What is Accounting Journal Entry

It is the process of Recording Business Transaction Chronologically (Date-Wise) in the Book or Journal of business. There are Different Types / Kinds of Journal Entries used in accounting. In a Journal Entry, one side is called Debit and other side is named as Credit. Both sides are equal in monetary value but shows different Nature of Accounts / Kinds of Accounts. For Example, if Mr. A invested Rs. 700000 into the business. This is a Business Transaction in which two accounts are involved. One account is Cash and other account is Capital. Cash is increasing by Rs. 700000, as it is brought into the business, so it is debited while Capital is also increasing as it is the right of owner that is invested into the business, so it will increase the Cash as a Current Asset ( Rs. 70000) of the business.

 

The following Accounting Journal Entry is passed in The Book / Journal of Business as shown below:

                                               Cash a/c 700000

                                                               Capital a/c 7000000

(Cash Introduced into the Business By Rs. 700000)

You may also be like to Read Out, “What is the Difference Between Debit And Credit”

There are cases in which two or more accounts involved in a Accounting Journal Entry, but in that case also, both debit and credit sides must be in equal value. For Example, When a customer makes prompt payment (before due date) Worth Rs.7000 for goods purchased on credit basis, then the entrepreneur grants him / her discount 5% of purchase price, then, following Accounting Journal Entry is passed in the book of business:

                                                 Cash a/c 6650

                                                 Discount Allowed a/c 350

                                                                              Accounts Receivable a/c 7000

(Cash Received From Customer And Discount Allowed at 5%)

So, when business transaction is occurred, Accounting Journal Entry is passed in the Book / Journal of Business to show different Nature of Accounts appearing in Debit And Credit Side and both sides (Debit And Credit Sides) have equal monetary value.