Journal Entry

Journal Entry

Financial transactions are recorded with the help of journal entries. These journal entries recorded with the help of debit credit rules in a book known as journal. Some important feature of journal entries have been explained below

1.   Recording of Transaction:

Journal entry is used to record the transaction.

2.   Debit & Credit Rules:

Journal entry is recorded with the help of debit and credit rules. These rules have been explained in my other article. These rules are listed below

1.   Increase in asset & expenses are debited.

2.   Decrease in assets & expenses are credited.

3.   Increase in income and liabilities are credited.

4.   Decrease in income and liability is debited.

3.   Reflect the Transaction:

Journal entry reflects the complete transactions. However, technical knowledge of accounting is required to understand the journal entry.

4.   Narration of Journal Entry:

Narration of journal entry is a short description about the journal entry which briefly explains the journal entry. It is important to note that narration is not a mandatory requirement.

5.   Format of Journal Entry

The simplest format of journal entry is given below.

Date	Particular	Folio	Dr.	Cr.
	Purchases		50,000
	Cash			50,000

6.   Journal Entry is recorded in book

Journal entry is recorded in a book known as journal. There are two types of book used for recording the journal entries i.e. General journal and special journal.

7.   Examples of Journal Entry

Journal entry has been explained with some example

1.   Sales made in cash of 10,000.

2.   Sales made on credit 10,000.

3.   Purchases made in cash 10,000.

4.   Purchases made on credit 10,000.

5.   Purchase of asset of 10,000.

6.   Introduction of investment 10,000.

Date	Particular	Folio	Dr.	Cr.
	Cash		10,000
	Sales			50,000

Date	Particular	Folio	Dr.	Cr.
	Ali		10,000
	Sales			50,000

Date	Particular	Folio	Dr.	Cr.
	Purchases		10,000
	Cash			10,000

Date	Particular	Folio	Dr.	Cr.
	Purchases		10,000
	Ahmed			10,000

Date	Particular	Folio	Dr.	Cr.
	Plant		10,000
	Cash			10,000

Date	Particular	Folio	Dr.	Cr.
	Cash		10,000
	Capital			10,000