Session 7 - Rules Regarding Journal Entries

Practice/Practical/Practicum Session Plan : Rules Regarding Journal Entries

Introduction (5 min): Explain the need for journal entries and the double-entry system.

Golden Rules of Accounting (15 min): Discuss Personal, Real, and Nominal accounts with rules.

Examples & Practice (10 min): Illustrate rules with sample transactions (cash sales, rent, salary, credit purchases).

Common Mistakes (5 min): Highlight typical errors in applying debit/credit rules.

Recap & Q/A (10 min): Summarize rules and engage students with practice questions.

Instruction for Practice/Practical/Practicum : (PDF, PPT)

Rules_Regarding_Journal_Entries.pptx 

Practice Material (IV Quadrant Approach)

(Q1) : Practice Questions/Problems (PDF Formats)

(Q1) : Practice Questions/Problems (PDF Formats)

 Rules for Journal Entries

 1. Double-Entry System

• Every transaction affects at least two accounts.

• One account is debited, and another is credited.

• The total of debit and credit must be equal.

 2. Golden Rules of Accounting

These rules are based on the type of account involved in the transaction:

Type of Account Rule for Debit Rule for Credit Example

Personal Debit the receiver Credit the giver Paid ₹5,000 to Ram: Ram A/C Dr. To Cash A/C

Real Debit what comes in Credit what goes out Bought furniture for cash: Furniture A/C Dr. To Cash A/C

Nominal Debit expenses/losses Credit incomes/gains Paid rent ₹2,000: Rent A/C Dr. To Cash A/C

3. Format of a Journal Entry

Date      Particulars                         Debit (₹) Credit (₹)

-----------------------------------------------------------------------

           [Account to be Debited]     Dr.  XXXX

                To [Account to be Credited]              XXXX

           (Brief narration of the transaction)

 4. Chronological Order

• Journal entries must be recorded in the order in which transactions occur.

5. Narration

• A brief description of the transaction (narration) must be written after each journal entry.

6. No Entry Without Evidence

• Each journal entry should be based on documentary proof like bills, invoices, receipts, etc.

7. Balanced Entry

• The total of debit amounts must equal total of credit amounts in every journal entry.

Example Entry

Transaction: On July 23, 2025, paid ₹1,000 for electricity bill.

July 23    Electricity Expenses A/C     Dr.   ₹1,000 

               To Cash A/C                            ₹1,000 

           (Being electricity bill paid in cash)

Journal entries are fundamental to the accounting process. They are the first step in the recording of financial transactions. Here are the key rules and principles that govern journal entries:

Basic Rules of Journal Entries

1. Double-Entry System

• Every transaction affects at least two accounts.

• One account is debited and another is credited.

• Total debits must always equal total credits.

Components of a Journal Entry

1. Date of transaction

2. Accounts involved (with appropriate debits/credits)

3. Amounts debited and credited

4. Brief narration (explaining the transaction)

5. Reference or voucher number (if applicable)

General Rules & Best Practices

• Use chronological order to record transactions.

• Avoid backdating entries unless allowed for corrections.

• Each entry should be supported by proper documentation (invoice, receipt, etc.).

• Do not use abbreviations or unclear account names.

• Adjusting, closing, and reversing entries may be needed at the period end.

Example of a Simple Journal Entry

Transaction: Bought office supplies for $500 cash.

Date: July 23, 2025

Office Supplies A/C     Dr.   $500 

  To Cash A/C                 $500 

(Being office supplies purchased for cash)

(Q2) : Video Based Content (Youtube): www.youtube.com/watch?v=-EfaH-hBnn0 

(Q3) : Formative Assessment (Google Form/Any Other Online Quiz Platform): forms.fillout.com/t/4bM2xV2NCxus 

R.L. Gupta & V.K. Gupta – Financial Accounting, Sultan Chand & Sons, New Delhi.

S.P. Jain & K.L. Narang – Financial Accounting, Kalyani Publishers, New Delhi.

T.S. Reddy & Y. Hari Prasad Reddy – Financial Accounting, Margham Publications, Chennai.

P.C. Tulsian – Financial Accounting, S. Chand Publications, New Delhi.

Thothadri & Nafeesa – Financial Accounting, Vijay Nicole Imprints Pvt. Ltd., Chennai.