Introduction: Journal Entries

Overview of Topics

• Importance of Journal Entries in accounting
• Classification of accounts
• General entries of various transactions
• Illustrations for better understanding
• Introduction to GST (separate chapter)

Key Concepts

• Business Initiation: Essential purchases to start a business.
  • Capital introduction
  • Purchasing furniture, etc.
• Transactions: Every business transaction needs recording.
• Identification, Measuring, and Recording: Core steps in accounting leading to financial statements.
• Double Entry System: Every debit must have a corresponding credit.

Basic Accounting Terminology

• Personal Account: Accounts related to individuals or organizations.
  • Natural, Artificial, Representative
  • Rule: Debit the receiver, Credit the giver
• Impersonal Account: Non-persons related accounts (Real and Nominal Account)
  • Real Account: Tangible and intangible assets.
    • Rule: Debit what comes in, credit what goes out
  • Nominal Account: Expenses, losses, incomes, gains.
    • Rule: Debit expenses/losses, Credit incomes/gains

Modern Approach to Accounting

• Five Heads of Accounts: Assets, Expenses, Liabilities, Capital, Revenue
  • Assets: Debit increases, Credit decreases
  • Expenses: Debit increases, Credit decreases
  • Liabilities/Capital/Revenue: Credit increases, Debit decreases

Journal Entries Format

• Columns: Date, Particulars, Ledger Folio, Debit Amount, Credit Amount
• Particulars: Detailed description of transactions

Examples of Journal Entries

• Cash Transactions: Cash, Capital, Purchases
• Credit Transactions: Creditors, Debtors
• Goods and Furniture Purchases: Use appropriate account names

Specialized Entries

• Outstanding Expenses: Expenses yet to be paid
• Prepaid Expenses: Payments made in advance
• Depreciation: Decrease in the value of assets over time
• Bad Debts: Amounts that cannot be recovered
• Purchase Returns: Returning purchased goods
• Cash and Trade Discounts: Financial incentives

Banking Transactions

• Deposits: Cash deposit in bank
• Withdrawals: Cash drawn from bank
• Payments: Payment of expenses and creditors
• Receipts: Receiving payments and interests

Comprehensive Examples

• Combining Entries: Examples involving multiple accounts
• Trade and Cash Discounts: Applying discounts
  • Trade Discount: Given at the time of sale, deducted from list price
  • Cash Discount: Offered for prompt payment, reflected in transactions

End of Year Adjustments

• Closing Entries: Transferring incomes and expenses to P&L account
• Opening Entries: Bringing forward asset and liability balances