Chapter 3 · Lesson 4 of 6 · ⏱ 35 min

Journal: the book where every transaction is first written

🎯 After this lesson you will be able to:

Understand why the journal is called the book of original entry
Write simple and compound journal entries in the correct format
Pass an opening entry from a list of assets and liabilities
Handle special entries like goods for personal use, discount, bad debts and outstanding expenses

So far you have learnt which account to debit and which to credit. Today you will learn where to write it. Every transaction of a business is first written in one book called the Journal. If you master the journal, 60–70% of Class 11 accounts becomes easy, because the cash book, ledger, trial balance and rectification all start from here. We will go slowly: first the format, then simple entries, then compound entries, then the opening entry, and finally the “special” entries that examiners love.

1. Why do we need a journal?

Vikas Sharma runs Sharma Stationery Mart in Aligarh. In the first week he buys paper, sells notebooks, pays rent through UPI and gets money from a school. If he just keeps the bills in a drawer, after a month nobody can say what happened on which day. So every evening he opens a register and writes each transaction, in date order, with the account to be debited, the account to be credited, the amount and one line of explanation. That register is his journal.

In the last lessons you saw that each transaction affects at least two accounts. Real accounting systems do not jump straight into those accounts. First, each transaction is written in date order in a book, using the source document (cash memo, invoice, UPI receipt, voucher) as proof. This gives a complete record of each transaction in one place, with its debit and credit side by side.

Journal: the book in which transactions are recorded for the first time, in chronological (date-wise) order. It is also called the book of original entry (or book of prime entry).

Journalising: the process of recording transactions in the journal.

Later, each entry is transferred from the journal to the individual accounts in the ledger (the principal book). That transfer is called posting; you will learn it in Lesson 6.

Big businesses have thousands of similar transactions, so the journal is divided into several books of original entry: Journal Proper, Cash Book, and day books such as the Purchases Book, Sales Book, Purchases Returns Book, Sales Returns Book, Bills Receivable Book and Bills Payable Book. You will study these in Chapter 4. In this chapter we use one simple journal for everything.

2. Format of the journal

A journal page has five columns:

Date	Particulars	Dr (₹)	Cr (₹)
2026 Apr 1	Cash A/c Dr.	1,20,000
	To Capital A/c		1,20,000
	(Being business started with cash)

Date: the date on which the transaction took place (not the day you wrote it). The year is written once at the top, the month when it changes.
Particulars: first line = account to be debited, starting from the left edge, with “Dr.” written at the end of the column. Second line = account to be credited, starting a little to the right (indented), with the prefix “To”. Below them, in brackets, a one-line explanation called the narration. After the narration a line is drawn to show that this entry is over.
L.F. (Ledger Folio): the page number of the ledger where the account is kept. It is filled at the time of posting, not while writing the entry. In most exam answers it stays blank.
Debit amount: amount against the debited account.
Credit amount: amount against the credited account.

When a page is full, both amount columns are totalled and written as Total c/f (carried forward); the next page starts with the same figures as Total b/f (brought forward). At the end, the grand totals of both columns must be equal.

“Debit first, Dr. at the end; credit second, To in front.” Debit is always written first and on the left; credit is written next, pushed to the right with “To”.

3. How to think before writing any entry

Use the same three questions every time:

Which two (or more) accounts are affected?
What type is each account: asset, liability, capital, revenue or expense?
Is it increasing or decreasing? Then apply the rules: assets and expenses increase on the debit side; liabilities, capital and revenues increase on the credit side.

When goods (the items you trade in) are bought, we debit Purchases A/c, not “Goods A/c”. When goods are sold, we credit Sales A/c. The goods account is split into five accounts: Purchases, Sales, Purchases Return, Sales Return and Stock. But furniture, a computer or a machine bought for use in the shop is not a purchase of goods; debit Furniture A/c, Computer A/c or Machinery A/c.

Read the wording carefully. “Bought goods from Ravi” (no mention of cash) means a credit purchase, so credit Ravi’s A/c. “Bought goods for cash from Ravi” means cash went out, so credit Cash A/c; Ravi’s name does not appear. Payments by UPI, cheque, debit card or NEFT go through Bank A/c.

4. Simple journal entries

A simple entry has only two accounts: one debit and one credit.

Journalise the following transactions of Sharma Stationery Mart for April 2026:
Apr 1 Vikas Sharma started business with cash ₹1,20,000.
Apr 2 Deposited ₹50,000 into a bank account with SBI.
Apr 4 Bought goods from Gupta Paper House ₹30,000.
Apr 6 Sold goods for cash ₹8,000.
Apr 9 Sold goods to Meena ₹6,500.
Apr 12 Paid shop rent by UPI ₹7,000.
Apr 15 Received ₹6,500 from Meena through UPI.
Apr 30 Paid salary to the helper in cash ₹9,000.

Analyse each transaction first:

Date	Accounts & type	Effect	Dr / Cr
Apr 1	Cash (asset), Capital	Cash ↑, Capital ↑	Dr Cash, Cr Capital
Apr 2	Bank (asset), Cash (asset)	Bank ↑, Cash ↓	Dr Bank, Cr Cash
Apr 4	Purchases (expense), Gupta Paper House (liability)	both ↑	Dr Purchases, Cr Gupta Paper House
Apr 6	Cash (asset), Sales (revenue)	both ↑	Dr Cash, Cr Sales
Apr 9	Meena (asset: debtor), Sales (revenue)	both ↑	Dr Meena, Cr Sales
Apr 12	Rent (expense), Bank (asset)	Rent ↑, Bank ↓	Dr Rent, Cr Bank
Apr 15	Bank (asset), Meena (asset)	Bank ↑, Meena ↓	Dr Bank, Cr Meena
Apr 30	Salaries (expense), Cash (asset)	Salaries ↑, Cash ↓	Dr Salaries, Cr Cash

Now write each one in the journal format, with a narration, and total both columns.

Journal of Sharma Stationery Mart

Date	Particulars	Dr (₹)	Cr (₹)
2026 Apr 1	Cash A/c Dr.	1,20,000
	To Capital A/c		1,20,000
	(Being business started with cash)
Apr 2	Bank A/c Dr.	50,000
	To Cash A/c		50,000
	(Being cash deposited into SBI)
Apr 4	Purchases A/c Dr.	30,000
	To Gupta Paper House A/c		30,000
	(Being goods bought on credit)
Apr 6	Cash A/c Dr.	8,000
	To Sales A/c		8,000
	(Being goods sold for cash)
Apr 9	Meena’s A/c Dr.	6,500
	To Sales A/c		6,500
	(Being goods sold to Meena on credit)
Apr 12	Rent A/c Dr.	7,000
	To Bank A/c		7,000
	(Being shop rent paid through UPI)
Apr 15	Bank A/c Dr.	6,500
	To Meena’s A/c		6,500
	(Being amount received from Meena through UPI)
Apr 30	Salaries A/c Dr.	9,000
	To Cash A/c		9,000
	(Being salary paid to helper)
	Total	2,37,000	2,37,000

On Apr 15, many students credit Sales A/c again. No! The sale was already recorded on Apr 9. Now Meena is only paying what she owed, so her account is credited (the debtor decreases).

Apr 18: Paid the shop’s electricity bill of ₹2,400 through UPI.

Electricity is an expense. Which asset went down when you paid by UPI?

Expense (Electricity) increases → debit. UPI payment reduces bank balance → credit Bank.

Date	Particulars	Dr (₹)	Cr (₹)
2026 Apr 18	Electricity A/c Dr.	2,400
	To Bank A/c		2,400
	(Being electricity bill paid through UPI)

Apr 20: Bought goods from Kapoor Brothers ₹18,000.

No cash is mentioned. What does that tell you?

“Bought goods from Kapoor Brothers” with no cash = credit purchase. Purchases A/c is debited (not “Goods A/c”) and the supplier, now a creditor, is credited.

Date	Particulars	Dr (₹)	Cr (₹)
2026 Apr 20	Purchases A/c Dr.	18,000
	To Kapoor Brothers A/c		18,000
	(Being goods bought on credit)

5. Compound journal entries

When more than two accounts are involved (two or more debits, or two or more credits), the entry is a compound entry. The rule does not change: total debits = total credits.

Apr 22: Sharma Stationery Mart bought a computer for office use for ₹45,000 from Digital World. ₹15,000 was paid through UPI and the balance is payable later.

Computer (asset) increases by ₹45,000 → debit Computer A/c ₹45,000.
Bank (asset) decreases by ₹15,000 → credit Bank A/c ₹15,000.
Digital World becomes a creditor for 45,000 − 15,000 = ₹30,000 → credit Digital World A/c ₹30,000.
Check: debit 45,000 = credit 15,000 + 30,000 ✔

Date	Particulars	Dr (₹)	Cr (₹)
2026 Apr 22	Computer A/c Dr.	45,000
	To Bank A/c		15,000
	To Digital World A/c		30,000
	(Being computer bought, part payment through UPI, balance due)

Cash discount is the small reduction given for paying quickly. The one who gives it has an expense (Discount Allowed A/c, debit); the one who gets it has a gain (Discount Received A/c, credit). Trade discount (the reduction on list price at the time of sale) is never recorded; we simply record the net amount.

Apr 25: Received ₹9,800 in cash from Anil in full settlement of his account of ₹10,000.

“Full settlement” means Anil’s whole ₹10,000 is now cleared → credit Anil’s A/c ₹10,000.
Cash actually received ₹9,800 → debit Cash A/c ₹9,800.
The ₹200 we let go is a loss for us → debit Discount Allowed A/c ₹200.

Date	Particulars	Dr (₹)	Cr (₹)
2026 Apr 25	Cash A/c Dr.	9,800
	Discount Allowed A/c Dr.	200
	To Anil’s A/c		10,000
	(Being cash received from Anil in full settlement, discount allowed)

Apr 28: Paid ₹29,400 by cheque to Gupta Paper House in full settlement of their account of ₹30,000. (One debit, two credits.)

The creditor’s whole ₹30,000 is cleared. Bank paid less. Who gained the ₹600?

Creditor decreases by ₹30,000 → debit Gupta Paper House. Bank decreases ₹29,400 → credit Bank. We gained ₹600 → credit Discount Received.

Date	Particulars	Dr (₹)	Cr (₹)
2026 Apr 28	Gupta Paper House A/c Dr.	30,000
	To Bank A/c		29,400
	To Discount Received A/c		600
	(Being cheque paid in full settlement, discount received)

6. The opening entry

A business that is already running starts a new year with some balances: cash, bank, stock, debtors, furniture, creditors, loans. These closing balances of last year are brought into the new books through one compound entry called the opening entry.

Opening entry: debit all assets, credit all liabilities, and credit Capital A/c with the difference.

Capital = Total Assets − Total Liabilities

On 1 April 2026, the books of Sharma Stationery Mart show: Cash ₹15,000, Bank ₹60,000, Stock ₹45,000, Furniture ₹30,000, Rakesh (a debtor) ₹10,000 and Sunil (a creditor) ₹20,000. Pass the opening entry.

Total assets = 15,000 + 60,000 + 45,000 + 30,000 + 10,000 = ₹1,60,000
Total liabilities = ₹20,000 (Sunil)
Capital = 1,60,000 − 20,000 = ₹1,40,000

Date	Particulars	Dr (₹)	Cr (₹)
2026 Apr 1	Cash A/c Dr.	15,000
	Bank A/c Dr.	60,000
	Stock A/c Dr.	45,000
	Furniture A/c Dr.	30,000
	Rakesh’s A/c Dr.	10,000
	To Sunil’s A/c		20,000
	To Capital A/c (balancing figure)		1,40,000
	(Being opening balances brought forward)
	Total	1,60,000	1,60,000

On 1 April 2026, a mobile store has: Cash ₹8,000, Bank ₹42,000, Stock ₹30,000, Debtors ₹20,000, Creditors ₹15,000 and a Bank Loan of ₹25,000. What amount will be credited to Capital A/c in the opening entry?

Capital = assets − liabilities. The bank loan is a liability.

Assets = 8,000 + 42,000 + 30,000 + 20,000 = ₹1,00,000. Liabilities = 15,000 + 25,000 = ₹40,000. Capital = 1,00,000 − 40,000 = ₹60,000.

7. Special entries examiners love

These look strange at first, but each one follows the same rules. Learn the logic, not just the entry.

Transaction	Entry	Why
Owner takes goods for home use	Drawings A/c Dr. To Purchases A/c	Capital goes down (drawings); goods bought for sale are reduced
Goods given as charity	Charity A/c Dr. To Purchases A/c	Charity is an expense; goods leave the business
Goods given as free samples	Advertisement A/c Dr. To Purchases A/c	Samples are a way of advertising
Goods destroyed by fire	Loss by Fire A/c Dr. To Purchases A/c	A loss is debited
Owner withdraws cash for personal use	Drawings A/c Dr. To Cash A/c	Capital decreases; cash decreases
A debtor’s amount becomes irrecoverable	Bad Debts A/c Dr. To Debtor’s A/c	Loss ↑; debtor (asset) ↓
Bad debt written off earlier is recovered	Cash A/c Dr. To Bad Debts Recovered A/c	Gain ↑ (the debtor’s account was already closed)
Salary due but not paid (outstanding)	Salaries A/c Dr. To Outstanding Salaries A/c	Expense ↑; liability ↑
Insurance paid in advance (prepaid)	Prepaid Insurance A/c Dr. To Cash A/c	Prepaid expense is an asset
Commission received in advance	Cash A/c Dr. To Commission Received in Advance A/c	Income not yet earned is a liability
Depreciation on machinery	Depreciation A/c Dr. To Machinery A/c	Expense ↑; asset value ↓
Interest on capital allowed to owner	Interest on Capital A/c Dr. To Capital A/c	Expense for business; owner’s capital ↑
Cash paid for installing a new machine	Machinery A/c Dr. To Cash A/c	Installation is part of the asset’s cost

Whenever goods go out of the business without a sale (home use, charity, samples, fire), credit Purchases A/c at cost price, never Sales A/c.

Rohit, who owed ₹5,000 to the business, has become insolvent (unable to pay his debts). His estate pays 60 paise in the rupee in cash. Pass the entry.

“60 paise in the rupee” means ₹0.60 for every ₹1 owed: 5,000 × 0.60 = ₹3,000 received.
The remaining 5,000 − 3,000 = ₹2,000 will never come → Bad Debts.
Rohit’s whole account of ₹5,000 is closed → credit Rohit’s A/c ₹5,000.

Particulars	Dr (₹)	Cr (₹)
Cash A/c Dr.	3,000
Bad Debts A/c Dr.	2,000
To Rohit’s A/c		5,000
(Being 60 paise in the rupee received from Rohit’s estate, balance written off)

Vikas took notebooks costing ₹1,200 from the shop for his children.

Goods left the business, but not through a sale.

Goods taken by the owner = drawings (debit). Goods going out without a sale → credit Purchases at cost.

Particulars	Dr (₹)	Cr (₹)
Drawings A/c Dr.	1,200
To Purchases A/c		1,200
(Being goods taken by proprietor for personal use)

Pens costing ₹3,000 were distributed as free samples to school students.

Why do shops give free samples?

Free samples promote the shop, so they are an advertisement expense. Goods go out without a sale → credit Purchases.

Particulars	Dr (₹)	Cr (₹)
Advertisement A/c Dr.	3,000
To Purchases A/c		3,000
(Being goods distributed as free samples)

8. Play: journal game

Test your speed. For each transaction, choose the debit and credit accounts.

9. Exam tips

A narration is expected for every entry in the board exam; start it with “Being …”.
Write “A/c” after every account name, and “Dr.” on every debit line, also in compound entries.
If the journal runs over pages, show “Total c/f” and “Total b/f”; give a grand total at the end.
Journalising questions usually carry 1 mark per correct entry (the narration is part of it). Neat ruling and indentation matter.

The L.F. column of the journal is filled in:

when the transaction takes place
when the voucher is prepared
when the entry is posted to the ledger
when the trial balance is prepared

L.F. is the ledger page number, so it can be written only when the entry is actually posted to the ledger.

“Sold goods to Nisha ₹5,000.” The correct entry is:

Cash A/c Dr. To Sales A/c
Nisha’s A/c Dr. To Sales A/c
Sales A/c Dr. To Nisha’s A/c
Nisha’s A/c Dr. To Goods A/c

No cash is mentioned, so it is a credit sale. Nisha becomes a debtor (asset ↑, debit) and Sales (revenue ↑) is credited.

📌 Points to remember (Quick Revision)

Journal = book of original entry; transactions are written in date order; recording them is journalising.
Format: Date | Particulars | L.F. | Dr | Cr. Debit line ends with “Dr.”, credit line starts with “To”, then narration. L.F. is filled at posting.
Simple entry = two accounts; compound entry = more than two, but total debits always equal total credits.
Opening entry: debit all assets, credit all liabilities and credit Capital with the difference.
Goods going out without a sale (drawings, charity, samples, fire) are credited to Purchases A/c at cost.
Cash discount is recorded (allowed = expense, received = gain); trade discount is never recorded.

Pressing this saves your progress on this phone/computer.