Introduction - Books of Original Entry: Journal Entries Commerce Notes | EduRev

Crash Course of Accountancy - Class 11

Commerce : Introduction - Books of Original Entry: Journal Entries Commerce Notes | EduRev

 Page 1


 
 
67 
Chapter 9 
Books of original entry - Journal entries 
 
Meaning of a Journal:  
? A Journal is the primary book of accounts in which transactions are first recorded in a chronological order, i.e., 
as they are entered into. 
? It shows for each transaction the transaction date, name of accounts that are to be debited or credited, Ledger 
page number (Ledger folio) of the accounts, the amount of debit and credit. 
 
Meaning of a Journal entry:  
? An entry recorded in the Journal is called a Journal Entry. 
 
Meaning of Journalising: 
? The process of recording a transaction in a Journal is known as Journalising 
 
Meaning of posting: 
? The transfer of Journal entry to a Ledger account is called Posting. 
 
Characteristics of a Journal  
1.  A Journal contains day-to-day transactions in a chronological order.  
2.  It is a book of original entry in which transactions are written before they are posted in the Ledger.  
3.  It records both the debit and credit aspects of a transaction by using the Double Entry System of Book Keeping.  
4.  A Journal is a record which shows complete details of a transaction in one entry.  
5.  Journalising means recording a transaction in the Journal and the form in which it is recorded is known as a 
Journal Entry.  
 
Form of a Journal:  
The format of a Journal is as follows:  
JOURNAL 
Date 
(1) 
Particulars 
(2) 
L.F. 
(3) 
Dr. Amount 
Rs. 
(4) 
Cr. Amount 
Rs. 
(5) 
 
 
    
(L.F. Stands for Ledger Folio.) 
 
Rules of Debit and Credit ( modern approach) 
Types of Account Debit Credit 
1. Assets Account  Increase ? Decrease ? 
2. Liabilities Account  Decrease ? Increase ? 
3. Capital Account  Decrease ? Increase ? 
4. Revenue Account  Decrease ? Increase ? 
5. Expense Account  Increase ? Decrease ? 
 
Steps for journalizing: 
1. Identify the accounts which are affected 
2. Name them as real/ personal and nominal 
3. Apply the rules  
4. Find Dr. and Cr. 
5. Pass journal entry 
 
 
 
 
Page 2


 
 
67 
Chapter 9 
Books of original entry - Journal entries 
 
Meaning of a Journal:  
? A Journal is the primary book of accounts in which transactions are first recorded in a chronological order, i.e., 
as they are entered into. 
? It shows for each transaction the transaction date, name of accounts that are to be debited or credited, Ledger 
page number (Ledger folio) of the accounts, the amount of debit and credit. 
 
Meaning of a Journal entry:  
? An entry recorded in the Journal is called a Journal Entry. 
 
Meaning of Journalising: 
? The process of recording a transaction in a Journal is known as Journalising 
 
Meaning of posting: 
? The transfer of Journal entry to a Ledger account is called Posting. 
 
Characteristics of a Journal  
1.  A Journal contains day-to-day transactions in a chronological order.  
2.  It is a book of original entry in which transactions are written before they are posted in the Ledger.  
3.  It records both the debit and credit aspects of a transaction by using the Double Entry System of Book Keeping.  
4.  A Journal is a record which shows complete details of a transaction in one entry.  
5.  Journalising means recording a transaction in the Journal and the form in which it is recorded is known as a 
Journal Entry.  
 
Form of a Journal:  
The format of a Journal is as follows:  
JOURNAL 
Date 
(1) 
Particulars 
(2) 
L.F. 
(3) 
Dr. Amount 
Rs. 
(4) 
Cr. Amount 
Rs. 
(5) 
 
 
    
(L.F. Stands for Ledger Folio.) 
 
Rules of Debit and Credit ( modern approach) 
Types of Account Debit Credit 
1. Assets Account  Increase ? Decrease ? 
2. Liabilities Account  Decrease ? Increase ? 
3. Capital Account  Decrease ? Increase ? 
4. Revenue Account  Decrease ? Increase ? 
5. Expense Account  Increase ? Decrease ? 
 
Steps for journalizing: 
1. Identify the accounts which are affected 
2. Name them as real/ personal and nominal 
3. Apply the rules  
4. Find Dr. and Cr. 
5. Pass journal entry 
 
 
 
 
 
 
68 
Types of accounts (traditional approach)  
 
?  Whenever a suffix or prefix is fixed with the nominal account it becomes a personal account 
S.No  TRANSACTION Journal entry 
1. Started business with cash Cash a/c                           dr. 
   To capital a/c 
2. Started business with cash, buildings, goods and other assets Cash a/c                           dr. 
Buildings a/c                    dr. 
Purchases a/c                  dr. 
Other assets a/c             dr. 
   To capital a/c   
3. Purchased fixed assets in cash Fixed assets a/c              dr. 
    To cash a/c  
4. Took a loan from bank / friends or relatives or friends/ bank lent to the 
business 
Cash a/c                           dr.  
  To loan a/c 
5. Purchased goods for cash Purchases a/c                dr. 
   To cash a/c         
6. Purchased goods  Purchases a/c                dr. 
   To cash a/c         
7. Purchased goods  from Ravan on credit  Purchases a/c                dr. 
   To Ravan a/c         
8. Purchased goods  from Ravan Purchases a/c                dr. 
   To Ravan a/c         
9. Purchased goods  from Ravan in cash Purchases a/c                dr. 
   To cash a/c         
10. Sold goods for cash Cash a/c                         dr. 
   To sales a/c  
11. Sold goods / cash sales Cash a/c                         dr. 
   To sales a/c 
12. Sold goods  to Ricky on credit Ricky a/c                         dr. 
   To sales a/c 
13. Sold goods  to Ricky in cash Cash a/c                         dr. 
   To sales a/c 
14. Sold goods  to Ricky Ricky a/c                         dr. 
   To sales a/c 
15. Paid cash to ravan Ravan a/c                      dr. 
To cash 
16. Received cash from ricky Cash a/c                    dr. 
   To ricky a/c  
17. Paid expenses Expenses a/c            dr. 
  To cash a/c   
18. Paid salary to gopu or paid rent to landlord  Expenses a/c            dr. 
  To cash a/c   
19. Received incomes / commission Cash a/c                    dr.  
   To incomes a/c  
20. Withdrew money for personal use / household purpose/ income tax/  life 
insurance premium  
Drawings a/c          dr. 
  To cash a/c  
                                                                                       
Types of discount (nominal account ) 
? Trade discount-  it is not recorded in the books of accounts (entry is same just deduct the amount from 
goods ) 
? Cash discount - It is recorded in the books of accounts ( discount received is cr. &  discount allowed is dr.) 
real (assets)
•dr. what comes in 
• cr.  what goes out
personal 
(name of the persons)
•dr. the reciever
•cr. the giver
nominal 
•dr. all expenses and losses
•cr all incomes and gains
Page 3


 
 
67 
Chapter 9 
Books of original entry - Journal entries 
 
Meaning of a Journal:  
? A Journal is the primary book of accounts in which transactions are first recorded in a chronological order, i.e., 
as they are entered into. 
? It shows for each transaction the transaction date, name of accounts that are to be debited or credited, Ledger 
page number (Ledger folio) of the accounts, the amount of debit and credit. 
 
Meaning of a Journal entry:  
? An entry recorded in the Journal is called a Journal Entry. 
 
Meaning of Journalising: 
? The process of recording a transaction in a Journal is known as Journalising 
 
Meaning of posting: 
? The transfer of Journal entry to a Ledger account is called Posting. 
 
Characteristics of a Journal  
1.  A Journal contains day-to-day transactions in a chronological order.  
2.  It is a book of original entry in which transactions are written before they are posted in the Ledger.  
3.  It records both the debit and credit aspects of a transaction by using the Double Entry System of Book Keeping.  
4.  A Journal is a record which shows complete details of a transaction in one entry.  
5.  Journalising means recording a transaction in the Journal and the form in which it is recorded is known as a 
Journal Entry.  
 
Form of a Journal:  
The format of a Journal is as follows:  
JOURNAL 
Date 
(1) 
Particulars 
(2) 
L.F. 
(3) 
Dr. Amount 
Rs. 
(4) 
Cr. Amount 
Rs. 
(5) 
 
 
    
(L.F. Stands for Ledger Folio.) 
 
Rules of Debit and Credit ( modern approach) 
Types of Account Debit Credit 
1. Assets Account  Increase ? Decrease ? 
2. Liabilities Account  Decrease ? Increase ? 
3. Capital Account  Decrease ? Increase ? 
4. Revenue Account  Decrease ? Increase ? 
5. Expense Account  Increase ? Decrease ? 
 
Steps for journalizing: 
1. Identify the accounts which are affected 
2. Name them as real/ personal and nominal 
3. Apply the rules  
4. Find Dr. and Cr. 
5. Pass journal entry 
 
 
 
 
 
 
68 
Types of accounts (traditional approach)  
 
?  Whenever a suffix or prefix is fixed with the nominal account it becomes a personal account 
S.No  TRANSACTION Journal entry 
1. Started business with cash Cash a/c                           dr. 
   To capital a/c 
2. Started business with cash, buildings, goods and other assets Cash a/c                           dr. 
Buildings a/c                    dr. 
Purchases a/c                  dr. 
Other assets a/c             dr. 
   To capital a/c   
3. Purchased fixed assets in cash Fixed assets a/c              dr. 
    To cash a/c  
4. Took a loan from bank / friends or relatives or friends/ bank lent to the 
business 
Cash a/c                           dr.  
  To loan a/c 
5. Purchased goods for cash Purchases a/c                dr. 
   To cash a/c         
6. Purchased goods  Purchases a/c                dr. 
   To cash a/c         
7. Purchased goods  from Ravan on credit  Purchases a/c                dr. 
   To Ravan a/c         
8. Purchased goods  from Ravan Purchases a/c                dr. 
   To Ravan a/c         
9. Purchased goods  from Ravan in cash Purchases a/c                dr. 
   To cash a/c         
10. Sold goods for cash Cash a/c                         dr. 
   To sales a/c  
11. Sold goods / cash sales Cash a/c                         dr. 
   To sales a/c 
12. Sold goods  to Ricky on credit Ricky a/c                         dr. 
   To sales a/c 
13. Sold goods  to Ricky in cash Cash a/c                         dr. 
   To sales a/c 
14. Sold goods  to Ricky Ricky a/c                         dr. 
   To sales a/c 
15. Paid cash to ravan Ravan a/c                      dr. 
To cash 
16. Received cash from ricky Cash a/c                    dr. 
   To ricky a/c  
17. Paid expenses Expenses a/c            dr. 
  To cash a/c   
18. Paid salary to gopu or paid rent to landlord  Expenses a/c            dr. 
  To cash a/c   
19. Received incomes / commission Cash a/c                    dr.  
   To incomes a/c  
20. Withdrew money for personal use / household purpose/ income tax/  life 
insurance premium  
Drawings a/c          dr. 
  To cash a/c  
                                                                                       
Types of discount (nominal account ) 
? Trade discount-  it is not recorded in the books of accounts (entry is same just deduct the amount from 
goods ) 
? Cash discount - It is recorded in the books of accounts ( discount received is cr. &  discount allowed is dr.) 
real (assets)
•dr. what comes in 
• cr.  what goes out
personal 
(name of the persons)
•dr. the reciever
•cr. the giver
nominal 
•dr. all expenses and losses
•cr all incomes and gains
 
 
69 
?  Trade and cash discount-  first deduct the trade discount (not recorded in the books of accounts) 
                                              Second allow cash discount (discount received is cr. & discount allowed is dr.) 
? Trade and cash discount(part payment)-  first deduct the trade discount (not recorded in the books of 
accounts) 
Second divide the amount after first step into two parts (paid / unpaid) 
On the paid amount allow cash discount (discount received is cr. & discount allowed is dr.) 
In case of cash discount always search for three things  
1. Amount of cash                                  2. Discount allowed / discount received                                             3.  
Name of the person 
Apply the rule to find Dr. and Cr. 
21. Purchase goods at a trade discount (pass entry and deduct the amount of  
discount  from goods ) 
Purchases a/c               dr. 
  To cash / supplier a/c 
22. Return the above goods(deduct T.D. if it was given at the time of purchases)  Cash / supplier a/c      dr. 
   To purchase returns a/c 
23. Sold goods at a trade discount (pass entry and deduct the amount of  
discount  from goods ) 
Cash / customers a/c   dr. 
   To sales a/c 
24. Customer return above the goods(deduct T.D. if it was given at the time of 
sales) 
Sales returns a/c           dr. 
   To Cash / customers a/c 
25. Paid cash to Ram Rs.5700 in full settlement of his account of Rs.6000/  
Settled Rams a/c of Rs.6000 after a cash discount of 5%/ 
Paid cash to Ram Rs.5700 and received a discount of Rs.300. 
Ram’s A/c     dr.          6000 
 To Cash a/c                   5700  
 To discount received  300 
26. Received  cash from Ravan Rs.5700 in full settlement of his account of 
Rs.6000/  
Ravan’s Settled his account of Rs.6000 after a cash discount of 5%/ 
Received  cash from Ravan Rs.5700 and allowed a discount of Rs.300. 
Cash a/c   dr.               5700 
Discount allowed dr. 300 
  To Ravan’s A/c           6000  
Cash & trade discount 
27. Purchased goods of Rs. 50,000 from jojo at a trade discount of 10% and cash 
discount of 5%.(allow T.D.{is not recoded} and then C.D.) 
?  Avoid the name of the person as the cash is paid so name ko jala du 
Purchases  A/c     dr. 45000 
 To Cash a/c                42750  
 To discount received  2250 
28. Sold goods of Rs50,000 to YOYO at a trade discount of 10% and cash 
discount of 5%.(allow T.D.{is not recoded} and then C.D.) 
?  Avoid the name of the person as the cash is paid so name ko jala du 
Cash a/c   dr.               42750 
Discount allowed dr. 2250 
  To sales A/c               45000 
Part payment and Cash & trade discount 
29. Purchased goods of Rs. 50,000 from jojo at a trade discount of 10% and cash 
discount of 5%. Paid 40% amount immediately in cash. 
Steps      1.   Allow T.D.{is not recoded} 
2. Divide the remaining amt. (step 1) into two parts into paid and 
unpaid    
3. And  then allow C.D. on the paid amount 
Purchases  A/c     dr. 45000 
 To Cash a/c                17100  
 To discount received  900 
  To Jojo’s a/c          27000 
30. Sold goods of Rs50,000 to YOYO at a trade discount of 10% and cash 
discount of 5%. Received 40% amount immediately in cash. Steps   Allow 
T.D.{is not recoded} 
? Divide the remaining amt. (step 1) into two parts into paid and 
unpaid    
? And  then allow C.D. on the paid amount 
Cash a/c               dr.   17100 
Discount allowed dr.900 
YoYo’s A/c             dr. 27000 
  To sales A/c               45000 
Opening Entry 
31. When capital is not given and debit side is greater than the credit side 
Assets:  cash Rs.40000, cash at bank Rs. 50,000, plant Rs.60000 , stock 
Rs.45000 machinery Rs.15000  , debtors : om Rs.10000 and Som Rs.15000 
Liabilities:  creditors-  anil Rs.5000, Sunil Rs.25000 and bank loan Rs.40000   
 
Capital = assets – liabilities  
    = 2,35,000- 70,000 
     = 165000 (capital) 
Cash A/c          dr. 40000 
Bank A/c          dr. 50,000 
Plant A/c         dr. 60,000 
Stock A/c         dr. 45,000 
Machinery a/c   dr. 15,000 
Om             dr. 10,000 
Som           dr. 15,000 
   To Anil          5,000 
   To sunil         25,000 
    To bank loan   40,000 
    To capital  1,65000 
Page 4


 
 
67 
Chapter 9 
Books of original entry - Journal entries 
 
Meaning of a Journal:  
? A Journal is the primary book of accounts in which transactions are first recorded in a chronological order, i.e., 
as they are entered into. 
? It shows for each transaction the transaction date, name of accounts that are to be debited or credited, Ledger 
page number (Ledger folio) of the accounts, the amount of debit and credit. 
 
Meaning of a Journal entry:  
? An entry recorded in the Journal is called a Journal Entry. 
 
Meaning of Journalising: 
? The process of recording a transaction in a Journal is known as Journalising 
 
Meaning of posting: 
? The transfer of Journal entry to a Ledger account is called Posting. 
 
Characteristics of a Journal  
1.  A Journal contains day-to-day transactions in a chronological order.  
2.  It is a book of original entry in which transactions are written before they are posted in the Ledger.  
3.  It records both the debit and credit aspects of a transaction by using the Double Entry System of Book Keeping.  
4.  A Journal is a record which shows complete details of a transaction in one entry.  
5.  Journalising means recording a transaction in the Journal and the form in which it is recorded is known as a 
Journal Entry.  
 
Form of a Journal:  
The format of a Journal is as follows:  
JOURNAL 
Date 
(1) 
Particulars 
(2) 
L.F. 
(3) 
Dr. Amount 
Rs. 
(4) 
Cr. Amount 
Rs. 
(5) 
 
 
    
(L.F. Stands for Ledger Folio.) 
 
Rules of Debit and Credit ( modern approach) 
Types of Account Debit Credit 
1. Assets Account  Increase ? Decrease ? 
2. Liabilities Account  Decrease ? Increase ? 
3. Capital Account  Decrease ? Increase ? 
4. Revenue Account  Decrease ? Increase ? 
5. Expense Account  Increase ? Decrease ? 
 
Steps for journalizing: 
1. Identify the accounts which are affected 
2. Name them as real/ personal and nominal 
3. Apply the rules  
4. Find Dr. and Cr. 
5. Pass journal entry 
 
 
 
 
 
 
68 
Types of accounts (traditional approach)  
 
?  Whenever a suffix or prefix is fixed with the nominal account it becomes a personal account 
S.No  TRANSACTION Journal entry 
1. Started business with cash Cash a/c                           dr. 
   To capital a/c 
2. Started business with cash, buildings, goods and other assets Cash a/c                           dr. 
Buildings a/c                    dr. 
Purchases a/c                  dr. 
Other assets a/c             dr. 
   To capital a/c   
3. Purchased fixed assets in cash Fixed assets a/c              dr. 
    To cash a/c  
4. Took a loan from bank / friends or relatives or friends/ bank lent to the 
business 
Cash a/c                           dr.  
  To loan a/c 
5. Purchased goods for cash Purchases a/c                dr. 
   To cash a/c         
6. Purchased goods  Purchases a/c                dr. 
   To cash a/c         
7. Purchased goods  from Ravan on credit  Purchases a/c                dr. 
   To Ravan a/c         
8. Purchased goods  from Ravan Purchases a/c                dr. 
   To Ravan a/c         
9. Purchased goods  from Ravan in cash Purchases a/c                dr. 
   To cash a/c         
10. Sold goods for cash Cash a/c                         dr. 
   To sales a/c  
11. Sold goods / cash sales Cash a/c                         dr. 
   To sales a/c 
12. Sold goods  to Ricky on credit Ricky a/c                         dr. 
   To sales a/c 
13. Sold goods  to Ricky in cash Cash a/c                         dr. 
   To sales a/c 
14. Sold goods  to Ricky Ricky a/c                         dr. 
   To sales a/c 
15. Paid cash to ravan Ravan a/c                      dr. 
To cash 
16. Received cash from ricky Cash a/c                    dr. 
   To ricky a/c  
17. Paid expenses Expenses a/c            dr. 
  To cash a/c   
18. Paid salary to gopu or paid rent to landlord  Expenses a/c            dr. 
  To cash a/c   
19. Received incomes / commission Cash a/c                    dr.  
   To incomes a/c  
20. Withdrew money for personal use / household purpose/ income tax/  life 
insurance premium  
Drawings a/c          dr. 
  To cash a/c  
                                                                                       
Types of discount (nominal account ) 
? Trade discount-  it is not recorded in the books of accounts (entry is same just deduct the amount from 
goods ) 
? Cash discount - It is recorded in the books of accounts ( discount received is cr. &  discount allowed is dr.) 
real (assets)
•dr. what comes in 
• cr.  what goes out
personal 
(name of the persons)
•dr. the reciever
•cr. the giver
nominal 
•dr. all expenses and losses
•cr all incomes and gains
 
 
69 
?  Trade and cash discount-  first deduct the trade discount (not recorded in the books of accounts) 
                                              Second allow cash discount (discount received is cr. & discount allowed is dr.) 
? Trade and cash discount(part payment)-  first deduct the trade discount (not recorded in the books of 
accounts) 
Second divide the amount after first step into two parts (paid / unpaid) 
On the paid amount allow cash discount (discount received is cr. & discount allowed is dr.) 
In case of cash discount always search for three things  
1. Amount of cash                                  2. Discount allowed / discount received                                             3.  
Name of the person 
Apply the rule to find Dr. and Cr. 
21. Purchase goods at a trade discount (pass entry and deduct the amount of  
discount  from goods ) 
Purchases a/c               dr. 
  To cash / supplier a/c 
22. Return the above goods(deduct T.D. if it was given at the time of purchases)  Cash / supplier a/c      dr. 
   To purchase returns a/c 
23. Sold goods at a trade discount (pass entry and deduct the amount of  
discount  from goods ) 
Cash / customers a/c   dr. 
   To sales a/c 
24. Customer return above the goods(deduct T.D. if it was given at the time of 
sales) 
Sales returns a/c           dr. 
   To Cash / customers a/c 
25. Paid cash to Ram Rs.5700 in full settlement of his account of Rs.6000/  
Settled Rams a/c of Rs.6000 after a cash discount of 5%/ 
Paid cash to Ram Rs.5700 and received a discount of Rs.300. 
Ram’s A/c     dr.          6000 
 To Cash a/c                   5700  
 To discount received  300 
26. Received  cash from Ravan Rs.5700 in full settlement of his account of 
Rs.6000/  
Ravan’s Settled his account of Rs.6000 after a cash discount of 5%/ 
Received  cash from Ravan Rs.5700 and allowed a discount of Rs.300. 
Cash a/c   dr.               5700 
Discount allowed dr. 300 
  To Ravan’s A/c           6000  
Cash & trade discount 
27. Purchased goods of Rs. 50,000 from jojo at a trade discount of 10% and cash 
discount of 5%.(allow T.D.{is not recoded} and then C.D.) 
?  Avoid the name of the person as the cash is paid so name ko jala du 
Purchases  A/c     dr. 45000 
 To Cash a/c                42750  
 To discount received  2250 
28. Sold goods of Rs50,000 to YOYO at a trade discount of 10% and cash 
discount of 5%.(allow T.D.{is not recoded} and then C.D.) 
?  Avoid the name of the person as the cash is paid so name ko jala du 
Cash a/c   dr.               42750 
Discount allowed dr. 2250 
  To sales A/c               45000 
Part payment and Cash & trade discount 
29. Purchased goods of Rs. 50,000 from jojo at a trade discount of 10% and cash 
discount of 5%. Paid 40% amount immediately in cash. 
Steps      1.   Allow T.D.{is not recoded} 
2. Divide the remaining amt. (step 1) into two parts into paid and 
unpaid    
3. And  then allow C.D. on the paid amount 
Purchases  A/c     dr. 45000 
 To Cash a/c                17100  
 To discount received  900 
  To Jojo’s a/c          27000 
30. Sold goods of Rs50,000 to YOYO at a trade discount of 10% and cash 
discount of 5%. Received 40% amount immediately in cash. Steps   Allow 
T.D.{is not recoded} 
? Divide the remaining amt. (step 1) into two parts into paid and 
unpaid    
? And  then allow C.D. on the paid amount 
Cash a/c               dr.   17100 
Discount allowed dr.900 
YoYo’s A/c             dr. 27000 
  To sales A/c               45000 
Opening Entry 
31. When capital is not given and debit side is greater than the credit side 
Assets:  cash Rs.40000, cash at bank Rs. 50,000, plant Rs.60000 , stock 
Rs.45000 machinery Rs.15000  , debtors : om Rs.10000 and Som Rs.15000 
Liabilities:  creditors-  anil Rs.5000, Sunil Rs.25000 and bank loan Rs.40000   
 
Capital = assets – liabilities  
    = 2,35,000- 70,000 
     = 165000 (capital) 
Cash A/c          dr. 40000 
Bank A/c          dr. 50,000 
Plant A/c         dr. 60,000 
Stock A/c         dr. 45,000 
Machinery a/c   dr. 15,000 
Om             dr. 10,000 
Som           dr. 15,000 
   To Anil          5,000 
   To sunil         25,000 
    To bank loan   40,000 
    To capital  1,65000 
 
 
70 
32. When capital is given and credit side is greater than the debit side 
Assets:  cash Rs.40000, cash at bank Rs. 50,000, plant Rs.60000 , stock 
Rs.45000 machinery Rs.15000  , debtors : om Rs.10000 and Som Rs.15000 
Liabilities:  creditors-  anil Rs.5000, Sunil Rs.25000 and bank loan Rs.40000, 
capital Rs.1,70,000   
Goodwill : liabilities – assets  
           = 2,40,000-2,35,000 
           =  5,000 
Cash A/c          dr. 40000 
Bank A/c          dr. 50,000 
Plant A/c         dr. 60,000 
Stock A/c         dr. 45,000 
Machinery a/c   dr. 15,000 
Om             dr. 10,000 
Som           dr. 15,000 
Goodwill A/c  dr. 5,000 
   To Anil          5,000 
   To sunil         25,000 
    To bank loan   40,000 
    To capital  1,65000 
Banking Transactions (bank is a personal account) 
33. When cash is deposited in to bank account / opened a current account Bank a/c     dr. 
    To cash A/c 
34. When cash is withdrawn from the bank Cash a/c    dr.  
    To Bank A/c 
35. When money is withdrawn from bank for personal use   Drawings A/c   dr. 
    To bank a/c  
36. When money is withdrawn from bank for office use Cash a/c    dr.  
    To Bank A/c 
37. When expenses are paid by cheque  Expenses A/c   dr. 
   To bank A/c  
38.  When any person(Polly) is paid by cheque  Personal A/c (polly)  dr. 
   To bank A/c  
39. When interest is charged by bank Interest A/c  
To bank A/c 
40. When bank charges some money for services  Bank Charges A/c   dr.  
   To bank A/c 
41. When interest is allowed by bank Bank A/c   dr. 
   To interest A/c  
42. When a cheque or a draft is received from a customer and deposited into 
the bank on the same day.(without discount) 
Bank A/c   Dr. 
  To Customer A/c 
43. When the above is dishonored (Ulti/Reverse entry)  Customer A/c   dr. 
To bank A/c 
44. When a cheque or a draft is received from a customer of Rs.9800 in full 
settlement of his account of Rs.10,000 and deposited into the bank on the 
same day.(with discount) 
Bank A/c   Dr   9,800 
Discount allowed a/c 2,00 
  To Customer A/c     10,000 
45. When the above is dishonored (Ulti/Reverse entry) Customer A/c     10,000 
 To Bank A/c   Dr   9,800 
 To Discount allowed  200 
46. When a cheque or a draft is received from a customer and deposited into 
the bank on the next day.(without discount) 
Cheque in Hand A/c   dr. 
To bank A/c 
47. On the day when the above cheque is deposited into bank. Bank A/c    dr. 
   To Cheque in Hand A/c 
48. When the above cheque is dishonored Customer A/c   dr. 
To bank A/c 
49. When a cheque or a draft is received from a customer of Rs.9800 in full 
settlement of his account of Rs.10,000 and deposited into the bank on the 
same day.(with discount) 
Cheque in hand A/c    9,800 
Discount allowed a/c 2,00 
  To Customer A/c     10,000 
50. On the day when the above cheque is deposited into bank. Bank A/c    dr. 9,800 
   To Cheque in Hand 9,800 
51. When the above cheque is dishonored Customer A/c     10,000 
 To Bank A/c   Dr   9,800 
 To Discount allowed  200 
52. When a customer directly deposits money into our bank a/c Bank A/c   Dr. 
  To Customer A/c 
Page 5


 
 
67 
Chapter 9 
Books of original entry - Journal entries 
 
Meaning of a Journal:  
? A Journal is the primary book of accounts in which transactions are first recorded in a chronological order, i.e., 
as they are entered into. 
? It shows for each transaction the transaction date, name of accounts that are to be debited or credited, Ledger 
page number (Ledger folio) of the accounts, the amount of debit and credit. 
 
Meaning of a Journal entry:  
? An entry recorded in the Journal is called a Journal Entry. 
 
Meaning of Journalising: 
? The process of recording a transaction in a Journal is known as Journalising 
 
Meaning of posting: 
? The transfer of Journal entry to a Ledger account is called Posting. 
 
Characteristics of a Journal  
1.  A Journal contains day-to-day transactions in a chronological order.  
2.  It is a book of original entry in which transactions are written before they are posted in the Ledger.  
3.  It records both the debit and credit aspects of a transaction by using the Double Entry System of Book Keeping.  
4.  A Journal is a record which shows complete details of a transaction in one entry.  
5.  Journalising means recording a transaction in the Journal and the form in which it is recorded is known as a 
Journal Entry.  
 
Form of a Journal:  
The format of a Journal is as follows:  
JOURNAL 
Date 
(1) 
Particulars 
(2) 
L.F. 
(3) 
Dr. Amount 
Rs. 
(4) 
Cr. Amount 
Rs. 
(5) 
 
 
    
(L.F. Stands for Ledger Folio.) 
 
Rules of Debit and Credit ( modern approach) 
Types of Account Debit Credit 
1. Assets Account  Increase ? Decrease ? 
2. Liabilities Account  Decrease ? Increase ? 
3. Capital Account  Decrease ? Increase ? 
4. Revenue Account  Decrease ? Increase ? 
5. Expense Account  Increase ? Decrease ? 
 
Steps for journalizing: 
1. Identify the accounts which are affected 
2. Name them as real/ personal and nominal 
3. Apply the rules  
4. Find Dr. and Cr. 
5. Pass journal entry 
 
 
 
 
 
 
68 
Types of accounts (traditional approach)  
 
?  Whenever a suffix or prefix is fixed with the nominal account it becomes a personal account 
S.No  TRANSACTION Journal entry 
1. Started business with cash Cash a/c                           dr. 
   To capital a/c 
2. Started business with cash, buildings, goods and other assets Cash a/c                           dr. 
Buildings a/c                    dr. 
Purchases a/c                  dr. 
Other assets a/c             dr. 
   To capital a/c   
3. Purchased fixed assets in cash Fixed assets a/c              dr. 
    To cash a/c  
4. Took a loan from bank / friends or relatives or friends/ bank lent to the 
business 
Cash a/c                           dr.  
  To loan a/c 
5. Purchased goods for cash Purchases a/c                dr. 
   To cash a/c         
6. Purchased goods  Purchases a/c                dr. 
   To cash a/c         
7. Purchased goods  from Ravan on credit  Purchases a/c                dr. 
   To Ravan a/c         
8. Purchased goods  from Ravan Purchases a/c                dr. 
   To Ravan a/c         
9. Purchased goods  from Ravan in cash Purchases a/c                dr. 
   To cash a/c         
10. Sold goods for cash Cash a/c                         dr. 
   To sales a/c  
11. Sold goods / cash sales Cash a/c                         dr. 
   To sales a/c 
12. Sold goods  to Ricky on credit Ricky a/c                         dr. 
   To sales a/c 
13. Sold goods  to Ricky in cash Cash a/c                         dr. 
   To sales a/c 
14. Sold goods  to Ricky Ricky a/c                         dr. 
   To sales a/c 
15. Paid cash to ravan Ravan a/c                      dr. 
To cash 
16. Received cash from ricky Cash a/c                    dr. 
   To ricky a/c  
17. Paid expenses Expenses a/c            dr. 
  To cash a/c   
18. Paid salary to gopu or paid rent to landlord  Expenses a/c            dr. 
  To cash a/c   
19. Received incomes / commission Cash a/c                    dr.  
   To incomes a/c  
20. Withdrew money for personal use / household purpose/ income tax/  life 
insurance premium  
Drawings a/c          dr. 
  To cash a/c  
                                                                                       
Types of discount (nominal account ) 
? Trade discount-  it is not recorded in the books of accounts (entry is same just deduct the amount from 
goods ) 
? Cash discount - It is recorded in the books of accounts ( discount received is cr. &  discount allowed is dr.) 
real (assets)
•dr. what comes in 
• cr.  what goes out
personal 
(name of the persons)
•dr. the reciever
•cr. the giver
nominal 
•dr. all expenses and losses
•cr all incomes and gains
 
 
69 
?  Trade and cash discount-  first deduct the trade discount (not recorded in the books of accounts) 
                                              Second allow cash discount (discount received is cr. & discount allowed is dr.) 
? Trade and cash discount(part payment)-  first deduct the trade discount (not recorded in the books of 
accounts) 
Second divide the amount after first step into two parts (paid / unpaid) 
On the paid amount allow cash discount (discount received is cr. & discount allowed is dr.) 
In case of cash discount always search for three things  
1. Amount of cash                                  2. Discount allowed / discount received                                             3.  
Name of the person 
Apply the rule to find Dr. and Cr. 
21. Purchase goods at a trade discount (pass entry and deduct the amount of  
discount  from goods ) 
Purchases a/c               dr. 
  To cash / supplier a/c 
22. Return the above goods(deduct T.D. if it was given at the time of purchases)  Cash / supplier a/c      dr. 
   To purchase returns a/c 
23. Sold goods at a trade discount (pass entry and deduct the amount of  
discount  from goods ) 
Cash / customers a/c   dr. 
   To sales a/c 
24. Customer return above the goods(deduct T.D. if it was given at the time of 
sales) 
Sales returns a/c           dr. 
   To Cash / customers a/c 
25. Paid cash to Ram Rs.5700 in full settlement of his account of Rs.6000/  
Settled Rams a/c of Rs.6000 after a cash discount of 5%/ 
Paid cash to Ram Rs.5700 and received a discount of Rs.300. 
Ram’s A/c     dr.          6000 
 To Cash a/c                   5700  
 To discount received  300 
26. Received  cash from Ravan Rs.5700 in full settlement of his account of 
Rs.6000/  
Ravan’s Settled his account of Rs.6000 after a cash discount of 5%/ 
Received  cash from Ravan Rs.5700 and allowed a discount of Rs.300. 
Cash a/c   dr.               5700 
Discount allowed dr. 300 
  To Ravan’s A/c           6000  
Cash & trade discount 
27. Purchased goods of Rs. 50,000 from jojo at a trade discount of 10% and cash 
discount of 5%.(allow T.D.{is not recoded} and then C.D.) 
?  Avoid the name of the person as the cash is paid so name ko jala du 
Purchases  A/c     dr. 45000 
 To Cash a/c                42750  
 To discount received  2250 
28. Sold goods of Rs50,000 to YOYO at a trade discount of 10% and cash 
discount of 5%.(allow T.D.{is not recoded} and then C.D.) 
?  Avoid the name of the person as the cash is paid so name ko jala du 
Cash a/c   dr.               42750 
Discount allowed dr. 2250 
  To sales A/c               45000 
Part payment and Cash & trade discount 
29. Purchased goods of Rs. 50,000 from jojo at a trade discount of 10% and cash 
discount of 5%. Paid 40% amount immediately in cash. 
Steps      1.   Allow T.D.{is not recoded} 
2. Divide the remaining amt. (step 1) into two parts into paid and 
unpaid    
3. And  then allow C.D. on the paid amount 
Purchases  A/c     dr. 45000 
 To Cash a/c                17100  
 To discount received  900 
  To Jojo’s a/c          27000 
30. Sold goods of Rs50,000 to YOYO at a trade discount of 10% and cash 
discount of 5%. Received 40% amount immediately in cash. Steps   Allow 
T.D.{is not recoded} 
? Divide the remaining amt. (step 1) into two parts into paid and 
unpaid    
? And  then allow C.D. on the paid amount 
Cash a/c               dr.   17100 
Discount allowed dr.900 
YoYo’s A/c             dr. 27000 
  To sales A/c               45000 
Opening Entry 
31. When capital is not given and debit side is greater than the credit side 
Assets:  cash Rs.40000, cash at bank Rs. 50,000, plant Rs.60000 , stock 
Rs.45000 machinery Rs.15000  , debtors : om Rs.10000 and Som Rs.15000 
Liabilities:  creditors-  anil Rs.5000, Sunil Rs.25000 and bank loan Rs.40000   
 
Capital = assets – liabilities  
    = 2,35,000- 70,000 
     = 165000 (capital) 
Cash A/c          dr. 40000 
Bank A/c          dr. 50,000 
Plant A/c         dr. 60,000 
Stock A/c         dr. 45,000 
Machinery a/c   dr. 15,000 
Om             dr. 10,000 
Som           dr. 15,000 
   To Anil          5,000 
   To sunil         25,000 
    To bank loan   40,000 
    To capital  1,65000 
 
 
70 
32. When capital is given and credit side is greater than the debit side 
Assets:  cash Rs.40000, cash at bank Rs. 50,000, plant Rs.60000 , stock 
Rs.45000 machinery Rs.15000  , debtors : om Rs.10000 and Som Rs.15000 
Liabilities:  creditors-  anil Rs.5000, Sunil Rs.25000 and bank loan Rs.40000, 
capital Rs.1,70,000   
Goodwill : liabilities – assets  
           = 2,40,000-2,35,000 
           =  5,000 
Cash A/c          dr. 40000 
Bank A/c          dr. 50,000 
Plant A/c         dr. 60,000 
Stock A/c         dr. 45,000 
Machinery a/c   dr. 15,000 
Om             dr. 10,000 
Som           dr. 15,000 
Goodwill A/c  dr. 5,000 
   To Anil          5,000 
   To sunil         25,000 
    To bank loan   40,000 
    To capital  1,65000 
Banking Transactions (bank is a personal account) 
33. When cash is deposited in to bank account / opened a current account Bank a/c     dr. 
    To cash A/c 
34. When cash is withdrawn from the bank Cash a/c    dr.  
    To Bank A/c 
35. When money is withdrawn from bank for personal use   Drawings A/c   dr. 
    To bank a/c  
36. When money is withdrawn from bank for office use Cash a/c    dr.  
    To Bank A/c 
37. When expenses are paid by cheque  Expenses A/c   dr. 
   To bank A/c  
38.  When any person(Polly) is paid by cheque  Personal A/c (polly)  dr. 
   To bank A/c  
39. When interest is charged by bank Interest A/c  
To bank A/c 
40. When bank charges some money for services  Bank Charges A/c   dr.  
   To bank A/c 
41. When interest is allowed by bank Bank A/c   dr. 
   To interest A/c  
42. When a cheque or a draft is received from a customer and deposited into 
the bank on the same day.(without discount) 
Bank A/c   Dr. 
  To Customer A/c 
43. When the above is dishonored (Ulti/Reverse entry)  Customer A/c   dr. 
To bank A/c 
44. When a cheque or a draft is received from a customer of Rs.9800 in full 
settlement of his account of Rs.10,000 and deposited into the bank on the 
same day.(with discount) 
Bank A/c   Dr   9,800 
Discount allowed a/c 2,00 
  To Customer A/c     10,000 
45. When the above is dishonored (Ulti/Reverse entry) Customer A/c     10,000 
 To Bank A/c   Dr   9,800 
 To Discount allowed  200 
46. When a cheque or a draft is received from a customer and deposited into 
the bank on the next day.(without discount) 
Cheque in Hand A/c   dr. 
To bank A/c 
47. On the day when the above cheque is deposited into bank. Bank A/c    dr. 
   To Cheque in Hand A/c 
48. When the above cheque is dishonored Customer A/c   dr. 
To bank A/c 
49. When a cheque or a draft is received from a customer of Rs.9800 in full 
settlement of his account of Rs.10,000 and deposited into the bank on the 
same day.(with discount) 
Cheque in hand A/c    9,800 
Discount allowed a/c 2,00 
  To Customer A/c     10,000 
50. On the day when the above cheque is deposited into bank. Bank A/c    dr. 9,800 
   To Cheque in Hand 9,800 
51. When the above cheque is dishonored Customer A/c     10,000 
 To Bank A/c   Dr   9,800 
 To Discount allowed  200 
52. When a customer directly deposits money into our bank a/c Bank A/c   Dr. 
  To Customer A/c 
 
 
71 
Special entries 
53. Bad debts(money which is not recovered from debtors)  nominal a/c  
Topi who owed us Rs.10,000 was declared insolvent paid 40paisa in rupee 
was received from his estate   
Cash A/c    Dr.  4,000 
Bad debts   Dr.  6,000 
   To Topi            10,000   
54. Bad debts recovered (gain for business) nominal account  
Topi who was a bad debt paid Rs.500 
Cash A/c  
    To Bad debts recovered   
55. Outstanding expenses salary due to clerks 
                                         Rent due to landlord 
Expenses a/c Dr. 
   To O/s expenses  
56. Prepaid expenses (paid rent of a building which related to next year) Prepaid expenses A/c  
   To cash  
57. Expenses and prepaid expenses 
Paid insurance premium of Rs. 8400 p.a. on 1
st
 july 2010 for the year ending  
on 31
st
 march 2011.(prepaid is for 3 months = 2100) 
Expenses a/c  6300 
 Prepaid expenses a/c 2100 
   To cash   8400 
58. When outstanding expenses are paid by the firm O/ S expenses 
    To cash a/c  
59. Depreciation(fall in the value of fixed assets)- NOMINAL A/C 
Amount of depreciation= fixed asset ×
??????
100
  ×
?? 12
  
? If rate of depreciation is not given in p.a. then 
?? 12
  will not be used  
 Depreciation a/c 
  To fixed assets a/c 
60. Interest on capital -NOMINAL A/C 
Interest on capital = capital ×
??????
100
  ×
?? 12
 
Interest on capital a/c dr. 
  To Capital A/c 
61. Interest on drawings- nominal A/c 
 
Drawings A/c 
   To Interest on drawings  
62. Expenditure on purchase/ installation/ erection/ of newly purchased fixed 
assets is debited to fixed assets a/c(capital expenditure) 
Fixed assets A/c   Dr. 
   To Cash A/c 
Special transactions related to Goods 
63. Goods distributed as free samples Advertising exp. A/c dr. 
   To purchases A/c 
64. Goods given in charity  Charity A/c 
  To purchases A/c 
65. Good used for the personal use Drawings A/c   dr. 
   To purchases A/c 
66. Goods used in the business Fixed assets A/c 
   To purchases A/c 
67. Goods destroyed by fire (not insured) Loss by Fire A/c   dr. 
   To purchases A/c 
68. Goods destroyed by fire (insured) of Rs.10,000 and insurance company 
accepted a claim of 60% 
Loss by Fire A/c   dr. 10,000 
   To purchases A/c 10,000 
 Insurance Co.  dr.  10,000 
  To loss by fire A/c 10,000 
Bank A/c Dr.  6,000 
P & L A/c  4,000 
  To insurance co. 10,000  
69. Goods purchased on V.P.P.(value payable post) Purchases a/c   dr. 
   To cash a/c 
Some extra entries 
74. Received cash from Ram on behalf of sham  Cash a/c       dr. 
  To sham   a/c 
75. Paid cash to lallu on behalf of kallu Kallu        dr. 
   To cash  a/c 
76. Refund of income tax Bank a/c / cash a/c    dr. 
   To capital   a/c 
77. Bills drawn (B/R) Bills receivable a/c  Dr. 
    To Drawee   a/c 
78.  Bills accepted  (B/P) Drawer a/c    dr. 
    To bills payables a/c  
Read More
Offer running on EduRev: Apply code STAYHOME200 to get INR 200 off on our premium plan EduRev Infinity!

Related Searches

Extra Questions

,

Summary

,

Semester Notes

,

shortcuts and tricks

,

ppt

,

Introduction - Books of Original Entry: Journal Entries Commerce Notes | EduRev

,

Viva Questions

,

mock tests for examination

,

Free

,

MCQs

,

practice quizzes

,

video lectures

,

pdf

,

Exam

,

Introduction - Books of Original Entry: Journal Entries Commerce Notes | EduRev

,

Important questions

,

Sample Paper

,

past year papers

,

Objective type Questions

,

Previous Year Questions with Solutions

,

Introduction - Books of Original Entry: Journal Entries Commerce Notes | EduRev

,

study material

;