Accounting General Journal Entries

Here are important accounting general journal entries which are commonly used in business transactions:

1. Cash Sales

When goods are sold in cash.

Example: Goods worth ₹50,000 are sold in cash.

Journal Entry:

Explanation:

• Cash Account Debit: Increases the cash account as the company receives money.
• Sales Account Credit: Records the revenue generated from the sale.

2. Credit Purchase of Inventory

When goods are purchased on credit.

Example: Goods worth ₹30,000 are purchased on credit from a supplier.

Journal Entry:

Explanation:

• Purchase/Inventory Account Debit: Increases the inventory account as goods are received.
• Accounts Payable Account Credit: Creates a liability to the supplier.

3. Payment of Accounts Payable

When payment is made to a supplier for goods purchased on credit.

Example: Payment of ₹30,000 is made to a supplier.

Journal Entry:

Explanation:

• Accounts Payable Account Debit: Reduces the liability owed to the supplier.
• Bank Account Credit: Decreases the bank account as payment is made.

4. Receipt of Cash from Accounts Receivable

When a customer pays off a credit sale.

Example: Received ₹20,000 from a customer for a previous credit sale.

Journal Entry:

Explanation:

• Cash (Debit): Increases the cash account as payment is received.
• Accounts Receivable Account Credit: Decreases the receivables as the customer has paid.

5. Depreciation of Equipment

Recording depreciation on equipment.

Example: Depreciation of ₹5,000 is recorded on equipment.

Journal Entry:

Explanation:

• Depreciation Expense Account Debit: Records the cost of using the equipment.
• Equipment/Accumulated Depreciation Account Credit: Increases the accumulated depreciation, which is a contra asset account.

6. Payment of Rent

Recording payment of rent.

Example: Paid ₹10,000 for office rent.

Journal Entry:

Explanation:

• Rent Expense Account Debit: Records the expense of renting the office space.
• Cash/Bank Account Credit: Decreases the cash or bank balance as payment is made.

7. Owner’s Investment

When the owner invests money into the business.

Example: The owner invests ₹1,00,000 into the business.

Journal Entry:

Explanation:

• Cash Account Debit: Increases the cash account as the business receives money.
• Owner’s Capital Account Credit: Increases the capital account, reflecting the owner’s investment.

8. Loan Received from Bank

When the business takes out a loan from the bank.

Example: The business receives a loan of ₹5,00,000 from the bank.

Journal Entry:

Explanation:

• Bank Account Debit: Increases the cash account as the loan is received.
• Bank Loan Payable Account Credit: Records the liability of the loan to be repaid.

9. Interest Expense on Loan

Recording interest paid on a bank loan.

Example: Paid ₹15,000 as interest on a bank loan.

Journal Entry:

Explanation:

• Interest Expense Account Debit: Records the cost of borrowing money.
• Cash/Bank Account Credit: Decreases the cash or bank balance as payment is made.

10. Payment of Utilities

When payment is made for utilities like electricity, water, etc.

Example: Paid ₹5,000 for electricity.

Journal Entry:

Explanation:

• Utilities Expense Account Debit: Records the expense for utilities used.
• Cash/Bank Account Credit: Decreases the cash or bank balance as payment is made.

11. Prepaid Expenses

When a business pays for an expense in advance.

Example: Paid ₹12,000 for a one-year insurance policy.

Journal Entry:

Explanation:

• Prepaid Insurance Account Debit: Increases the asset account for the prepaid expense.
• Cash/Bank Account Credit: Decreases the cash or bank balance as payment is made.

12. Unearned Revenue

When a business receives payment in advance for services not yet provided.

Example: Received ₹20,000 as an advance payment for a service to be provided later.

Journal Entry:

Explanation:

• Cash Account Debit: Increases the cash account as money is received.
• Unearned Revenue Account Credit: Records the liability of providing the service in the future.

13. Accrued Salaries

Recording salaries that have been earned by employees but not yet paid.

Example: Salaries of ₹15,000 are due at the end of the month but will be paid next month.

Journal Entry:

Explanation:

• Salaries Expense Account Debit: Records the expense for salaries incurred.
• Salaries Payable Account Credit: Creates a liability to be paid in the next period.

14. Interest Earned but Not Received

Interest has been earned but not yet received in cash.

Example: Earned ₹2,000 in interest from a bank deposit that will be received next month.

Journal Entry:

Explanation:

• Interest Receivable Account Debit: Records the amount of interest earned but not yet received.
• Interest Income Account Credit: Recognizes the interest income earned.

15. Write-off Bad Debts

When it is decided that a receivable will not be collected and is written off as a bad debt.

Example: Writing off a bad debt of ₹5,000.

Journal Entry:

Explanation:

• Bad Debts Expense Account Debit: Records the expense of the uncollectible account.
• Accounts Receivable Account Credit: Reduces the accounts receivable balance.

16. Purchase of Fixed Assets

When a business purchases fixed assets such as machinery or equipment.

Example: Purchased machinery worth ₹1,00,000.

Journal Entry:

Explanation:

• Machinery Account Debit: Increases the fixed asset account for the machinery.
• Cash/Bank Account Credit: Decreases the cash or bank balance as payment is made.

17. Payment of Dividends

When a business pays dividends to its shareholders.

Example: Paid ₹50,000 in dividends to shareholders.

Journal Entry:

Explanation:

• Dividends Payable Account Debit: Reduces the liability of dividends to be paid.
• Cash/Bank Account Credit : Decreases the cash or bank balance as dividends are paid.

18. Amortization of Intangible Assets

Recording amortization expense for intangible assets.

Example: Recording amortization of ₹5,000 for a patent.

Journal Entry:

Explanation:

• Amortization Expense Account Debit: Records the cost of using the intangible asset.
• Accumulated Amortization Account Credit: Increases the accumulated amortization, a contra asset account.

19. Capital Contribution by Owner

When the owner contributes additional capital to the business.

Example: The owner contributes ₹2,00,000 to the business.

Journal Entry:

Explanation:

• Cash Account Debit: Increases the cash account as the business receives money.
• Owner’s Capital Account Credit: Increases the capital account, reflecting the owner’s contribution.

20. Accrued Interest on Loan

When interest on a loan is accrued but not yet paid.

Example: Interest of ₹10,000 is accrued on a loan but will be paid next month.

Journal Entry:

Explanation:

• Interest Expense Account Debit: Records the expense of the interest incurred.
• Interest Payable Account Credit: Creates a liability to be paid in the next period.

These journal entries cover a broad range of typical business transactions and help in maintaining accurate financial records.