As discussed in Chapter 1, the journal is a book of original entry; that is, any material financial transaction is first and foremost recorded in the journal. It is based on the concept of double entry where one account is debited and one account is credited. It is also possible that multiple accounts are debited or credited as per the nature of the transaction.
We will take an example for better understanding.
Let us journalize the following transactions.
- Gaurav invested Rs. 50,000 in business.
- He deposited Rs. 10,000 in the bank.
- Furniture was purchased for Rs. 20,000.
- Loan taken from Sahil was Rs. 15,000.
- Salaries paid for the month total Rs. 25,000, and Rs. 5,000 is still outstanding.
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Transaction analysis ...
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