How to pass journal entries – Bookkeeping basics

What is Journal?

A journal is the first book where bookkeeping or accounting related entries are recorded. So, you are going to learn how to pass journal entries.

In the following tables, you can see some data regarding transactions that took place during the month of December in 2020

Illustration.

2020		Particulars	$
December	1	Jack started the business with cash	10000
		Deposited cash into the bank	7000
	3	Bought goods in cash	500
	6	Withdrawn cash from the bank	100
	13	Sold goods to Dimple on credit	150
	15	Received cash from Peter	145
	15	Discount allowed to Peter	5
	20	Dimple paid cash	150
	25	Cash sales made during the month	1000
	30	Rent paid for the month of December	50
	30	Salary paid for the month of December	75

Journalise the above transactions

Solution

Date	Particulars	L.F.	Amount Dr ($)	Amount Cr. ($)
(2020) Dec. 1	Cash A/c                                                     Dr. To Capital A/c	1 4	10000	10000
Dec  1	Bank A/c                                                     Dr. To Cash A/c (being cash deposited into the bank)	5 1	7000	7000
Dec  3	Purchase A/c                                             Dr. To cash A/c (Being goods purchased in cash)	7 1	500	500
Dec 6	Cash A/c                                                     Dr To Bank A/c (Being cash withdrawn from the bank)	1 5	100	100
Dec 13	Dimple                                                            Dr To Sales A/c (Being sold to Dimple on credit)	9 7	150	150
Dec 15	Cash A/c                                                      Dr. To Discount A/c Dr. To  Peter A/c (Being cash received from Peter and discount allowed to him)	1 12 10	145 5	150
Dec 20	Cash A/c                                                     Dr To Dimple	1 9	150	150
Dec 25	Cash A/c                                                      Dr To Sales A/c (Being goods sold for cash)	1 7	1000	1000
Dec 30	Rent A/c                                                        Dr. Salaries A/c                                                  Dr. To Cash A/c (Being the amount paid for rent and salary for the month of December)	13 14 1	50 75	125

Illustration 3.

Following are some examples of  translations and Journal Entries, we have analysed each entry with golden rules to understand it better

1. Cash brought in by proprietor as capital $ 30000
   a) debit what comes in
   Cash came in business;
   cash account will be debited in journal entry.
   
   b) credit the giver
   Proprietor gives cash to business

Journal Entry
Cash Account Debit 30,000                                
         To Capital Account 30,000

2. Goods purchased on credit from Monty for $ 5,000

a) debit what comes in

Goods have come in business
b) credit the giver

Monty is a giver, so his account will be credited

Journal Entry.
Purchase account Dr. 5000
          To Monty                    5000

3. Furniture purchased for cash $ 10000

a) debit what comes in

furniture came in business
b) Cash is what goes out

Entry
Furniture Account Dr. 10,000
        To Cash Account         10,000

4. Goods sold on credit to Deven $ 1600

a) Deven is the receiver of goods (DEBIT)
b) Goods go out (CREDIT)

Deven Account Dr. 1600
   To Sales Account               1600

5. Goods purchased for cash $ 4500

a) Goods come in, so purchase account DEBIT
b) Cash goes out, so cash account will be CREDIT

Purchase account Dr 4500
        To Cash account                      4500

6. Goods sold for cash $ 2100
a) debit what comes in, Cash comes in,
b) credit what goes out, Goods go out
Cash account Dr. 2100

      To Sale account 2100

7. Rent paid for the shop to landlord $3000

a) debit all expenses, Rent is an item of expense, it will be debited.
b) credit what goes out Cash is an item of asset and it goes out

Entry

Rent Account Dr.  3000
      To Cash Account       3000

8. Commission received in cash $2000

Cash A/C	Dr	$2000
To Commission			$2000

Cash A/C	Dr	$2000
To Commission			$2000

9. Cash deposited into bank $5000

a) Bank is the receiver of cash, so the bank account will be debited.
b) Cash goes out, so the cash account will be credited.

Bank A/C	Dr	$5000
To Cash			$5000

10. Cash is withdrawn from bank for office use $ 2000

a) debit what comes in, Cash comes in the business
b) Bank is the giver, so the bank account will be credited.

Cash A/C	Dr	$2000
To Bank			$2000

11. Cash has drawn by the proprietor from the business for personal use $ 3000

a) Debit the Receiver, Proprietor is the receiver of cash
b) Cash goes out, so the cash account will be credited

Entry

Drawings A/C	Dr	$3000
To Cash			$3000

12. Goods given as charity $ 1000

a) Debit all expenses, Charity is an expense of business
b) Goods go out, so the purchase account will be credited.

Entry

Charity Account	Dr	$1000
To Purchase Account			$1000

In this way, we have cleared the art of passing journal entries along with the explanation of each entry.