Journal Entry Definition |  Learn the Basics Journal Entry Idea

Journal Entry Definition | Learn the Basics Journal Entry Idea

Journal Entry Meaning And Basics Idea Which You Can Understand Easily

In bookkeeping or accounting system, business transactions are firstly recorded in a journal. Definition of the journal entry is the foundation of all accounting and financial data. This is the first step of the accounting cycle and takes place of all financial transactions when it’s happening. The bookkeeper or accountant recorded the entries as evidence and each transaction has the same value after transactions which are recorded as debit and credit. This is the first book of accounting where we are recording our daily business transactions and the recording books called journal entry.

On the other hand, the book has another name called day books and books of original entry also. It also assists in an equation and also played important role in an accounting.

Day books are used as the daily basis and the books of original entry are taken first place of transactions from the accounting source documents.

Types of journal:

Types of the journal are referring branches of the journal entry and it also found the different knowledge of accounting and different recording system of accounting in the journal. There are two types of accounting, one is the general journal and another is a special journal. these two types of journal discuss in below;

(1)    General Journal:

In general journal, accounts are the main journal of a business. Most of the business transaction is entered in these journal entries and then this information of the general journal entries is posted in ledger accounts as known as the general ledger accounts. Journal in a spreadsheet and exercise books as manual which has five columns and the structure is as follows;

  • Date of the transactions
  • the accounts and amount that will be the debit column
  • the credit amount and accounts in column
  • summarize the discretion of transactions
  • Numbering of the reference number

These transactions are posted the general ledger accounts after that journalized transactions.

(2)    Special journal:

Special journal entries are posted which entries do not record in general journal entries. The entries are classified by the sub-point of special journal entries because of on accounts transactions and other transactions.

There have 6 types of special journal as following below;

  • Sales Journal
  • Cash Receipts Journal
  • Sales Returns and Allowances
  • Purchases Journal
  • Cash Payments Journal
  • Purchases Returns and Allowances

we can discuss these six types of the journal detailed in as follows;

  • Sales Journals:

Have a look at an example of an entry in general journal entries for sales on credit. Accounts receivable is the head of leader accounts used for sales that not been paid for.

  • Purchase journal:

Purchase journal is the same as sales journal and it’s used to record the purchase items 30 to 60 days. The purchase journal entry example is given below;

Accounts payable is the head of the ledger accounts used for recording purchase on credit have not been paid for.

Journal entry meaning

Journal entries examples:

As for easy understanding, here I give an example with the explanation of its transactions. The demo is the basics journal entries examples helps you figure it out easily how to record the daily transaction in recording book or daily book or journalize the transaction.

We can discuss a month of journal entries example with explanations as it given below;

A company is named X was incorporated on January 1, 2009, with an initial capital of 10,000 shares of common stock having $10 per value. During the first month of its start, the company initialized in following transactions:

DateTransaction
Jan 1An amount of $20,000 was paid as advance rent for two months.
Jan 2Paid $50,000 cash on the purchase of machinery costing $70,000. The remaining amount was recognized as a one year note payable with interest rate of 9%.
Jan 3Purchased supplies for the office costing $16,600 on account.
Jan 9To Provide services to its customers and received $28,000 in cash.
Jan 13Paid the accounts payable on the office supplies purchased on January 3.
Jan 14Paid wages to its employees for first three weeks of January, aggregating $18,100.
Jan 20To provide $50,100 worth of services to its customers. They paid $30,900 and promised to pay the remaining amount.
Jan 22To Receive $15,000 from customers for the services provided on January 20.
Jan 25Received $4,000 as an advance payment from the client.
Jan 26Purchased supplies for the office costing $5,000 on account.
Jan 28Paid wages to its employees for the month of January: $18,100.
Jan 31To Pay $4,000 as dividends.
Jan 31Received electricity bill of $2,000.
Jan 31Received telephone bill of $1,514.
Jan 31Miscellaneous expenses paid during the month totaled $3,575

The following table shows the journal entries for the above transactions.

DateAccountDebitCredit
Jan 1Cash100,000
Common Stock100,000
Jan 1Prepaid Rent20,000
Cash20,000
Jan 2Machinery70,000
Cash50,000
Notes Payable20,000
Jan 3Office Supplies16,600
Accounts Payable16,600
Jan 9Cash28,000
Service Revenue28,000
Jan 13Accounts Payable16,600
Cash16,600
Jan 14Wages Expense18,100
Cash18,100
Jan 20Cash30,900
Accounts Receivable20 ,200
Service Revenue50,100
Jan 22Cash15,000
Accounts Receivable15,000
Jan 25Cash4,000
Unearned Revenue4,000
Jan 26Office Supplies5,000
Accounts Payable5,000
Jan 28Wages Expense18,100
Cash18,100
Jan 31Dividends4,000
Cash4,000
Jan 31Electricity Expense2,000
Utilities Payable2,000
Jan 31Telephone Expense1,514
Utilities Payable1,514
Jan 31Miscellaneous Expense3,575
Cash

3,575

At the end of the accounting period, the journal entries for the period are posted to the ledger accounts and it is the first process of the accounting cycle.

 

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.