JOURNAL ENTRIES IN DOUBLE ENTRY ACCOUNTING

In this article we will provide the information related to Journal Entries in Double Entry Accounting. The foundation of accounting lies in the double entry system, a concept that warrants our understanding.

In this system, each financial transaction impacts two accounts, manifesting on both sides. One side represents the recipient of profit, while the other signifies the contributor.

Let’s break down the rules of the double entry system

Table of Contents

FOR PERSONAL ACCOUNTS

Debit corresponds to the receiver.

Credit corresponds to the giver.

FOR REAL ACCOUNTS

Debit records what comes in.

Credit records what goes out.

FOR NOMINAL ACCOUNTS

Debit encompasses all expenses and losses.

Credit encompasses all incomes and gains.

It’s crucial to grasp the notion of personal accounts.

JOURNAL ENTRIES IN DOUBLE ENTRY ACCOUNTING ARE TWO TYPES

Human Personal Accounts and

Artificial Personal Accounts.

Here’s the distinction:

Ram’s account is a human personal account.

HDFC Bank or ICICI Bank represents artificial personal accounts.

However, in the double entry system, we diligently consider both types of accounts, embracing both human and artificial personal accounts.

Now, let’s illustrate the double entry system with a practical example:

Question:

Pramod borrowed Rs. 10,000 from his friend Santosh and Rs. 10,000 from his elder sister Mrs. Priti Write the journal entry using the double entry system.

Answer:

Since we are documenting Pramod’s accounts, we recognize that cash is flowing into Pramod’s business. Therefore, we debit the Cash account. Santosh and Mrs. Priti, both being lenders, are credited. Since this is a loan, we establish Loan accounts in their names.

Here’s the journal entry:

Cash Account Debit: Rs. 20,000

To Santosh’s Loan Account Credit: Rs. 10,000

To Mrs. Priti’s Loan Account Credit: Rs. 10,000

This journal entry effectively captures the financial transaction in accordance with the principles of the double entry system.

JOURNAL ENTRIES WITH EXAMPLES

CONCLUSION JOURNAL ENTRIES IN DOUBLE ENTRY ACCOUNTING

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