What is a Journal?
The journal is the book where every transaction is recorded for the first time, in chronological order, following the principles of double entry. Because it's the very first place a transaction is recorded, it's called the book of original entry.
The process of recording a transaction in the journal is called journalising. Once recorded, the entry is later transferred ("posted") to the ledger.
Format of a Journal
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| 10.01.20 | Furniture A/c Dr. To Cash A/c (Being furniture purchased for cash) |
— | 16,000 |
16,000 |
The columns explained:
- Date — the date the transaction occurred
- Particulars — the two accounts involved, with "Dr." after the debited account on line 1, "To [Account]" on line 2 for the credited account, and a narration in brackets explaining the entry
- L.F. (Ledger Folio) — the page number in the ledger to which this entry has been posted (filled in only at posting time)
- Debit / Credit Amount — the rupee values
How to Record a Journal Entry (Step by Step)
- Identify the two accounts involved in the transaction
- Determine each account's type (asset / liability / capital / revenue / expense)
- Apply the debit/credit rule to decide which is debited and which is credited
- Write the debited account first, with "Dr." after it
- Write "To [credited account]" on the next line (indented)
- Write a brief narration in brackets
- Enter both amounts — they must be equal
Simple vs Compound Journal Entries
Simple Entry
One account debited, one account credited.
Compound Entry
More than one account on either side. Three or more accounts involved.
Personal Books vs Business Books
Critical rule: private transactions of the proprietor are not recorded in the business's books. Equally, the business's transactions don't appear in the proprietor's personal books. But transactions between the proprietor and the business are recorded in both.
Capital Account
When the proprietor brings money into the business, the business is borrowing from the owner. The owner becomes an "internal creditor".
Drawings Account
When the owner withdraws money or goods for personal use:
Entries for Specific Transactions
Discount
Trade discount is not recorded — it's already deducted on the invoice. Cash discount is recorded. If both apply, trade discount is taken first, cash discount on the net.
Bad Debts
Bad Debts Recovered
Outstanding Expense
Prepaid Expense
Depreciation
Accrued Income
Income Received in Advance
Purchase of a Fixed Asset
Asset A/c is debited (not Purchases — that's only for stock-in-trade).
Drawings of Goods (Owner takes stock home)
Goods Given Away as Charity
Goods Distributed as Samples
Loss of Goods by Fire / Theft
Step 1 — recognise the loss:
Step 2 — if goods were insured, claim from insurer:
Step 3 — when claim is received:
The Opening Entry
At the start of every new financial year, the closing balances from the previous year become the opening balances of the new year. The very first entry in the new year's journal is the opening entry — all assets debited, all liabilities and capital credited.
A Full Worked Example
Here are 14 transactions of Mr. X for February 2020, journalised:
| Date | Transaction | Journal Entry |
|---|---|---|
| Feb 3 | Started business with ₹15,000 cash | Cash Dr. 15,000 / To Capital 15,000 |
| Feb 5 | Purchased goods ₹6,000 cash | Purchases Dr. 6,000 / To Cash 6,000 |
| Feb 7 | Purchased goods ₹3,000 on credit from S & Co. | Purchases Dr. 3,000 / To S & Co. 3,000 |
| Feb 10 | Purchased furniture ₹2,400 | Furniture Dr. 2,400 / To Cash 2,400 |
| Feb 11 | Sold goods ₹3,900 cash | Cash Dr. 3,900 / To Sales 3,900 |
| Feb 15 | Sold goods ₹2,250 on credit to D | D A/c Dr. 2,250 / To Sales 2,250 |
| Feb 20 | Paid salaries ₹960 | Salaries Dr. 960 / To Cash 960 |
| Feb 25 | Received commission ₹75 | Cash Dr. 75 / To Commission 75 |
| Feb 26 | Returned goods worth ₹600 to S & Co. | S & Co. Dr. 600 / To Purchase Returns 600 |
| Feb 27 | Goods worth ₹450 returned by D | Sales Returns Dr. 450 / To D A/c 450 |
| Feb 28 | Received ₹1,500 from D | Cash Dr. 1,500 / To D A/c 1,500 |
| Feb 28 | Paid ₹1,800 to S & Co. | S & Co. Dr. 1,800 / To Cash 1,800 |
| Feb 28 | X withdrew ₹900 | Drawings Dr. 900 / To Cash 900 |
| Feb 28 | Charged depreciation ₹240 on furniture | Depreciation Dr. 240 / To Furniture 240 |
| Feb 28 | Borrowed ₹1,500 from K | Cash Dr. 1,500 / To K A/c 1,500 |
You don't manually pass journal entries in iAccounting — you record transactions through purpose-built forms (Sales Invoice, Purchase Invoice, Receipt, Payment, etc.) and the software automatically generates the correct journal entry behind the scenes. The journal view is always available to inspect.
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