What is Journal Entries
Before discussing journal Entries, I would like to describe about Journal Journal word derived from jour, which meaning is a day. It is also called Day Book. It is the basic book of accounts on which all others accounts are prepared and reports are made. Every transaction of business entity should first enter in Day book. It is assisting book of Ledger.
Most common practice is to first record every transaction on daily basis in the journal. Accountant updates the record with supporting documents to supporting files on daily basis. It is the first phase of accounting definition, recording and classification.
Before recording a transaction, book keeper should have basic knowledge of chart of accounts, Golden Rules of accounting and Debit and Credit Rules. Which account will be debited with what amount? Learn More about debit and credit.
Features of Journal Entries
- Date: When the transaction Occurred.
- Ledger folio: Where the next step of recording entered. Book and its page Number
- Ref: On what basis of transaction is recorded. Voucher or invoice Reference.
- Debit Column: Account is debited with what amount
- Credit Column Account is credited with what Amount.
- Description: Brief description about the transaction.
- Supporting Documents: Voucher or invoice file should be maintained transaction wise.
Journal Entries Example:
- XYZ started business with amount $300,000
- Bough Furniture by 100 on cash
- Cash Deposited into Bank $1000
- Rent of Building paid $200
- Raw Material of $300 purchased at cash $200 and credit $100
- Good Sold on Credit $200
- Salaries and Wages paid $200