Types of Entries | Ruling of a Journal | NTA UGC NET paper 2

Types of Entries

There are two types of entries, which are recorded in the journal: simple entry and compound entry. A simple entry involves two accounts only, one affecting the debit side and other affecting the credit side with an equal amount. Sometimes a journal entry may have more than one debit or more than one credit entry. This type of journal entry is called compound journal entry. Regardless of how many debits or credits are contained in a compound journal entry, all the debits are entered before any credits are entered. The aggregate amount of debits should be equal to the aggregate amount of credits.

Ruling of a Journal

• Date: Recording Date and Year of transaction.
• Particulars: This is meant for recording the titles, description of transaction and passing entries. Here the name of the Account to be debited is written along with „Dr‟ on the first line and the name of the Account to be credited is written along with a prefix „To‟ on the second line. Finally, a short explanation of the transaction known as narration begins on the line immediately below the account credited. The narration always appears within parentheses and is begun with the word „Being‟ – which means, „what it is‟.
• L.F: Recording ledger folio number, which helps in identifying where the transaction is recorded in ledger.
• Debit Amount: Recoding amount debited.
• Credit Amount: Recording amount credited.

The Ledger

Once the transactions have been entered in the journal the next step is to classify or categorise them according to the accounts affected. All similar transactions are brought together through the ledger. For instance, all transactions relating to cash are brought to one place in the cash ledger or cash book. In the same way all transactions with a clients or a supplier are also written at one place.

The book in which this classification is done is called the ledger. The Ledger is also called the king of all books of accounts because all entries from the books of original entry are posted to the various accounts in the ledger. It should always be kept in mind that journal contains a chronological record while a ledger contains a classified record of all transactions.
The features of a ledger can be studied through the following points:
1. Two identical sides – The left hand side is called debit side and right hand side is called credit side.
2. The debit aspects of every transactions is recorded on the debit side, while credit aspect on credit side according to date.
3. The difference of the two sides represents the balance. The excess of debit side over credit side indicates debit balance, while excess of credit side over debit side indicates credit balance. If the two sides are equal there will be no balance.
4. Normally balance is drawn at the year–end and recorded on the deficit side to make the two sides equal. This balance is known as closing balance.
The closing balance of the current year will become the opening balance of the next year.

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