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Friday, 5 April 2019

What is a journal entry?









In accounting General journal serves as the base of Financial statements. When a business transaction takes place, it is recorded in the General Journal by passing a journal entry.

Every Journal entry consists of two balances and a short narration/ discription underneath. One balance is debit and the other one is credit. Both balances must always be equal to each other. Both balances can have any account title and can be related to any accounting head. For example:
a). Mr. Adeel started his business with a capital of USD $10,000 .




In the above example “Cash” is an asset and “Capital (Adeel)” is owner’s equity.

Furthermore, there can be more than one account in each side (Debit/ Credit) of a Journal entry. However, the total balance of both sides will always be equal.
For example:
b). Mr. Adeel started his business with cash USD $10,000 and furniture worth of USD $5,000.




In above example Cash and Furniture are Assets and capital is owner's equity.

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