A Compound Journal Entry Is

What Is Journal in Accounting?

Journal is the first bookkeeping book in which financial transactions of a business are entered for the first time. Therefore, journal is popularly known as the book of original entry.

In other words, journal is a daily accounting tape in which all financial transactions of a business are recorded in a chronological club. It records both debit and credit aspects of financial transactions and provides a brief clarification of each entry called narration.

Table of Contents

1 What Is Journal in Accounting?
ii What is Journalising?
- two.1 Journalising Example
  - 2.1.one Journal (No. ane)
  - 2.1.2 Journal (No. 2)
3 Types of Journal Entry
- three.1 Unproblematic Entries
- 3.2 Compound Entries
- 3.iii Opening Entries
- 3.4 Transfer Entries
- 3.5 Closing Entries
- iii.vi Adjustment Entries
- iii.seven Rectifying Entries
4 Compound Journal Entry
v Open Journal Entry

Organisations prepare journal because there are then many transactions which might issue in the omission of any transactions due to negligence or some other reason. Journal helps in recognising the date of a transaction when required; thereby laying a foundation for preparing ledger. The transactions mentioned in the periodical are transferred to ledger.

Following are the functions of periodical:

Journal helps in maintaining chronological records of monetary transactions
Journal uses the double-entry organisation of book keeping
Journal enables an organisation to maintain permanent record of each financial transaction at ane place.

The format of periodical is given as follows:

Date	Particulars	Ledger Folio (L.F.)	Amount (Debit)	Amount (Credit)

Permit us understand the format in item

Date: The date on which the transaction was made
Particulars: The financial transactions of a business bear on two accounts, i.due east., Debit (Dr.) account and Credit (Cr.) account. The name of the account to exist debited is entered in the first line and Dr is written towards the right side in the Particulars column.
In the adjacent line, the name of other afflicted account is entered with the word 'To'. After the details of the debit and credit accounts, a narration or the brief description of the transaction is provided.
Ledger Folio (L.F.): This column mentions the page number or folio number of the ledger account where debit and credit accounts are posted.
For example, if we make a posting in the machinery account that is prepared at page 30 of the ledger, nosotros shall write xxx in the LF cavalcade against the Machinery account in the journal.
Corporeality debit (Dr.): The corporeality of the account being debited is written nether this cavalcade. In simple words, it records the debit corporeality.
Amount credit (Cr.): The amount of the account beingness credited is written under this column. In simple words, it records the credit corporeality

What is Journalising?

Equally mentioned earlier, a journal entry is the bones record of business concern transactions. It becomes easy to journalise business organisation transactions if one is aware of debit and credit rules. You have already studied debit and credit rules in other post.

Co-ordinate to these rules, when we journalise a transaction, one business relationship receives the benefits and another account gives the benefits. The process of recording a transaction in a journal is known every bit journalising.

The post-obit are the steps in the journalising process:

Ascertaining that the accounts are affected past the transaction.
Ascertaining the nature of the business relationship which is affected.
Determining the account to be debited and the business relationship to exist credited by applying the rules of debit and credit.
Identifying the corporeality past which the accounts are to be debited and credited.
Recording the appointment and calendar month of the transaction in the date column and the year at the top.
Recording in the "Particulars" column the name of the account to be debited. Along with the name of the business relationship, the abridgement "Dr." as well should be written in the same line against the name of the account. Write the amount to be debited in the debit amount cavalcade.
Recording in the "Particulars" column the name of the account to be credited. The name of the business relationship to exist credited should be written in the next line preceded by the word "To". The word "To" is written towards the right after leaving a few spaces. Write the corporeality to be credited in the credit corporeality column.
Recording a brief description of the transaction starting from the next line in the "Particulars" cavalcade. This brief description of the transaction is termed equally narration.
Drawing a line across the "Particulars" column to separate one periodical entry from the other.

Journalising Example

Case 1: A new business firm issues 1,000 shares of mutual stock on Jan six, 2019, and receives ₹ 7,50,000 cash. for this transaction, the journal entry steps are every bit follows:

Step 1: the firm raises capital by issuing shares of its stock on Jan 6, 2019

Accounts Affected:

Assets – cash is increased.

share capital letter common stock is increased

Step 2: The periodical entry would be as follows:

cash ₹7,50,000

common stock ₹7,50,000

Periodical (No. 1)

Date	Particulars	Ledger Folio (Fifty.F.)	Amount (Debit)	Amount (Credit)
Jan vi, 2019	Greenbacks a/c …………….. Dr.		7, 50,000
Jan six, 2019	to common stock (Being 1000 shares issued)			7, 50,000

Instance 2: The business firm pays salaries of ₹ 1,00,000 to its employees on January 31, 2019. the periodical entry steps are every bit follows:

Step 1: salaries stand for an expense of the accounting menses. the matching concept requires expenses to be recorded in the period they are incurred to generate revenue.

Accounts Affected:

salary Expenses a/c Expense is increased

avails cash is decreased

Footstep 2: the journal entry would be as follows:

salaries Expense ₹ 1,00,000

cash ₹ 1,00,000

Journal (No. 2)

Date	Particulars	Ledger Folio (50.F.)	Corporeality (Debit)	Amount (Credit)
Jan 31, 2013	Salary A/C…………….. Dr.		i, 00,000
Jan 31, 2013	to cash a/c (being salary paid)			1, 00,000

Therefore, each journal entry follows a two-stride process of balancing every transaction for its debit and credit upshot on the financial position of an organisation.

Types of Journal Entry

As mentioned earlier, a journal entry is a record of business organization transactions in the books of accounts of a business. A properly documented journal entry consists of the correct appointment, amounts to be debited and credited, description of the transaction and a unique reference number.

There are vii types of periodical entries that are used to record fiscal transactions of concern. The journal entries are equally follows:

Elementary Entries
Compound Entries
Opening Entries
Transfer Entries
Closing Entries
Adjustment Entries
Rectifying Entries

Simple Entries

Financial transactions or entries that affect two accounts are chosen simple entries. In these entries, one account is debited and the other is credited. Allow us sympathize a uncomplicated entry with the help of an instance.

Example: ABC enterprise sold goods worth ₹1,00,000 for cash. The entries will be:

Cash A/c	Dr. ane,00,000
To Sales A/c (Being appurtenances sold for cash)		1,00,000

Compound Entries

Financial transactions that touch more two accounts at the aforementioned time are chosen compound entries. In these entries, more than than two accounts are debited or credited.

Example: Sukhami Traders paid salaries of ₹60,000 and rent of ₹fifteen,000, the entries will be

Salary A/c	Dr. 60,000
Rent A/c	Dr. 15,000
To Cash A/c (Beingness salary and rent paid)		75,000

Opening Entries

These are the journal entries that tape the balances (avails and liabilities) appeared in the previous accounting menstruation.

Instance: A concern has been operating since by two years. It used to maintain its accounting records using the single-entry system. The opening assets and opening liabilities of the business concern are as follows:

Assets:

Cash ₹700
Inventory ₹1,900
Accounts receivable ₹4,500
Property ₹1,00,000
Constitute and equipment ₹20,000

‰ Liabilities:

Accounts payable ₹3,000
Loan ₹threescore,000

Here, the equity of the business organization can be adamant using the bookkeeping equation as:

Avails = Liabilities + Equity

₹700 + ane,900 + ₹4,500+ ₹1,00,000 + ₹20,000 = ₹3,000 + ₹60,000 + Equity ‰

Disinterestedness = ₹1,27,100 – ₹63,000 = ₹64,100

For this business concern, the opening entry will be passed as:

Cash	Dr. 700
Inventory	Dr. 15,000
Accounts Receivable	Dr. 4500
Property	Dr. 1,00,000
Plant and Equipment	Dr. xx,000
To Accounts payable A/c		3,000
To Loan A/c		60,000
To Equity A/c		64,100

Transfer Entries

These are those journal entries that help in transferring the amount of the account to another business relationship when incorrect booking has been made in respect of any account. Transfer entries can also be done in sure other circumstances.

For example, when goods purchased for resale are used past the proprietor for office purpose. X Furniture mart used furniture of 2,00,000 for furnishing his part.

Instance: Furniture purchased by Suhani for ₹thirty,000 and machinery for ₹xx,000. The accountant recorded the total corporeality of ₹50,000 to the furniture business relationship. Laissez passer the journal entry for transferring the amount of the machinery to machinery A/c.

Machinery A/c	Dr. 20,000
To Furniture A/c (Transferred the overwritten amount to machinery account)		20,000

Closing Entries

These entries assist in transferring the closed balances of revenues and expenses to the Statement of Profit & Loss.

Case 7: Laissez passer the journal entry for the balance of Sales Account ₹lx,000.

Bacon A/c	Dr. 60,000
To Trading A/c (Sales amount transferred to Trading account)		60,000

Adjustment Entries

These are periodical entries which help in recording the truthful value of assets and liabilities and help in matching the revenues with the expenses.

Instance 8: Pass the journal entry in the book of Sahnaz Traders for closing stocks worth ₹l,600 for the year catastrophe 31st March 2020.

Stock A/c	Dr. 50,600
To Statement of Profit & Loss A/c (Closing stock incorporated in P&L account)		50,600

Rectifying Entries

these are the periodical entries which are passed for making rectification in the books of original entries or in ledger.

Instance 9: the corporeality of ₹600 paid to Deepak was recorded in the account of sachin. Pass the rectification entry.

Deepak	Dr. 600
To Sachin (Rectified the corporeality that was paid to Deepak but debited in the account of sachin)		600

Compound Journal Entry

compound entries are those entries which affect more than two air-conditioning- counts on the aforementioned date. thus, an accountant passes one entry instead of passing split up entries for all such transactions. such journal entries tin be passed in the following manner:

By crediting two or more accounts and debiting ane account
By crediting one account and debiting two or more than 2 accounts
By crediting and debiting two or more accounts like in case of opening entry let us understand with compound periodical entries with the aid of an case.

Open Journal Entry

Every organization begins its new books in the starting of each financial year. Since the closing balances of the previous year have to be carried forward to the next year; the first periodical entry in each year'southward journal will be to record the last yr's closing balances of all the assets and liabilities. It is known as the opening entry considering it is the beginning entry.

In the opening entry, all avails accounts are debited and the liabilities and capital account are credited. If the balance of the capital account is non mentioned or given, it can be calculated past subtracting total liabilities from the full of assets.

In case, the total of liabilities exceeds the full of assets, the deviation will be considered as the goodwill amount and the same will be debited in the opening entry.

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