The journal: format, rules and journal entries worked
Financial Accounting · Unit II · Topic 5 of 14 · 4 min read
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Cases checked to exist. Read the judgment before quoting a holding.
Every case cited here has been checked to exist — the citation resolves and names the right parties. The propositions attributed to each case have not been verified line by line against the judgment. Case names link through to the full judgment: read it before quoting a holding in an examination answer, and never carry a proposition from notes into court on trust.
1. Meaning
The journal is the book of original (prime) entry. Transactions are entered in it first, in the order of their dates, showing which account is debited and which credited and why. The act of recording is called journalising; each record is a journal entry. From the journal the entries are posted to the ledger.
2. Ruling of the journal
| Date | Particulars | L.F. | Debit Rs. | Credit Rs. |
|---|---|---|---|---|
| 2025 Jul 1 | Cash A/c …… Dr To Capital A/c (Being business started with cash) | 20,000 | 20,000 |
The account debited is written first with “Dr” at the end; the account credited is written on the next line, indented, beginning with “To”; the narration follows in brackets. L.F. (ledger folio) is filled in at the time of posting.
3. Steps to journalise
- Identify the two accounts affected.
- Classify each as personal, real or nominal.
- Apply the rule for that kind (debit the receiver / what comes in / expenses; credit the giver / what goes out / incomes).
- Write the entry and the narration.
Standard treatments. Goods bought for resale go to Purchases A/c, goods sold to Sales A/c, never to “Goods A/c”. A cash transaction uses Cash A/c; a credit transaction uses the party’s personal account. Goods returned by us go to Purchases Returns A/c; goods returned to us, to Sales Returns A/c. Cash or goods taken by the owner for personal use go to Drawings A/c. Where a party settles for less than the balance, the difference is Discount allowed (we receive less — a loss, debit) or Discount received (we pay less — a gain, credit). A compound entry has more than one debit or credit (salaries and rent paid together; a payment with discount).
4. Worked problem: Govind (January 2026)
| Date | Particulars | Dr Rs. | Cr Rs. |
|---|---|---|---|
| Jul 1 | Cash A/c Dr Purchases (Stock) A/c Dr Furniture A/c Dr To Govind’s Capital A/c (Business started with cash, goods and furniture) | 20,000 10,000 50,000 | 80,000 |
| Jul 5 | Raghav A/c Dr To Sales A/c (Goods sold on credit) | 5,000 | 5,000 |
| Jul 6 | Cash A/c Dr To Sales A/c (Cash sales) | 3,000 | 3,000 |
| Jul 9 | Cash A/c Dr To Raghav A/c (Cash received from Raghav) | 3,000 | 3,000 |
| Jul 12 | Purchases A/c Dr To Manav A/c (Goods bought on credit) | 9,000 | 9,000 |
| Jul 15 | Manav A/c Dr To Cash A/c (Paid on account) | 5,000 | 5,000 |
| Jul 20 | Interest A/c Dr To Cash A/c (Interest paid to Raj) | 400 | 400 |
| Jul 22 | Stationery A/c Dr To Cash A/c (Stationery bought) | 500 | 500 |
| Jul 23 | Salaries A/c Dr Rent A/c Dr To Cash A/c (Salaries and rent paid) | 2,000 3,000 | 5,000 |
| Jul 26 | Manav A/c Dr To Cash A/c To Discount Received A/c (Paid in full settlement of Rs. 4,000) | 4,000 | 3,800 200 |
| Total | 1,14,900 | 1,14,900 |
Check. Manav’s balance before 26 July is 9,000 − 5,000 = Rs. 4,000, which matches the “full settlement of Rs. 4,000” in the question. The opening goods are debited to Purchases (or Stock) A/c — either is accepted, but not “Goods A/c”. Interest paid to Raj is an expense; Raj is not debited because nothing is owed to him afterwards.
5. Worked problem: Ajit (June 2025), the entries that need care
The routine entries follow section 4 (Dec 1 Cash Dr 40,000 to Capital; Dec 3 Bank Dr 20,000 to Cash; Dec 5 Purchases Dr 15,000 to Cash; Dec 8 Cash Dr 6,000 to Sales; Dec 10 Furniture Dr 5,000 to Bank; Dec 12 Arvind Dr 4,000 to Sales; Dec 15 Purchases Dr 10,000 to Hari). The others:
| Date | Particulars | Dr Rs. | Cr Rs. |
|---|---|---|---|
| Dec 16 | Hari A/c Dr To Purchases Returns A/c | 5,000 | 5,000 |
| Dec 18 | Cash A/c Dr Discount Allowed A/c Dr To Arvind A/c | 3,960 40 | 4,000 |
| Dec 20 | Hari A/c Dr To Cash A/c To Discount Received A/c | 5,000 | 4,900 100 |
| Dec 28 | Rent A/c Dr Salaries A/c Dr To Cash A/c | 1,500 2,000 | 3,500 |
Hari’s balance after the return is 10,000 − 5,000 = Rs. 5,000, so the payment of Rs. 4,900 “in full settlement” leaves a discount of Rs. 100. Arvind owed Rs. 4,000 and paid Rs. 3,960, so discount allowed is Rs. 40. The journal total for all eleven dates is Rs. 1,17,500 on each side.
How this is examined
Every 80-mark paper since 2021 has a journal problem as the first choice in Unit II, with a three-column cash book as the alternative. The 100-mark paper asks the same transactions posted to the ledger instead (see the ledger note). Rule the journal properly, write a narration for every entry, and total both columns at the end: a matching total is the examiner’s first check.
Now try the real questions: Financial Accounting past question papers.