3

JOURNALIZING,
POSTING AND
BALANCING
Meaning of an ACCOUNT
An Account is a summary of the relevant
transactions at one place relating to a particular
head.
Traditional Classification of Accounts
 Personal Accounts: relate to natural persons,
artificial persons and representative persons
 Real Accounts: relate to the tangible or
intangible real assets
 Nominal Accounts: relate to expenses,
losses, profits & gains.
Accounting Equation Based
Classification of Accounts
 Assets Accounts: tangible or intangible real assets
 Liabilities Accounts: relate to financial obligations of
an enterprise towards outsiders
 Capital Accounts: relate to owners of an enterprise
 Revenue Accounts: relate to the amount charged for
goods sold or services rendered or permitting others
to use enterprise resources yielding interest, royalty
and dividend.
 Expenses Accounts: relate to the amount incurred or
lost in the process of earning revenue
Illustration 1: Classify the following
Accounts
1. Capital Brought in
2. Building Purchased
3. Purchases A/c
4. Sales A/c
5. Carriage Inwards paid
6. Carriage Outwards paid
7. Cash Received
8. Cash Paid
9. Interest Paid
10. Interest Received
Contd………
11. Bank A/c
12. Sales Promotion Expenses
13. Furniture Purchased
14. Sales Return
15. Bank Overdraft
16. Purchase Return
17. Bad Debts written off
18. Subscription received
19. Outstanding Salary A/c
20. Bank Loan
Meaning of Debit and Credit
 Debit (Dr.) means to enter an amount on the
left side of an account
 Credit (Cr.) means to enter an amount on the
right side of an account
Rules of Debit and Credit
(based on traditional classification)
 For Personal Accounts
Debit the receiver
Credit the giver
 For Real Accounts
Debit what comes in
Credit what goes out
 For Nominal Accounts
Debit all expenses and losses
Credit all gains and profits
Rules of Debit and Credit
(based on accounting equation)
 For Assets Accounts
Debit the increase; Credit the decrease
 For Liabilities Accounts
Debit the decrease; Credit the increase
 For Capital Accounts
Debit the decrease; Credit the increase
 For Revenue Accounts
Debit the decrease; Credit the increase
 For Expenses Accounts
Debit the increase; Credit the decrease
JOURNAL
 A Journal is a book in which transaction are
recorded in the order in which they occur i.e. in
chronological order.
 A Journal is also called book of prime entry
because all transactions are entered first in this
book
 The process of recording a transaction in
Journal is called a Journalizing
 An entry made in Journal is called Journal Entry
FORMAT OF A JOURNAL
Journal

Date Particulars L.F. Debit Credit

(Rs.) (Rs.)
Illustration 2:Journalize the following
transactions:
(a) Ganesh started his business with cash Rs.1,00,00/-
(b) Borrowed from Mahesh Rs.50,000/-
(c) Purchased Furniture for Rs.10,000/-
(d) Purchased goods for cash Rs.40,000/-
(e) Purchased goods on credit from Ram Rs.25,000/-
(f) Paid cash to Ram Rs.10,000/-
(g) Sold goods for cash Rs.30,000
(h) Sold Goods on credit to Shyam Rs.25,000.
(i) Received cash from Shyam Rs.15,000/-
(j) Withdrew cash for personal use Rs.1,000/-
(k) Salaries Paid Rs.6,000/-
Journal Entry
 Compound Journal Entry: When two or more
accounts are involved in a transaction and the
transaction is recorded by means of a single journal
entry instead of passing several journal entries, such
single journal entry s termed as ‘Compound Journal
Entry’

 Opening Entry: A journal entry by means of which

the balances of various assets, liabilities and capital
appearing in the balance sheet of the previous
accounting period are brought forward in the books of
current accounting period, is known as ‘Opening
Entry’
Illustration 3: Enter the following transactions in a
Journal, post them to ledger and prepare a Trial
Balance
2006 Assets in Hand: Cash Rs.630, Cash at Bank
Jan.1 Rs.23,100; Stock of goods Rs.26,400;
Mohanratta & Co. Rs.6,750
Liabilities: Marathi & Co. Rs.3,880; Ram Sons
Rs.3,000
Jan.2 Received a cheque from Mohanaratta & Co. in 6,650
full settlement
Jan.3 Sold goods to Dass & Co. 1,400
Jan.4 Sold goods to Jai Chand & Sons 1,440
Carriage paid 35
Sold goods to Gainda & Co., for cash 3,120
Jan.5 Brought goods from Ram & Sons 4,000
Paid Marathi & Co., by cheque in full
settlement 3,800
Jan.6 Bought goods from Chatterjee & Mukherjee 6,300
Jan.7 Dass & Co. return goods, not being up to standard 100
Travelling Expenses paid to salesman 147
Goods sold to cash to Vijay 800
Jan.10 Paid for stationery 66
Postage Stamps 15
Jan.13 Returned goods to Chatterjee & Mukherjee (not being upto
standards) 300
Chatterjee & Mukherjee (also admit claim for breakage of 100
goods)
Jan.15 Paid for furniture by cheque 700
Jan.16 Goods used personally by proprietor 50
Jan.17 Sold goods to Mohanratta & co. 5,000
Jan.19 Dass & Co. pay by cheque 1,300
Jan.20 Cheque received from Jai Chand & Sons 1,440
Jan.22 Bank advises Jai Chand & sons, cheque returned unpaid

Jan.23 Sold goods to Ajay for cash 800

Jan.24 Cash deposited with bank 2,000

Jan.27 Cheque sent to Chaterjee & Mukherjee 5,850

(Discount allowed Rs.50/-)
Jan.29 Paid telephone charges 23

Jan.31 Paid Salaries 600

Paid Rent 300
Bank Charges 10
Drew for personal use out of bank 500
Received claim from Mohanratta & Co., for defect on goods
supplied to them, claim admitted 150
LEDGER
 Ledger is the principle book which contains all
accounts to which transactions recorded in
the book of original entry are transferred
 The ledger is also called ‘Book of Final Entry’
as it is the ultimate destination of all
transactions.
UTILITY OF LEDGER
 It provides complete information of all accounts in
one book
 It enables to ascertain what are the main items of
revenue
 It enables to ascertain what are the main items of
expenses
 It enables to ascertain which are the assets and of
what values
 It enables to ascertain which are the liabilities and of
what amounts
 It facilitates the preparation of final accounts.
 FORMAT OF A LEDGER A/C

(Name of the Account)…… Ledger Folio No………..

Dr.
Cr.
Date Particulars Folio Amount Date Particulars Folio Amount
(Rs.) (Rs.)
POSTING
 Posting is the process of transferring the
transactions recorded in the books of original
entry in the concerned accounts opened in
Ledger.
 It may be done daily, weekly, fortnightly or
monthly according to the convenience and
requirements of the business.
 Posting helps us to know the net effect of
various transactions during a given period on
a particular account
BALANCING
 Balance of an account is the difference
between the total of debit and total of credit
appearing in an account.
 Balance signifies the net effect of all
transactions posted to that account during a
given period.
 Normally, Personal and Real accounts are
balanced; Nominal Accounts are closed by
transferring to Trading & Profit & Loss A/c