Scribd
Upload
6 views13 pages

Journal Entries Explained

Journal entries are essential records of business transactions, documenting increases and decreases in accounts through debits and credits. They play a crucial role in maintaining accurate financial records, understanding performance, preparing reports, ensuring legal compliance, and aiding decision-making. The document provides examples of journal entries for various transactions to illustrate their application.

Uploaded by

Elvis Rumints
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
6 views13 pages

Journal Entries Explained

Journal entries are essential records of business transactions, documenting increases and decreases in accounts through debits and credits. They play a crucial role in maintaining accurate financial records, understanding performance, preparing reports, ensuring legal compliance, and aiding decision-making. The document provides examples of journal entries for various transactions to illustrate their application.

Uploaded by

Elvis Rumints
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 13

JOURNAL ENTRIES

EXPLAINED AS
SIMPLY AS
POSSIBLE!

SWIPE
CA Sadique
CONTENT
1. What Are Journal Entries?
2. The Importance of Journal Entries
3. How Do Journal Entries Work?
4. Examples
5. Conclusion

SWIPE
CA Sadique
WHAT ARE
JOURNAL
ENTRIES?
Journal entries are like a diary for
business. Each business transactions
measurable in money value
are recorded.

Each entry has:


Debit: Shows increases or expenses
Credit: Shows decreases or income

SWIPE
CA Sadique
KEY COMPONENTS OF
A JOURNAL ENTRY:

Date The date when the transaction occurs.

Account Titles The accounts affected by the transaction.

Debit and Credit Amounts to be debited or credited.

Narration A brief description of the transaction.

Reference Number Optional but useful for tracking purposes.

SWIPE
CA Sadique
THE IMPORTANCE OF
JOURNAL ENTRIES
Journal entries are the backbone of
accounting. They help record every
financial transaction in an organized
way.

HERE’S WHY THEY MATTER:

Keep Accurate Records:


1. Journal entries ensure all transactions
are documented correctly and in order.

Understand Financial Performance:


2. By tracking transactions, businesses can
see how well they ‘re doing financially.

SWIPE
CA Sadique
Prepare Financial Reports:
3. Entries are the starting point for creating
important reports like the Income Statement
and Balance Sheet.

Stay Legally Compliant:


4. Properly recorded entries help businesses
follow tax and Legal rules.

Make Better Decisions:


5. With clear financial records, businesses can plan
budgets and investments more effectively.

SWIPE
CA Sadique
HOW DO JOURNAL
ENTRIES WORKS

Assets {What the Liabilities {What


business owns} the business owes}

Increase - Debit Increase - Credit


{e.g: buying {e.g: taking a loan}
equipment}

Decrease - Credit Decrease - Debit


{e.g: selling assets} {e.g: repaying a loan}

SWIPE
CA Sadique
Expenses Revenues
{Cost the {Income the
business pays} business earns}

Increase - Debit Increase - Credit


{e.g: paying rent} {e.g: sales
revenue}
Decrease - credit Decrease - Debit
{e.g: refund or {e.g: sales returns
adjustment} or discounts}

SWIPE
CA Sadique
EXAMPLES
1. Transaction: A business buys
office equipment for 5,000
and pays in cash.

JOURNAL ENTRY:

Debit:
Equipment {Asset} 5,000
{Asset increases}.
Credit:
Cash {Asset} 5,000
{Asset decreases}.

SWIPE
CA Sadique
2. Transaction: A business takes a loan of
10,000 from the bank.
JOURNAL ENTRY:

Debit:
Cash {Asset} 10,000 {Asset increases}.
Credit:
Bank Loan {Liability} 10,000
{Liability increases}.

3. Transaction: A business pays 500


for utilities.

JOURNAL ENTRY:
Debit:
Utilities Expense 500 {Expense increases}.
Credit:
Cash {Asset} 500 {Asset decreases}.

SWIPE
CA Sadique
4. Transaction: A business earns 2,000
from sales.

JOURNAL ENTRY:

Debit: Credit:
Cash {Asset} Sales Revenue
2,000 {Asset 2,000 {Revenue
increases}. Increases}.

SWIPE
CA Sadique
Journal entries are
the foundation of
your financial story!
Start practicing today
to simplify accounting
and gain clarity over
your finances.

SWIPE
CA Sadique
THANKS FOR READING!
FOLLOW ME FOR MORE UPDATES.
casadique.com | +91 9744570842

CA Sadique

You might also like