Detailed Journal Entries
with Golden Rules &
Modern Approach
A comprehensive practical guide to 30 essential journal entries — from business commencement to year-end closings, explained with the double-entry system.
📖What is a Journal Entry?
A journal entry is the initial record of a financial transaction in an accounting system. Every entry follows the double-entry bookkeeping system — meaning each transaction affects at least two accounts, with Debits (Dr.) always equalling Credits (Cr.).
This ensures the fundamental Accounting Equation remains balanced:
🏆The Golden Rules of Accounting
The traditional approach classifies accounts into three types, each with its own debit/credit rule:
Personal Account
Real Account
Nominal Account
📋30 Journal Entries — All Categories
| # | Particulars | Dr/Cr | Amount (₹) | Narration |
|---|---|---|---|---|
| Entry 1 | Cash / Bank A/c Capital A/c |
DR CR |
5,00,000 |
Business started; owner invests ₹5,00,000 |
| Entry 2 | Purchase A/c Cash A/c |
DR CR |
— | Cash purchase of goods ₹10,000 |
| Entry 3 | Purchase A/c Creditors A/c (Ramesh & Co.) |
DR CR |
— | Credit purchase from Ramesh & Co. |
| Entry 4 | Cash A/c Sales A/c |
DR CR |
— | Cash sales of goods ₹15,000 |
| Entry 5 | Debtors A/c (Shyam) Sales A/c |
DR CR |
— | Credit sales to Shyam |
| Entry 6 | Creditors A/c Cash / Bank A/c |
DR CR |
— | Paid ₹5,000 to Ramesh & Co. |
| Entry 7 | Cash / Bank A/c Debtors A/c (Shyam) |
DR CR |
— | Received ₹8,000 from Shyam |
| # | Particulars | Dr/Cr | Narration |
|---|---|---|---|
| Entry 8 | Rent A/c Cash / Bank A/c | DR CR | Rent paid ₹10,000 for office |
| Entry 9 | Salary A/c Cash / Bank A/c | DR CR | Salary paid ₹20,000 to staff |
| Entry 10 | Bank A/c Commission Received A/c | DR CR | Commission ₹2,000 received |
| Entry 11 | Electricity Expenses A/c Bank A/c | DR CR | Electricity bill ₹3,000 paid |
| Entry 12 | Bank A/c Interest Income A/c | DR CR | Interest ₹1,500 credited by bank |
| # | Particulars | Dr/Cr | Narration |
|---|---|---|---|
| Entry 13 | Bank A/c Cash A/c | DR CR | Cash deposited to bank ₹10,000 |
| Entry 14 | Cash A/c Bank A/c | DR CR | Withdrew ₹5,000 from bank for office use |
| Entry 15 | Bank Charges A/c Bank A/c | DR CR | Bank charges of ₹200 deducted |
| Entry 16 | Bank A/c Debtors A/c | DR CR | Received ₹7,000 cheque from customer |
| # | Particulars | Dr/Cr | Narration |
|---|---|---|---|
| Entry 17 | Furniture A/c Cash / Bank A/c | DR CR | Bought furniture ₹25,000 |
| Entry 18 | Depreciation A/c Furniture A/c | DR CR | Depreciation ₹2,500 on furniture (10%) |
| Entry 19 | Drawings A/c Cash / Bank A/c | DR CR | Owner withdrew ₹3,000 for personal use |
| Entry 20 | Drawings A/c Purchase A/c | DR CR | Goods worth ₹1,000 used by owner personally |
| # | Particulars | Dr/Cr | Narration |
|---|---|---|---|
| Entry 21 | Bank A/c Loan A/c (SBI) | DR CR | Loan of ₹50,000 taken from SBI |
| Entry 22 | Interest A/c Bank A/c | DR CR | Interest ₹5,000 paid on loan |
| Entry 23 | Closing Stock A/c Trading A/c | DR CR | Closing stock ₹30,000 recorded at year-end |
| Entry 24 | Trading A/c Opening Stock A/c | DR CR | Opening stock ₹40,000 transferred to Trading A/c |
| # | Particulars | Dr/Cr | Narration |
|---|---|---|---|
| Entry 25 | Salary A/c Outstanding Expenses A/c | DR CR | Salary outstanding ₹5,000 (incurred, not paid) |
| Entry 26 | Prepaid Expenses A/c Insurance A/c | DR CR | Prepaid insurance ₹2,000 (paid in advance) |
| Entry 27 | Accrued Income A/c Interest Income A/c | DR CR | Interest ₹1,000 accrued (earned, not received) |
| Entry 28 | P&L A/c Provision for Bad Debts A/c | DR CR | Bad debt provision of ₹3,000 created |
| # | Particulars | Dr/Cr | Narration |
|---|---|---|---|
| Entry 29 | P&L A/c Capital A/c | DR CR | Net profit ₹10,000 transferred to Capital A/c |
| Entry 30 | Capital A/c Drawings A/c | DR CR | Drawings ₹3,000 adjusted against Capital A/c |
❓Frequently Asked Questions
🧠Test Your Knowledge — Quick Quiz
Keep practising!
📚Key Terms Glossary
Double Entry System
Every transaction affects ≥2 accounts; debits always equal credits.
Capital A/c
Owner’s equity account representing investment in the business.
Debtors A/c
Asset account — amounts owed to business by customers on credit.
Creditors A/c
Liability account — amounts owed by business to suppliers.
Depreciation
Systematic reduction of an asset’s value over its useful life.
Drawings A/c
Withdrawals of cash or goods by owner for personal use.
Outstanding Expenses
Expenses incurred but not yet paid at period end (current liability).
Prepaid Expenses
Expenses paid in advance for a future period (current asset).
Accrued Income
Income earned but not yet received in cash (current asset).
Provision for Bad Debts
Estimated amount of receivables likely uncollectable.
Trading A/c
Account to calculate gross profit by matching COGS vs. Sales.
Closing Stock
Value of unsold goods at the end of the accounting period.
Detailed Journal Entries
with Golden Rules &
Modern Approach
A comprehensive practical guide to 30 essential journal entries — from business commencement to year-end closings, explained with the double-entry system.
📖What is a Journal Entry?
A journal entry is the initial record of a financial transaction in an accounting system. Every entry follows the double-entry bookkeeping system — meaning each transaction affects at least two accounts, with Debits (Dr.) always equalling Credits (Cr.).
This ensures the fundamental Accounting Equation remains balanced:
🏆The Golden Rules of Accounting
The traditional approach classifies accounts into three types, each with its own debit/credit rule:
Personal Account
Real Account
Nominal Account
📋Journal Entries — All Categories
| # | Particulars | Dr/Cr | Amount (₹) | Narration |
|---|---|---|---|---|
| Entry 1 | Cash / Bank A/c Capital A/c |
DR CR |
5,00,000 | Business started; owner invests ₹5,00,000 |
| Entry 2 | Purchase A/c Cash A/c |
DR CR |
— | Cash purchase of goods ₹10,000 |
| Entry 3 | Purchase A/c Creditors A/c (Ramesh & Co.) |
DR CR |
— | Credit purchase from Ramesh & Co. |
| Entry 4 | Cash A/c Sales A/c |
DR CR |
— | Cash sales of goods ₹15,000 |
| Entry 5 | Debtors A/c (Shyam) Sales A/c |
DR CR |
— | Credit sales to Shyam |
| Entry 6 | Creditors A/c Cash / Bank A/c |
DR CR |
— | Paid ₹5,000 to Ramesh & Co. |
| Entry 7 | Cash / Bank A/c Debtors A/c (Shyam) |
DR CR |
— | Received ₹8,000 from Shyam |
| # | Particulars | Dr/Cr | Narration |
|---|---|---|---|
| Entry 8 | Rent A/c Cash / Bank A/c | DR CR | Rent paid ₹10,000 for office |
| Entry 9 | Salary A/c Cash / Bank A/c | DR CR | Salary paid ₹20,000 to staff |
| Entry 10 | Bank A/c Commission Received A/c | DR CR | Commission ₹2,000 received |
| Entry 11 | Electricity Expenses A/c Bank A/c | DR CR | Electricity bill ₹3,000 paid |
| Entry 12 | Bank A/c Interest Income A/c | DR CR | Interest ₹1,500 credited by bank |
| # | Particulars | Dr/Cr | Narration |
|---|---|---|---|
| Entry 13 | Bank A/c Cash A/c | DR CR | Cash deposited to bank ₹10,000 |
| Entry 14 | Cash A/c Bank A/c | DR CR | Withdrew ₹5,000 from bank for office use |
| Entry 15 | Bank Charges A/c Bank A/c | DR CR | Bank charges of ₹200 deducted |
| Entry 16 | Bank A/c Debtors A/c | DR CR | Received ₹7,000 cheque from customer |
| # | Particulars | Dr/Cr | Narration |
|---|---|---|---|
| Entry 17 | Furniture A/c Cash / Bank A/c | DR CR | Bought furniture ₹25,000 |
| Entry 18 | Depreciation A/c Furniture A/c | DR CR | Depreciation ₹2,500 on furniture (10%) |
| Entry 19 | Drawings A/c Cash / Bank A/c | DR CR | Owner withdrew ₹3,000 for personal use |
| Entry 20 | Drawings A/c Purchase A/c | DR CR | Goods worth ₹1,000 used by owner personally |
| # | Particulars | Dr/Cr | Narration |
|---|---|---|---|
| Entry 21 | Bank A/c Loan A/c (SBI) | DR CR | Loan of ₹50,000 taken from SBI |
| Entry 22 | Interest A/c Bank A/c | DR CR | Interest ₹5,000 paid on loan |
| Entry 23 | Closing Stock A/c Trading A/c | DR CR | Closing stock ₹30,000 recorded at year-end |
| Entry 24 | Trading A/c Opening Stock A/c | DR CR | Opening stock ₹40,000 transferred to Trading A/c |
Prepaid Expenses (Unexpired Expenses)
Expenses paid in advance, i.e., expenses that are paid in the current year but actually relate to the next year or future period. These are called Prepaid Expenses or Unexpired Expenses.
(benefit yet to be received)
Debit Prepaid Expenses A/c
On 1st October, 2024, a business paid ₹18,000 as insurance premium for a period of 12 months. Final accounts are prepared on 31st March, 2025. It means advance payment has been made for the period 1st April, 2025 to 30th September, 2025 (i.e., 6 months) for the next year. Since it should be recorded in the books for the year ended 31st March, 2025 as prepaid expenses:
| # | Particulars | Dr/Cr | Amount (₹) | Narration |
|---|---|---|---|---|
| Entry 25 ORIGINAL |
Insurance Premium A/c Cash / Bank A/c |
DR CR |
18,000 18,000 |
Insurance premium of ₹18,000 paid for 12 months (Oct 2024 – Sep 2025) |
| Entry 26 ADJUSTMENT |
Prepaid Insurance A/c Insurance Premium A/c |
DR CR |
9,000 9,000 |
Insurance premium paid in advance for 6 months (Oct 2024 – Mar 2025); prepaid portion ₹9,000 transferred to next year |
Outstanding Expenses
Expenses incurred but not yet paid during the current accounting period. They are a current liability as the payment is still due.
| # | Particulars | Dr/Cr | Amount (₹) | Narration |
|---|---|---|---|---|
| Entry 27 | Salary A/c Outstanding Salary A/c |
DR CR |
8,000 8,000 |
Salary of ₹8,000 due but not paid at year-end (outstanding liability) |
Income Received in Advance (Unearned Income)
Income received but not yet earned, i.e., received against which sale of goods or services is yet to be made. This is called Income Received in Advance or Unearned Income. It is a liability for the firm — an increase in liability is credited.
(service yet to be rendered)
Credit Income Received in Advance A/c
A building has been given on rent for ₹3,60,000 p.a. During the year ₹4,20,000 was received towards building rent. Thus ₹60,000 (₹4,20,000 − ₹3,60,000) is the income (rent) received in advance for the next period. It is adjusted in final accounts by passing the following entry:
| # | Particulars | Dr/Cr | Amount (₹) | Narration |
|---|---|---|---|---|
| Entry 28 ORIGINAL |
Cash / Bank A/c Rent Received A/c |
DR CR |
4,20,000 4,20,000 |
Total rent of ₹4,20,000 received in cash/bank during the year (includes advance portion) |
| Entry 29 ADJUSTMENT |
Rent Received A/c Rent Received in Advance A/c |
DR CR |
60,000 60,000 |
Rent received in advance ₹60,000 transferred; service for next period yet to be rendered |
| # | Particulars | Dr/Cr | Amount (₹) | Narration |
|---|---|---|---|---|
| Entry 30 | Accrued Interest A/c Interest Income A/c |
DR CR |
2,500 2,500 |
Interest ₹2,500 earned but not yet received (accrued income — current asset) |
| Entry 31 | P&L A/c Provision for Bad Debts A/c |
DR CR |
4,000 4,000 |
Provision created for estimated bad debts of ₹4,000 on outstanding debtors |
| # | Particulars | Dr/Cr | Narration |
|---|---|---|---|
| Entry 32 | P&L A/c Capital A/c | DR CR | Net profit ₹10,000 transferred to Capital A/c |
| Entry 33 | Capital A/c Drawings A/c | DR CR | Drawings ₹3,000 adjusted against Capital A/c |
❓Frequently Asked Questions
🧠Test Your Knowledge — Quick Quiz
Keep practising!
📚Key Terms Glossary
Double Entry System
Every transaction affects ≥2 accounts; debits always equal credits.
Capital A/c
Owner's equity account representing investment in the business.
Debtors A/c
Asset account — amounts owed to business by customers on credit.
Creditors A/c
Liability account — amounts owed by business to suppliers.
Depreciation
Systematic reduction of an asset's value over its useful life.
Drawings A/c
Withdrawals of cash or goods by owner for personal use.
Outstanding Expenses
Expenses incurred but not yet paid at period end (current liability).
Prepaid Expenses
Expenses paid in advance for a future period (current asset).
Accrued Income
Income earned but not yet received in cash (current asset).
Provision for Bad Debts
Estimated amount of receivables likely uncollectable.
Trading A/c
Account to calculate gross profit by matching COGS vs. Sales.
Closing Stock
Value of unsold goods at the end of the accounting period.