Journalizing

By O P Mishra


The book in which the transaction is recorded for the first time is called journal or book of original entry. The source document is required to record the transaction in the journal. This practice provides a complete record of each transaction in one place and links the debits and credits for each transaction. After the debits and credits for each transaction are entered in the journal, they are transferred to the individual accounts. The process of recording transactions in journal is called journalizing. Once the journalizing process is completed, the journal entry provides a complete and useful description of the event’s effect on the organization. The process of transferring journal entry to individual accounts is called posting. This sequence causes the journal to be called the Book of Original Entry and the ledger account as the Principal Book of entry. Books of Original Entry are as under:

(a) Journal Proper (b) Cash book

(c) Other day books:

            (i) Purchases (journal) book

            (ii) Sales (journal) book

            (iii) Purchase Returns (journal) book

            (iv) Sale Returns (journal) book

            (v) Bills Receivable (journal) book

            (vi) Bills Payable (journal) book. 


RULES OF DEBIT AND CREDIT

Traditional Approach

From the point of view of recording, all the accounts are divided into two categories, namely - 

1. Personal Accounts 2. Impersonal Accounts- (a) Real A/c (b) Nominal A/c

Rules for recording transactions:
1. Personal Accounts - Debit the receiver and Credit the giver.
2. Real A/c - Debit what comes in and Credit what goes out.
3. Nominal A/c - Debit all expenses/losses and Credit all revenues/incomes/gains.
Modern Approach

From the point of view of recording, all the accounts are divided into five categories, namely -

(i) Assets (ii) Liabilities (iii) Capital (iv) Expenses/Losses (v) Revenue/Gains.
I. Rules for recording changes in assets/expenses (losses):
Debit the increase in assets
Debit the increase in expenses/ losses
Credit the decrease in asset/expenses
Il. Rules of recording changes in Liabilities and Capital/Revenues (gains):
Credit the increase in liabilities / capital
Debit the decrease in liabilities / capital
Credit the increase in revenue / gains
Debit the decrease in revenue / gains

Journal: In this book, transactions are recorded in the chronological order, as and when they take place.

Each transaction is separately recorded after determining the particular account to be debited or

credited.

                                                            The format of Journal

Date

Particulars

L.F.

Debit Rs.

Credit Rs.

 

 

 

 

 


The journal entry is the basic record of a business transaction. It may be simple or compound. When

only two accounts are involved to record a transaction, it is called a simple journal entry.

           

For Example, Goods Purchased on credit for Rs.50,000 from M/s Sanju Traders on April 5, 2025,

involves only two accounts: (a) Purchases A/c (Goods), (b) Sanju Traders A/c (Creditors). 

This transaction is recorded in the journal as follows:                                                                                                                                                   Journal

Date

Particulars

L.F.

Debit Rs.

Credit Rs.

2025
April 05

Purchases A/c                                     Dr.
            To Sanju Traders A/c
(Purchase of goods from Sanju Traders)

 

50,000

 
50,000

When the number of accounts to be debited or credited is more than one, entry made for recording the

transaction is called compound journal entry. That means compound journal entry involves multiple

accounts. 

For example, For Rs. 28,000 Office furniture is purchased from Furniture Mart on July 04, 2025 and Rs.

8,000 is paid by cash immediately and balance of Rs. 20,000 is still payable. It increases furniture

(assets) by Rs. 28,000, decreases cash (assets) by Rs. 8,000 and increases liability by Rs. 20,000.

                                                                             Journal           

Date

Particulars

L.F.

Debit Rs.

Credit Rs.

2020
July 04

Office Furniture A/c                           Dr.
            To Cash A/c
            To Furniture Mart A/c
(Purchase of office furniture from Furniture Mart)

 

28,000

 
8,000
20,000


Analysis of Transactions according to Traditional Approach

Date
2025

Transactions     

Affected Accounts

Nature of Account

Dr. or Cr. Reason

Apr. 02

Started business with cash 80,000.

Cash A/c
Capital A/c

Real A/c
Personal A/c

Dr. Cash comes in.
Cr. Owner is giver.

Apr. 02

Bought goods for cash 15,000.

Purchases A/c
Cash A/c

Nominal A/c Real A/c

Dr. the exps. & losses.
Cr. what goes out.

Apr. 03

Bought furniture for cash 8,000.

Furniture A/c
Cash A/c

Real A/c
Real A/c

Dr. what comes in
Cr. what goes out

Apr. 05

Sold goods for cash 12,000.

Cash A/c
Sales A/c

Real A/c
Nominal A/c

Dr. what comes in
Cr. income & gains

Apr. 06

Bought goods from Amit 24,000.

Purchases A/c
Amit

Nominal A/c
Personal A/c

Dr. exps. &  losses
Cr. the giver

Apr. 09

Sold goods to Mohan 20,000.

Mohan A/c
Sales A/c

Personal A/c
Nominal A/c

Dr. the receiver
Cr. income & gains

Apr. 10

Cash received from Mohan Rs. 16,000

Cash A/c
Mohan

Real A/c
Personal A/c

Dr. what comes in
Cr. the giver

Apr. 12

Paid cash to Amit 20,000.

Amit
Cash A/c

Personal A/c.
Real A/c

Dr. the receiver
Cr. what goes out

Apr. 18

Sold goods to Sumit for cash Rs. 10,000.

Cash A/c
Sales A/c

Real A/c
Nominal A/c

Dr. what comes in
Cr. income & gains

Apr. 21

Bought machinery from Sohan for Rs. 25,000.

Machinery A/c
Sohan

Real A/c
Personal A/c

Dr. what comes in
Cr. the giver

Apr. 25

Withdrew cash 5,000 for personal use.

Drawing A/c
Cash A/c

Personal A/c
Real A/c

Dr. the receiver
Cr. what goes out

Apr. 30
 

Paid Rent Rs. 4,000.

Rent A/c
Cash A/c

Nominal A/c
Real A/c

Dr.  exps. &  losses
Cr. what goes out

Apr. 30

Paid Salary to Gopal Rs. 8,000.

Salary A/c
Cash A/c

Nominal A/c
Real A/c

Dr. exps. &  losses
Cr. what goes out

Apr. 30

Received Commission Rs. 6,000.

Cash A/c
Commission

Real A/c
Nominal A/c

Dr. what comes in
Cr. income & gains


Analysis of Transactions according to Modern Approach

Date

2025

Transactions     

Affected Accounts

Nature of Account

Dr. or Cr. Reason

Apr. 02

Started business with cash 80,000.

Cash A/c
Capital A/c

Asset
Capital

Dr. increase in asset
Cr. increase in capital

Apr. 02

Bought goods for cash 15,000.

Purchases A/c
Cash A/c

Expense
Asset

Dr. increase in exps.
Cr. decrease in asset

Apr. 03

Bought furniture for cash 8,000.

Furniture A/c
Cash A/c

Asset
Asset

Dr. increase in asset
Cr. decrease in asset

Apr. 05

Sold goods for cash 12,000.

Cash A/c
Sales A/c

Asset
Revenue

Dr. increase in asset
Cr. increase in revenue

Apr. 06

Bought goods from Amit 24,000.

Purchases A/c
Amit

Debtor (asset)
Revenue

Dr. increase in asset
Cr. increase in revenue

Apr. 09

Sold goods to Mohan 20,000.

Mohan A/c
Sales A/c

Expense
Creditor (liab.)

Dr. increase in exps.
Cr. increase in liab.

Apr. 10

Cash received from Mohan Rs. 16,000

Cash A/c
Mohan

Asset
Debtor (asset)

Dr. increase in assets
Cr. decrease in asset

Apr. 12

Paid cash to Amit 20,000.

Amit
Cash A/c

Creditor (liab.)
Asset

Dr. decrease in liab.
Cr. decrease in asset

Apr. 18

Sold goods to Sumit for cash Rs. 10,000.

Cash A/c
Sales A/c

Asset
Income/ gain

Dr. increase in asset
Cr. increase in gain

Apr. 21

Bought machinery from Sohan for Rs. 25,000.

Machinery A/c
Sohan

Asset
Liability

Dr. increase in asset
Cr. increase in liab.

Apr. 25

Withdrew cash 5,000 for personal use.

Drawing A/c
Cash A/c

Capital
Asset

Dr. decrease in capital
Cr. decrease in asset

Apr. 30
 

Paid Rent Rs. 4,000.

Rent A/c
Cash A/c

Expense
Asset

Dr. increase in exps.
Cr. decrease in assets

Apr. 30

Paid Salary to Gopal Rs. 8,000.

Salary A/c
Cash A/c

Expense
Asset

Dr. increase in exps.
Cr. decrease in assets

Apr. 30

Received Commission Rs. 6,000.

Cash A/c
Commission

Asset
Income

Dr. increase in asset
Cr. increase in income


Illustration 01. Transactions of M/S Suraj Mart during the month of April, 2025 are as under:      

Date

Transactions

02.04.2025
04.04.2025
05.04.2025
06.04.2025
07.04.2025
08.04.2025
10.04.2025
12.04.2025
14.04.2025
15.04.2025
17.04.2025
18.04.2025
20.04.2025
24.04.2025
27.04.2025
30.04.2025
30.04.2025
30.04.2025
30.04.2025

Business started with cash Rs. 1,50,000.
Goods purchased form Manisha Rs. 36,000.
Stationery purchased for cash Rs. 2,200.
Open a bank account with SBI for Rs. 35,000.
Goods sold to Priya for Rs. 16,000.
Received a cheque of Rs. 16,000 from Priya.
Sold goods to Nidhi Rs. 14,000.
Nidhi pays Rs. 14,000 cash.
Purchased goods for Rs. 20,000 on credit from Ritu.
Insurance paid by cheque Rs. 6,000.
Paid rent Rs. 2,000.
Goods costing Rs. 1,500 given as charity.
Purchased office furniture for Rs. 11,200.
Cash withdrawn for household purposes Rs. 5000.
Cash sales Rs. 2,300.
Interest received cash Rs. 1,200.
Commission paid Rs. 3,000 by cheque.
Telephone bill paid by cheque Rs. 2,000.
Payment of salaries in cash Rs. 12,000.

            Journalize the transactions.

Solution:                                              Journal of Suraj Mart            

Date

Particulars

L.F.

Debit Rs.

Credit Rs.

2025
April 02

Cash A/c                                             Dr.
            To Capital A/c
(Business started with cash)

 

1,50,000

 
1,50,000

April 04

Purchases A/c                                     Dr.
            To Manisha A/c
(Goods purchase on credit)

 

36,000

 
36,000

April 05

Stationery A/c                                     Dr.
            To Cash A/c
(Purchase of stationery for cash)

 

2,200

 
2,200

April 06

Bank A/c                                             Dr.
            To Cash A/c
(Opened a bank account with SBI)

 

35,000

 
35,000

April 07

Priya A/c                                             Dr.
            To Sales A/c
(Goods sold to Priya On Credit)

 

16,000

 
16,000

April 08

Bank A/c                                             Dr.
            To Priya A/c
(Cheque Received from Priya)

 

16,000

 
16,000

April 10

Nidhi A/c                                            Dr.
            To Sales A/c
(Sale of goods to Nidhi on credit)

 

14,000

 
14,000

April 12

Cash A/c                                             Dr.
            To Nidhi A/c
(Cash received from Nidhi)

 

14,000

 
14,000

April 14

Purchases A/c                                     Dr.
            To Ritu A/c
(Purchase of goods on credit)

 

20,000

 
20,000

April 15

Insurance Premium A/c                      Dr.
            To Bank A/c
(Payment of Insurance premium by cheque)

 

6,000

 
6,000

April 17

Rent A/c                                              Dr.
            To Cash A/c
(Rent paid)

 

2,000

 
2,000

April 18

Charity A/c                                         Dr.
            To Purchases A/c
(Goods given as charity)

 

1,500

 
1,500

April 20

Furniture A/c                                      Dr.
            To Cash A/c
(Purchase of office furniture)

 

11,200

 
11,200

April 24

Drawings A/c                                      Dr.
            To Cash A/c
(With drawl of cash from the business for personal use of the proprietor)

 

5,000

 
5,000

April 27

Cash A/c                                             Dr.
            To Interest received A/c
(Interest received)

 

1,200

 
1,200

April 30

Cash A/c                                             Dr.
            To Sales A/c
(Sale of goods for cash)

 

2,300

 
2,300

April 30

Commission A/c                                 Dr.
            To Bank A/c
(Commission paid by cheque)

 

3,000

 
3,000

 April 30

Telephone expenses A/c                     Dr.
            To Cash A/c
(Payment of telephone bill)

 

2,000

 
2,000

 April 30

Salaries A/c                                         Dr.
            To Cash A/c
(Payment of salary to the office persons)

 

12,000

 
12,000

 

Total of Journal

 

3,49,400

3,49,400

   

01. Record the following transactions in the journal of Anuj for March 2025:
01 Started business with cash 80,000
04 Deposited in bank 50,000
10 Received cash from Rahul 1,000
15 Bought goods for cash 8,000
22 Bought goods by cheque 10,000
25 Paid to Shyam by cash 20,000
30 Drew from Bank for office use 2,000
31 Rent paid by cheque 1,000

02. Record the following transactions in the journal of Anju for April 2025:

            02 Started business with cash 1,20,000
03 Cash paid into bank 50,000
05 Purchased goods from Sushmita 20,000
06 Sold goods to Dinker and received a cheque 20,000
10 Paid to Sushmita cash 20,000
14 Cheque received on April 06, 2025, deposited into bank
18 Sold goods to Rani 12,000
20 Cartage paid in cash 500
22 Received cash from Rani 12,000
27 Commission received 5,000
30 Drew cash for personal use 2,000

03. Record the following transactions in the journal of M/s Ambika Traders for June 2025:

            01 Commenced business with cash 50,000
03 Opened bank account with ICICI 30,000
05 Purchased goods for cash 10,000
10 Purchased office machine for cash 5,000
15 Sales goods on credit from Rohan and received cheque 7,000
18 Cash sales 8,000
20 Rohan’s cheque deposited into bank
22 Paid cartage by cheque 500
25 Cash withdrawn for personal use 2,000
30 Paid rent by cheque 1,000                                                                                                                                                                             ==                                                                                                              

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