Accounting · Accounting Process

Journal and Journal Entries for CA Foundation Accounting

Updated 1 October 2026

The journal is the book of original entry where you record each transaction in date order. For every transaction, identify the accounts, classify each one, apply the debit and credit rules, write the entry with a short narration, and check that total debits equal total credits.

Understand Journal and Journal Entries

A journal is the first book in which a business writes down a transaction. It is called the book of original entry. Every transaction is recorded here in chronological order, which means date by date, before it goes to the ledger.

Each transaction affects at least two accounts. This is the double entry system. One account is debited and another is credited, and the amounts are equal. A journal entry shows the date, the account to debit, the account to credit, the amounts, and a narration. The narration is a brief explanation of the transaction, written below the entry.

A simple entry has one debit and one credit. A compound entry has more than two accounts. For example, goods sold for part cash and part credit debit two accounts and credit one. You can also combine entries that occur on the same date and involve a common account, for example several cash payments made on one day. In a compound entry, total debits must still equal total credits.

An opening entry brings forward the balances of assets and liabilities at the start of a new accounting year. All assets are debited. All outside liabilities are credited. The capital is the balancing figure and is credited. It equals total assets minus outside liabilities. Often you must work it out yourself.

The journal does not show balances. It only records transactions. Its job is to give a clean record that you can later post to the ledger, and the narration helps anyone check why the entry was made.

Key rules to remember

Golden rule: Personal account: Debit the receiver; Credit the giver; Applies to accounts of persons, firms and companies, such as debtors, creditors, bank loan and capital.
Golden rule: Real account: Debit what comes in; Credit what goes out; Applies to assets such as cash, goods, furniture, machinery and building.
Golden rule: Nominal account: Debit all expenses and losses; Credit all incomes and gains; Applies to rent, salary, discount, interest, commission and similar items.
Modern rule (accounting equation approach): Debit increase in assets and expenses, decrease in liabilities, capital and income; Credit the opposite; Gives the same entries as the golden rules. Use whichever you find easier, but stay consistent.
Opening entry capital: Capital = Total assets − Outside liabilities; Debit all assets, credit all outside liabilities, credit Capital with the difference.
Compound entry check: Total of debit amounts = Total of credit amounts; Always add both sides before you move on.

How to solve Journal and Journal Entries questions

Use this method for any journal entry question. It works for simple, compound and opening entries.

1Read the transaction fully and note the date, the amounts and whether it is cash or credit.
2List every account affected. Ask what has come in, what has gone out, and who owes whom.
3Classify each account as personal, real or nominal. Or classify as asset, liability, capital, expense or income.
4Apply the rule to decide which accounts to debit and which to credit.
5Write the date, then the debit account with 'Dr.', then the credit account indented with 'To'. Put amounts in the correct columns.
6Add a narration in brackets starting with '(Being ...)'. Keep it short and factual.
7Check that total debit equals total credit. For an opening entry, find Capital as the balancing figure.
8Leave a line between entries. Write the Ledger Folio column blank unless asked.

Quickest way: Two-question shortcut for journal entries

When to use it: Use it when the paper has many entries and time is short.

Ask first: what is the benefit received? That account is usually debited (asset, expense or the person who receives).
Ask second: what is given up or owed? That account is credited (cash, bank, supplier or income).
Use the account name that matches the exact item. For example, write Purchases A/c for goods bought for resale, and Furniture A/c for furniture bought for use.
For part payment, split the credit side. Cash or bank is credited for the amount paid and the person for the balance.
For opening entries, write assets first, then liabilities, and compute Capital last.
Keep narration to one line. Marks are for the entry. A long narration wastes time.
Add up both sides before moving on. This catches most slips in compound entries.

Common mistakes in Journal and Journal Entries

Debiting the wrong account for goods bought on credit or for an asset.
Students confuse Purchases with assets bought for use, or the supplier with the goods.
Fix: Goods for resale go to Purchases A/c. Items kept for use go to the asset account. The supplier is credited if payment is not made.
Recording owner's personal expenses or goods taken as business expenses.
The business entity concept is forgotten.
Fix: Debit Drawings A/c. Credit Cash or Purchases, as the case may be.
Crediting Capital with total assets in the opening entry.
Students ignore the outside liabilities.
Fix: Compute Capital = Assets − Liabilities and credit only that difference.
Combining unrelated transactions into one compound entry.
Students try to save time.
Fix: Combine only when the entries are on the same date and involve a common account, such as several cash payments on one day.
Missing or vague narration, or leaving out the date.
Students think only the amounts matter.
Fix: Always write the date and a one-line narration beginning with 'Being'. A clear date and narration make the entry complete and easier to check.
Treating discount allowed or received as a real or personal account.
The rule for nominal accounts is mixed up with personal ones.
Fix: Discount allowed is a loss and is debited. Discount received is a gain and is credited.

Worked examples

Example 1

Journalise the following on 1 April: Bought goods from Rohan for ₹50,000 on credit. Paid ₹20,000 cash to Rohan in part settlement and he allowed discount of ₹1,000; the balance ₹29,000 remains payable.

Show the solution

The purchase on credit: Purchases A/c is debited and Rohan is credited for ₹50,000.
The payment: Rohan's account is reduced by the cash paid plus the discount, ₹20,000 + ₹1,000 = ₹21,000, so debit Rohan ₹21,000.
Cash paid is ₹20,000, so credit Cash. Discount received ₹1,000 is a gain, so credit Discount Received.
Check: debit ₹21,000 equals credit ₹20,000 + ₹1,000.
Balance payable to Rohan = ₹50,000 − ₹21,000 = ₹29,000, which matches the question.

Answer: Entry 1: Purchases A/c Dr. ₹50,000 To Rohan ₹50,000 (Being goods purchased on credit from Rohan). Entry 2: Rohan Dr. ₹21,000 To Cash A/c ₹20,000 To Discount Received A/c ₹1,000 (Being cash paid to Rohan and discount received). Rohan's account still shows ₹29,000 payable.

Example 2

On 1 April 2025, Meera starts the year with: Cash ₹15,000, Bank ₹85,000, Stock ₹60,000, Debtors ₹40,000, Furniture ₹30,000, Creditors ₹50,000 and Bank Loan ₹80,000. Pass the opening entry.

Show the solution

Total assets = 15,000 + 85,000 + 60,000 + 40,000 + 30,000 = ₹2,30,000.
Outside liabilities = 50,000 + 80,000 = ₹1,30,000.
Capital = 2,30,000 − 1,30,000 = ₹1,00,000.
Debit all assets. Credit creditors, bank loan and capital.
Check: credits = 50,000 + 80,000 + 1,00,000 = ₹2,30,000, which equals debits.

Answer: 1 April 2025: Cash A/c Dr. ₹15,000; Bank A/c Dr. ₹85,000; Stock A/c Dr. ₹60,000; Debtors A/c Dr. ₹40,000; Furniture A/c Dr. ₹30,000; To Creditors A/c ₹50,000; To Bank Loan A/c ₹80,000; To Capital A/c ₹1,00,000 (Being the opening balances brought forward). Total debit and total credit are both ₹2,30,000.

Exam tips

If the question gives no date for a transaction, use the dates provided and keep the order of the question. Do not rearrange.
In a compound entry, write all debit accounts first, then all credit accounts, using 'To' for credits.
For opening entries, show the Capital calculation as a working note so the examiner can follow your answer.
Read carefully for words such as 'for use', 'for resale', 'on credit' and 'in cash'. They decide the account.
Do not skip narration. Write a one-line narration for each entry.

Practice questions from Accounting Process

Journal and Journal Entries: frequently asked questions

What is a compound journal entry?

A compound journal entry involves more than two accounts. It can combine entries that happen on the same date and involve a common account, such as several cash payments on one day. Total debits must equal total credits.

How do you pass an opening entry?

Debit all assets and credit all outside liabilities. Then credit Capital with the balancing figure, which is total assets minus outside liabilities. Date it the first day of the year.

Is narration compulsory in journal entries?

Narration is not a debit or credit item, but you should always write it. It explains the entry, and proper narration makes the entry complete and easier for the examiner to check.

How do I practise journal entries for the exam?

Solve a mix of simple, compound and opening entry questions under timed conditions. Check that debits equal credits each time. Review your account classification when you make an error.