Journal Entry Rules

Journal Entry Rules

All Financial transactions in the books of accounts are recorded with the help of journal entries rules. Every journal entry has two aspects i.e. debit aspect and credit aspect and debit aspect of a journal entry is equal to credit aspect, this concept is also known as dual aspect of accounting. 

Rules of Recording Journal Entry

There are two basic rules as well as five specific rules for recording the Journal entries. Basic rules for recording the journal entry are very simple and straight forward i.e. Every debit has a credit and debit is always equal to credit vice versa. There are also some specific rules for recording the journal entries of different element of financial statements. Specific rules have been discussed below

Journal Entry Rules for Expenses

Journal entry for an expenses is recorded with the help of a simple rule i.e. increase in expense is debit and decrease in expenses is credit. Expenses and assets have same rules for recording the journal entry.

Journal Entry Rules for Assets

Rules for recording the journal entry for asset are similar to rules for recording the journal entry for expenses. Increase in asset is debit and decrease in asset is credit.

Journal Entry Rules for Income

Increase in income is credit, while decrease in income is debited. This simple rule is applicable to record all income related transactions. It is important to note that income, liabilities and equity have same rules for recording the journal entry.

Journal Entry Rules for Liabilities

An increase in liability is credited, while decrease in liability is debited. It is pertinent to mention that incomes, liabilities and equity have same rules for recording the journal entries. 

Journal Entry Rules for Equity

Rules for recording journal entry for equity is same as for incomes and liabilities i.e. increase would be credited and decrease would be debited. These two simple rules are applied to record journal entries for all equity related transactions.

Journal Entry Format

The simplest format of journal entry contains the five columns shown below. First column contain the date, second column reflect the account head, third column shows the ledger folio (page number of ledger where the transaction would be posted), Debit column in which the amount shall be debited and credit column in which amount shall be credited.

Date	Particular	Ledger Folio	Dr.	Cr.