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Journal entries are an important part of accountancy. A journal entry, into accounting, is the logging of a transaction in accounting journal items. The journal entry can consist of several recordings, each of which is either a debit or a credit. The total of the debits must equal the total of the credits or the journal entry is said to be "unbalanced". Journal entries can record unique items or recurring items such as depreciation or bond amortization. In accounting software, journal entries are usually entered using a separate module from accounts payable, which typically has its own subledger that indirectly affects the general ledger. As a result, journal entries directly change the account balances on the general ledger.
In order to record journal entries, one needs to have knowledge about:
- Type of Accounts
- Golden Rules of Accounting
- Experience of Working
Type of accounts
There are three types of accounts in accounting:
- Personal account
- Real account
- Nominal account
Personal accounts consist of all those accounts which are related to a person, business, firm etc. There are also subtypes of personal account:
- Natural Personal Any person like Mohan Account, Ram account etc.
- Artificial Personal Any company or group of people like Microsoft account, Hindustan Petroleum account etc
- Representative Personal this type of Personal a/c represents owner like. Capital a/c, drawings a/c etc
Dr. the receiver. Cr. the giver.
For example: Mohan's account, Apple ltd. account etc. Capital account
Real accounts consist of all those accounts which are related to assets.
For example: Plant and Machinery account, Stock account etc.
Dr. What is comes in. Cr. What is goes out.
Nominal accounts consist of all those accounts which are related to expenses, losses, Income and Gains.
Dr. are all expenses and losses. Cr. are all income and gains.
For example: Rent account, wages account etc.