Journal Entry
Journal entry is keeping records of transactions in journal items. Similarly, journal entries include various transactions records. Journal entry is the basis of any business organization to keep records of all the transactions in which expenses are on the debit side and incomes are on the credit side.
The journal entry format:
| Date | Particulars | PR | Dr. Rs. | Cr. Rs. |
Types of Journal Entry:
According to the types of accounts,
1. Personal Account
Receiver Dr. xxx
Giver xxx
2. Real accounts (Goods and Services)
What comes in the business Dr. xxx
What goes out from the business Cr. xxx
3. Nominal account
All types of expenses and losses Dr. xxx
All types of income and gains Cr. xxx
According to the nature of transactions
Increase in assets, expenses, and losses –Dr.
Decrease in assets, expenses, and losses – Cr.
Increase in capital, liabilities, income, and gains – Cr.
Decrease in capital, liabilities, income, and gains – Dr.
When shares are issued on cash.
Cash a/c Dr. xxx
Share capital a/c xxx
(To record the issue of shares on cash and paid up)
When notes are exchanged for cash
Cash a/c Dr. xxx
Notes payable a/c Cr. Xxx
(To record the exchange of notes for cash)
When assets are purchased on cash
Fixed assets a/c Dr. xxx
Cash a/c Cr. Xxx
(To record the purchase of fixed assets on cash)
When fixed assets are purchased on account (credit)
Assets a/c Dr. xxx
Account payable a/c Cr. Xxx
(To record the purchase of assets on account)
When service revenue received
Cash a/c Dr. xxx
Service revenue Cr. xxx
(To record the received of cash from service provided)
When service is provided on account
Account receivable a/c Dr. xxx
Service revenue a/c Cr. xxx
(To record the service provided on account)
Then, when this Account receivable received,
Cash a/c Dr. xxx
Account receivable a/c xxx
(To record the cash received from the account receivable)
When advance cash is received
Cash a/c Dr. xxx
Unearned service revenue a/c Cr. xxx
Or, Advance income a/c Cr. xxx
(To record the cash receipt in advance)
When expenses are paid
Related expenses a/c Dr. xxx
Cash a/c Cr. xxx
(To record the payment on cash)
When Office supplies purchased on cash
Office supplies a/c Dr. xxx
Cash a/c Cr. xxx
(To record the office supplies purchased on cash)
Office supplies purchased on account
Office supplies a/c Dr. xxx
Account payable a/c Cr. Xxx
(To record the purchase of office supplies on account)
When Prepayment is made
Prepaid expenses a/c Dr. xxx
Cash a/c Dr. xxx
(To record ….paid in advance)
For dividend paid
Dividend a/c Dr. xxx
Cash a/c xxx
(To record the payment of dividend to shareholders)
For discount
Note: Discount is always with cash or bank.
Ledger
Format of ledger account
1. Standard account
i. Running / continuous balance sheet
| Date | Particulars | PR | Dr. | Cr. | Dr./Cr. | Balance |
ii. T-form
Dr. Cr.
| Date | Particulars | PR | Amount | Date | Particulars | PR | Amount |
2. T-account
Name of account
Also, see examples of journal entries, Problems, and solutions here.