4 steps to convert transaction into journal entry for beginners
Journal: Principles of Accounting
Its always a nightmare for beginners especially who are introduced to the accounting jargons for the first time.
Thereforego through the following steps to transform transactions into journal entries as per the concepts of accounting.
Tip #1 - Identify the transactions as financial or non financial transactions as per the money measurement concept.
Tip #2 - Identify the nature of the transaction whether it is a cash transaction or credit transaction.
Transactions which clearly mentions a prompt payment or receipt of cash at the time of delivery of goods or services is known as cash transaction. The cash transaction will always mentions cash,bank or cheque, if such words are not present and names of any individual or company is present then it will be a credit transaction.
Example: Purchased raw material worth Rs.50,000 and payment made in cash
Tip #3 - Identify the dual aspects present in the transaction.
The transaction will clearly mention whether anything is being getting purchased or sold, any income received or payment done. Like in the above transaction there are two aspects purchase and cash respectively.
Tip #4 - Apply the golden rules of accounting
Once you have identified the types of accounts getting involved in the transaction just apply the golden rules and you are ready to make a journal entry.
Purchase a/c Dr. 50,000
To Cash a/c 50,000
Don’t Forget to write a narration after the journal entry
Shortcut: Jut add the word infront before the transaction (Being Raw material purchased worth Rs.50,000)
Illustration:
Solution:
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