Journal entries, with solved examples

The journal is the diary of the business: every transaction, in date order, with its debit, its credit and a line of explanation.

What the journal is

The journal is the book of original entry. A transaction is first recorded here, from its voucher, before it goes anywhere else. Recording in the journal is called journalising. Each record is an entry, and the short explanation under it is the narration.

Format

The journal has five columns: Date, Particulars, Ledger Folio (L.F., the ledger page number, filled in at the time of posting), Debit amount and Credit amount. In the Particulars column the account to be debited is written first with "Dr." at the end of the line. The account to be credited is written on the next line, a little to the right, beginning with "To". The narration follows in brackets. The tables on this page leave out the L.F. column to fit small screens.

Solved example 1: a month at Arjun Traders

Journalise these transactions of April 2026 in the books of Arjun Traders.

April 1: Arjun started business with cash ₹3,00,000.
April 2: Deposited ₹2,00,000 into the bank.
April 4: Bought goods from Nisha & Co. on credit, ₹60,000.
April 6: Bought furniture, paying ₹25,000 by cheque.
April 9: Sold goods for cash, ₹18,000.
April 12: Sold goods on credit to Kabir, ₹40,000.
April 15: Kabir returned goods worth ₹2,000.
April 20: Received ₹37,500 from Kabir in full settlement of his account.
April 24: Paid Nisha & Co. ₹59,000 by cheque in full settlement.
April 28: Withdrew ₹6,000 cash for personal use.
April 30: Paid salaries ₹15,000 and rent ₹8,000 by cheque.

Journal of Arjun Traders
Date	Particulars	Dr. (₹)	Cr. (₹)
Apr 1	Cash A/c Dr.	3,00,000
	To Capital A/c		3,00,000
	(Business started with cash)
Apr 2	Bank A/c Dr.	2,00,000
	To Cash A/c		2,00,000
	(Cash deposited into bank)
Apr 4	Purchases A/c Dr.	60,000
	To Nisha & Co.		60,000
	(Goods bought on credit)
Apr 6	Furniture A/c Dr.	25,000
	To Bank A/c		25,000
	(Furniture bought, paid by cheque)
Apr 9	Cash A/c Dr.	18,000
	To Sales A/c		18,000
	(Goods sold for cash)
Apr 12	Kabir Dr.	40,000
	To Sales A/c		40,000
	(Goods sold on credit)
Apr 15	Sales Return A/c Dr.	2,000
	To Kabir		2,000
	(Goods returned by Kabir)
Apr 20	Cash A/c Dr.	37,500
	Discount Allowed A/c Dr.	500
	To Kabir		38,000
	(Cash received in full settlement; discount allowed)
Apr 24	Nisha & Co. Dr.	60,000
	To Bank A/c		59,000
	To Discount Received A/c		1,000
	(Paid in full settlement; discount received)
Apr 28	Drawings A/c Dr.	6,000
	To Cash A/c		6,000
	(Cash withdrawn for personal use)
Apr 30	Salaries A/c Dr.	15,000
	Rent A/c Dr.	8,000
	To Bank A/c		23,000
	(Salaries and rent paid by cheque)
	Total	7,72,000	7,72,000

Notes on the entries

April 20. Kabir owed ₹40,000 − ₹2,000 returned = ₹38,000. He paid ₹37,500 in full settlement, so ₹500 is cash discount allowed, an expense.
April 24. ₹60,000 was owed and ₹59,000 paid in full settlement, so ₹1,000 is discount received, a gain.
April 20, 24 and 30 are compound entries: more than one debit or more than one credit in a single entry. The totals of the two sides are still equal.
The same journal is posted to the ledger on the ledger posting page and summarised on the trial balance page.

Solved example 2: special entries

These entries appear in almost every examination paper.

Journal: special entries
Date	Particulars	Dr. (₹)	Cr. (₹)
(a)	Bad Debts A/c Dr.	3,000
	To Rohan		3,000
	(Rohan became insolvent; amount due written off)
(b)	Cash A/c Dr.	1,200
	To Bad Debts Recovered A/c		1,200
	(Amount written off earlier now recovered)
(c)	Drawings A/c Dr.	4,000
	To Purchases A/c		4,000
	(Goods taken by the owner for personal use, at cost)
(d)	Advertisement A/c Dr.	2,500
	To Purchases A/c		2,500
	(Goods given away as free samples)
(e)	Loss by Fire A/c Dr.	10,000
	To Purchases A/c		10,000
	(Goods destroyed by fire)
(f)	Charity A/c Dr.	1,500
	To Purchases A/c		1,500
	(Goods given as charity)
(g)	Machinery A/c Dr.	5,000
	To Cash A/c		5,000
	(Wages paid for installing a new machine, added to its cost)
(h)	Depreciation A/c Dr.	12,000
	To Machinery A/c		12,000
	(Depreciation charged on machinery)
(i)	Rent A/c Dr.	8,000
	To Outstanding Rent A/c		8,000
	(Rent for March due but not paid)
(j)	Prepaid Insurance A/c Dr.	3,000
	To Insurance A/c		3,000
	(Insurance paid in advance for next year)
	Total	50,200	50,200

Why these are so

(b) Bad debts recovered are credited to a gain account, not to the debtor. His account was closed when the debt was written off.
(c) to (f) When goods leave the business other than by sale, Purchases A/c is credited, because the goods will no longer be sold. They leave at cost.
(g) Any expense needed to bring an asset into working condition, such as freight and installation, is added to the cost of the asset.
(i) and (j) are adjustment entries, explained on the page on adjustments.

Opening entry

At the start of a new year the balances of assets and liabilities are brought into the new books by one entry. All assets are debited, all liabilities are credited, and the difference is the capital.

Opening entry
Date	Particulars	Dr. (₹)	Cr. (₹)
Apr 1	Cash A/c Dr.	20,000
	Bank A/c Dr.	80,000
	Stock A/c Dr.	60,000
	Debtors A/c Dr.	40,000
	Furniture A/c Dr.	50,000
	To Creditors A/c		30,000
	To Bank Loan A/c		70,000
	To Capital A/c		1,50,000
	(Balances brought forward from last year)

Capital = total assets ₹2,50,000 − outside liabilities ₹1,00,000 = ₹1,50,000.

Trade discount and cash discount

Goods with a list price of ₹50,000 are sold at 10% trade discount. The sale is recorded at ₹45,000; trade discount gets no entry of its own. If the buyer then pays within the agreed time and is allowed 2% cash discount, he pays ₹44,100 and ₹900 is debited to Discount Allowed A/c.

For entries with tax, see GST journal entries.

Questions students ask

What is a compound journal entry?

An entry with more than one debit, more than one credit, or both. The total of the debits still equals the total of the credits.

Is trade discount recorded in the journal?

No. The transaction is recorded at the net amount after trade discount. Only cash discount is recorded, as Discount Allowed or Discount Received.

What is narration?

A short explanation written in brackets below each journal entry, saying what the transaction was.