/c 1,15,000
Cash Purchasing
For example – purchased goods worth Rs 95,000 on 11 October 2023
Cash and goods are both purchased goods hence real account
Like - goods are coming and cash is going. That is why goods purchased will be debit and cash will be credit.
Date Particular L.F Debit Credit
11 October 2023 Purchase A/c Dr. 95,000
To Cash A/c 95,000
Journal Entries Related to Sales
For example – Sold goods worth Rs 48,000 to Mahalakshmi Shoes Store on 12 October 2023.
Mahalakshmi Shoes Store is an institution. So personal account
Goods sold are a commodity hence real account
For example, if the goods are going then Majlakshmi Shoes Store is getting them. That is why Mahalaxmi Shoes Store will be debit and goods sold will be credit.
Date Particular L.F Debit Credit
12 October 2023 Mahalakshmi Shoes Store A/c Dr. 48,000
To Sales A/c 48,000
Cash Selling
For example – Goods worth Rs 62,000 were sold on 13 October 2023.
Cash and goods sold are both goods hence real account
Like - goods are going and cash is coming. Therefore cash will be debit and goods sold will be credit.
Date Particular L.F Debit Credit
13 October 2023 Cash A/c Dr. 62,000
To Sales A/c 62,000
