Every transaction touches at least two accounts, and a journal entry records which one is debited and which is credited. If you can classify the accounts, the rules do the rest. Here are both sets of rules and the twelve entries that cover most of the paper.
The rules of debit and credit
The traditional (golden) rules
| Account type | Debit | Credit |
|---|---|---|
| Personal (people, firms, banks) | the receiver | the giver |
| Real (assets: cash, goods, furniture) | what comes in | what goes out |
| Nominal (expenses, losses, incomes, gains) | expenses and losses | incomes and gains |
The modern rules
| Account | Increase | Decrease |
|---|---|---|
| Assets | Debit | Credit |
| Expenses | Debit | Credit |
| Liabilities | Credit | Debit |
| Capital | Credit | Debit |
| Revenue | Credit | Debit |
Both give the same entry. Use whichever you can apply fastest under time pressure, but be able to state both.
The format
Date Particulars L.F. Dr (₹) Cr (₹)
Cash A/c Dr 50,000
To Capital A/c 50,000
(Being business started with cash)Debit first, credit indented with "To", narration in brackets. The narration is usually a mark.
The twelve entries
1. Started business with cash ₹50,000. Cash A/c Dr 50,000 · To Capital A/c 50,000. Cash comes in (real, debit); the owner is the giver (personal, credit).
2. Purchased goods for cash ₹8,000. Purchases A/c Dr 8,000 · To Cash A/c 8,000. Goods come in; cash goes out.
3. Purchased goods from Ravi on credit ₹12,000. Purchases A/c Dr 12,000 · To Ravi's A/c 12,000. Ravi is the giver.
4. Sold goods for cash ₹6,000. Cash A/c Dr 6,000 · To Sales A/c 6,000.
5. Sold goods to Meena on credit ₹9,000. Meena's A/c Dr 9,000 · To Sales A/c 9,000. Meena is the receiver.
6. Paid rent ₹3,000. Rent A/c Dr 3,000 · To Cash A/c 3,000. Rent is an expense (nominal, debit).
7. Received commission ₹1,500. Cash A/c Dr 1,500 · To Commission Received A/c 1,500. An income is credited.
8. Paid Ravi ₹11,700 in full settlement of ₹12,000. Ravi's A/c Dr 12,000 · To Cash A/c 11,700 · To Discount Received A/c 300. Ravi receives the settlement; the ₹300 saved is a gain.
9. Received ₹8,800 from Meena in full settlement of ₹9,000. Cash A/c Dr 8,800 · Discount Allowed A/c Dr 200 · To Meena's A/c 9,000. Discount allowed is an expense.
10. Withdrew cash for personal use ₹2,000. Drawings A/c Dr 2,000 · To Cash A/c 2,000. Drawings reduce capital.
11. Purchased furniture ₹15,000 by cheque. Furniture A/c Dr 15,000 · To Bank A/c 15,000. An asset comes in; the bank balance goes out.
12. Goods worth ₹1,000 were destroyed by fire. Loss by Fire A/c Dr 1,000 · To Purchases A/c 1,000. A loss is debited; the goods leave the business (many boards also accept "To Trading A/c" at year-end).
Where students go wrong
- Writing Goods A/c. There is no goods account in the journal; use Purchases, Sales, Purchase Returns, Sales Returns.
- Debiting the wrong party in credit sales — the customer is debited (receiver), Sales is credited.
- Forgetting discount is a separate account: received = gain (credit), allowed = expense (debit).
- Recording a cheque payment as Cash. A cheque goes through Bank A/c.
- Skipping the narration.
How it is tested
Class 11 gives 8–12 transactions for 6–8 marks and expects the entries in the correct format with narrations. CA Foundation asks the same but hides the classification: "in full settlement", "trade discount 10 %", "GST @ 18 %". Trade discount is never recorded; cash discount is. GST adds Input GST (debit on purchases) and Output GST (credit on sales) — the entry shape stays the same.