Journal entry

A journal entry, in accounting, is a logging of transaction into accounting journal items. The journal entry can consist of several recordings, each of which is either a debit or a credit. The total of the debits must equal the total of the credits or the journal entry is said to be "unbalanced". Journal entries can record unique items or recurring items such as depreciation or bond amortization. In accounting software, journal entries are usually entered using a separate module from accounts payable, which typically has its own subledger that indirectly affects the general ledger. As a result, journal entries directly change the account balances on the general ledger.

Recording a journal entry

In order to record Journal Entries, you need to have knowledge about few things which are

1) Type of Accounts

2) Golden Rules of Accounting

Without the knowledge of these two terms, you can't record a journal entry.

Type of Accounts

There are three type of Accounts in Accounting which are

1) Personal Account

2) Real Account

3) Nominal Account

Personal account consist of all those accounts which are related to person, business,firm etc

For example- Mohan's account, Apple ltd. account etc

Real account consist of all those accounts which are related to assets.

For example- Plant and Machinery account, Stock account etc

Nominal account consist of all those accounts which are related to expenses, losses, Income and Gains.

For example- Rent account, wages account etc

Golden Rules of Accounting

There are three golden rules in Accounting to record journal entries. Each of these rules is associated with separate account.

Let's study about all these rules in details.

Rule in Case of Personal Account

"Debit the Receiver, Credit the Giver"

Rule in Case of Real Account

"Debit what Comes In, Credit what Goes out"

Rule in Case of Nominal account

"Debit all Expenses and Losses, Credit all Income and Gains"

Refer to this article on Golden Rules of Accounting to know about these rules in details Understand Golden Rules of Accounting

How to Record Journal Entries with Example

To record Journal entry , you simply have to ask few questions to yourself in your mind which are

Q1- How many and which accounts are involved?

Q2- Whether the accounts involved are personal account, real account or nominal account?

Q3- Which Golden Rule will be used to here?

Q4- Whether the accounts involved will be Debited or Credited?

Let's study it with example

Example- Cash received from Apple limited 6000$

Now you have to ask above questions to yourself

Q1- How many and which accounts are involved?

Ans- There are two accounts involved which are Cash account and Apple Limited Account

Q2- Whether the accounts involved are personal account, real account or nominal account?

Ans- Cash account is Real account and Apple limited account is Personal account

Q3- Which Golden Rule will be used to here?

Ans- The Golden Rules in case of Real account and Personal account will be used here.

Q4- Whether the accounts involved will be Debited or Credited?

Cash account will be Debited because cash is coming into the business (debit what Comes In) and

Apple limited Account will be Credited because it is giving cash into the business (Credit the Giver)

Thus the journal entry will be

Cash account---------------------------Dr. 6000$

To Apple Limited Account 6000$

Keeping these questions in mind, you guys can record any type of Journal entry.

See also

• Double-entry bookkeeping system
• Trial balance
• Debits and credits