Compound journal entry:

Compound journal entry:-

    When two or more transaction of the same nature take place on the same date, a compound or combined journal entry may be passed for them instead of passing separate entry for each transaction. Thus total number of book keeping entries may be reduced.

                In a compound journal entry, there may be:

One account to be debited and two or more accounts to be credited. For example, if

X pays to his creditor, Z Rs. 5,000 and Z allows X a discount of Rs.500, than compound journal entry will be passed as follows:

 

   Z’s account                                         Dr.                          Rs. 5000

          To Cash a/c                                         Cr.                         Rs. 4,500

          To Discount a/c                                    Cr.                         Rs.    500

                         ( Being payment of cash to Mr. Z, discount received Rs. 500) 

Journal - L02

Journal 

Meaning : A journal is a book of original entry wherein transactions are first recorded. The journal is the chronological record of the transactions of a business. It is a book of original entry wherein transactions are recorded chronological , showing the date for each, amounts to be debited and credited and an explanation. 

The Ruling of journal

Journal

Date (a)	Particulars (b)	L.F ©	Debit (d)	Credit (e)
	(f) Narration

Recording in Journal

Transaction 1.   Raja started business with Rs. 4,00,000 and this amount he brought in cash.

(i) The two accounts being affected in this transaction are: 

   (a) cash account (asset) and (b) Owner equity  - Raja's capital account

(ii) Cash account is a real account, The relevant rule of double entry for real account is "Debit what comes in and credit what goes out." In other words, increase in asset is debited to the relevant asset account. Here case will be debited.


(iii) Raj's capital account is a personal account. the relevant rule of double entry for personal accounts being "Debit the receiver and credit the giver". Raja. Raja has given the cash sum of Rs. 4,00,000 to business. so his account should be credit. In other words. increases in personal account are always credited.

Date (a)	Particulars (b)	L.F ©	Debit (d)	Credit (e)
	Cash                                        Dr.                       To Raja 's capital a/c ( Being money invested in the business )		4,00,000	4,00,000

                                                                                                                                                                                     

Transaction 2.   Business purchased for cash furniture of Rs. 20,0000.


(i) The two accounts being affected are (a) furniture, and (b) cash.


(ii) Both of these are real accounts.


(iii) The rule for real accounts is "debit what comes in or incoming and credit what goes out or outgoings"


The journal entry will be as under:

Furniture                                              Dr.                                     Rs.20,000               To cash                                                                                                  Rs. 20,000 (being furniture purchased for cash)

Transaction 3. Business paid rent Rs. 5,000.

(i) The two accounts being affected are expense (rent) and cash

(ii) Rent is nominal account while cash is real account

(iii) The rule for nominal account is " Debit all expenses or losses and credit all incomes or gains. The rule
for real account is "debit what comes in and credit what goes out"

Rent…                                            Dr.                                             Rs.5,000         To cash                                                                                                                    Rs. 5,000 (being rent for the month of…… paid in cahs)

Transaction 4. Business received interest Rs. 3,000.

This transaction increases assets (cash) and revenue (interest) both.The increase in assets is debited 

and that revenue is credited. 

Cash….                                            Dr.                                       Rs.3,000         To Interest                                                                                                Rs. 3,000 (being interest received in cash)

Transaction 5. Business paid its creditor Rs. 10,000

This transaction reduces the amounts of liability ( creditor) and asset ( cash ) both. The reduction in a liability

is debited and that in asset is credited.

Creditor                                            Dr.                                         Rs.10,000         To Cash                                                                                               Rs. 10,000 (being the amount paid)

Illustration 1. Enter the following transaction in the journal of Raj for the month of July 1999.

     

Learning Accountancy -L 01

Classification of Accounts 

The transactions of a business can be classified into the following three categories:

1. Transactions relating to persons or individuals
2. Transactions relating to property, assets or possessions, and
3. Transactions relating to incomes and expenses.

corresponding to the above three categories of transactions, the following three classes of accounts are maintained for recording the transactions of a business:

1. Personal accounts,
2. Real accounts
3. Nominal accounts.

• Personal accounts

         Personal accounts can take the following forms:

(I) Natural persons, accounts ( like Raja's a/c, Haja's a/c Naresh's a/c)

(II) Artificial persons accounts ( Bank account, insurance company a/c, any club a/c and limited company a/c )

(III) Representative personal Accounts 

When an accounts represents a certain person or persons, it is called a representative personal account.

(like rent prepaid , interest received in advance , unexpired insurance)

• Real account

    Property or real accounts record dealings in or with property, assets or possessions. The real accounts represent items which are more or less permanent.

(I) Tangible real account: ( like : furniture, plant, machinery, stock and cash)

(2) Intangible real account: ( like: Good will , Trade marks , Patent rights.)

• Nominal accounts:

Nominal record a trade's expenses or gains. They are the accounts which are in name only. They are simply used to define the nature of transactions. This will be clear from one example. If in a factory the manager gets salary, the commission agent gets commission, the worker gets wages, the carrier of goods gets carriage, the lender of money gets interest on money, in fact the all get cash ( like rent, interest, discount, carriage,.etc.,)

Rules of double entry / Rules of debit and credit

1. Personal account : 

         Debit the receiver , credit the giver.
       

    2.   Real  account:

       Debit  what comes in , credit  what goes out.

   3.  Nominal account:

     Debit  all losses and expenses , credit  all gains and incomes