Comprehensive Guide to Journal Entries in Accounting
ntroduction
Journal entries are the foundation of accounting, serving as the first step in recording financial transactions. Every business transaction is recorded as a journal entry to maintain accurate financial records. This guide provides a detailed list of common journal entries, categorized based on their nature.
1. Basic Accounting Journal Entries
1. Business Started (Capital Introduced)
Entry:
Debit: Cash/Bank A/c
Credit: Capital A/c
2. Purchase of Inventory (Cash & Credit)
Cash Purchase:
Debit: Inventory A/c
Credit: Cash A/c
Credit Purchase:
Debit: Inventory A/c
Credit: Accounts Payable A/c
3. Sale of Goods (Cash & Credit)
Cash Sale:
Debit: Cash A/c
Credit: Sales Revenue A/c
Credit Sale:
Debit: Accounts Receivable A/c
Credit: Sales Revenue A/c
4. Payment to Suppliers
Debit: Accounts Payable A/c
Credit: Cash/Bank A/c
5. Collection from Customers
Debit: Cash/Bank A/c
Credit: Accounts Receivable A/c
2. Expense-Related Journal Entries
6. Rent Paid
Debit: Rent Expense A/c
Credit: Cash/Bank A/c
7. Salaries Paid to Employees
Debit: Salary Expense A/c
Credit: Cash/Bank A/c
8. Utility Bills Paid
Debit: Utilities Expense A/c
Credit: Cash/Bank A/c
3. Asset & Liability Transactions
9. Purchase of Fixed Asset (Cash & Credit)
Cash Purchase:
Debit: Equipment A/c
Credit: Cash/Bank A/c
Credit Purchase:
Debit: Equipment A/c
Credit: Accounts Payable A/c
10. Depreciation Charged on Fixed Assets
Debit: Depreciation Expense A/c
Credit: Accumulated Depreciation A/c
11. Loan Taken from Bank
Debit: Cash/Bank A/c
Credit: Loan Payable A/c
12. Loan Repayment (Partial or Full)
Debit: Loan Payable A/c
Credit: Cash/Bank A/c
4. Capital & Dividend Transactions
13. Additional Capital Introduced
Debit: Cash/Bank A/c
Credit: Capital A/c
14. Withdrawal of Capital (Owner's Drawings)
Debit: Drawings A/c
Credit: Cash/Bank A/c
15. Dividend Declared
Debit: Retained Earnings A/c
Credit: Dividend Payable A/c
16. Dividend Paid
Debit: Dividend Payable A/c
Credit: Cash/Bank A/c
5. Adjusting & Closing Journal Entries
17. Accrued Expense Recorded
Debit: Expense A/c
Credit: Accrued Expense Payable A/c
18. Prepaid Expense Adjusted
Debit: Prepaid Expense A/c
Credit: Expense A/c
19. Unearned Revenue Adjusted
Debit: Unearned Revenue A/c
Credit: Revenue A/c
20. Closing Revenue Accounts
Debit: Sales Revenue A/c
Credit: Income Summary A/c
21. Closing Expense Accounts
Debit: Income Summary A/c
Credit: All Expense Accounts
22. Transferring Net Profit to Retained Earnings
Debit: Income Summary A/c
Credit: Retained Earnings A/c
Conclusion
Mastering journal entries is essential for maintaining accurate financial records. Whether you are a student, accountant, or business owner, understanding how to record different transactions will help ensure your books remain balanced. By categorizing journal entries effectively, businesses can track financial activities with clarity and precision.
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