How to Make Journal Entries by Saheb Academy - Class 11 / B.COM / CA Foundation

hello everyone you're watching saheb Academy if you like our videos then please subscribe to our Channel and also hit the bell again for the regular updates and also follow us on Instagram so have Academy now let's go to the video hi everyone in this video we are going to discuss about the journal entries and they're also going to understand how to pass the journal entries logically okay with the rules of debit and credit yes and we have also to understand what does debit and credit mean that's the most important thing yeah that's where the most of the students are confused about what does debit and credit mean they think debit is good credit is bad something like that debit is plus cut it is minus something like that they have all these misconceptions about the debit and credit so we are going to clear all that and we are going to understand properly and logically how to pass the journal entries and believe me if you understand the journal entries properly right then all the chapters which you have all the chapters in accountancy would be a really piece of cake for you because this is the foundation if you understand debit and credits and this journal entries you know in all the chapters you will have in the latest studies also you will find everywhere journal entries article because this is the primary part of accountancy in accountancy what you do in accounting first you record all the financial transactions yes first you record all the financial transaction and then you classify them into structured format and then what you do summarize them into financial statements such as profit and loss statement balance sheet cash flow statement and so on yes so the first step of accounting is recording the financial transaction isn't it so that's where the journal entry comes in yeah to record any financial transaction what does accountant do accountant passes an entry in a book called journal journal book yeah he passes an entry with debit and credit in a journal book that's how the recording is done of every transaction yes first the accountant would need a source document what is source document and evidence of the transaction it can be a voucher it can be a bill it can be a received a bank statement yeah which proves that that transaction has happened actually yeah so from that evidence the accountant makes an entry in the journal book he makes the recording yeah that's the recording step and then summarizing and all the idea classifying summarize financial statements and all that so this is the accounting process those document journal ledger trial balance and then financial statements are just profit and loss statement balance sheet cash flow statement statement of changes in equity and all that yeah but here in this video we are concerned about the journal only how to pass the journal interest yeah and I have a very special trick for you to understand this properly and logically okay so easily you'll be able to pass the general interest don't worry so let me just show you the rough format of journal see here this is the format we have you know date column particulars column where you will pass the actual entry yeah this is the entry here cash account debit to capital account yeah you don't have to understand here anything I'm just showing you here yeah this is the entry and this is the narration the description of this entry what does this entry mean yeah being started business with cash this is called narration understood okay then we have this LS column what is this LS ledger for you this is just a page number of you know this book ledger book alright just a page number for the reference yeah where does this transaction has been recorded in ledger to find that we have a reference here we have a reference number here that's called ledger for you just a page number then we have debit and credit these are the two columns you know where you write the amounts now and it will always be equal okay debit will always be equal to credit because in accounting what we do we follow double entry system yeah so in double entry system what we say is every transaction has two effects a debit and a credit and both of them have to be recorded yeah and it will always be equal debit is equal to credit okay yes so this is a rough just format I wanted to show you just you can get an idea what are we doing over here so this is the journal this is the entry we have to learn how to pass these journal entry and what to debate what to credit you have to understand that okay so you will understand that once you understand the rules of debit and credit okay so let's go there yeah let's see how to pass the journal entries let's see the rules of debit and credit we have modern approach so we have to see this modern approach let's see the modern approach now here we have the modern approach or you can say modern classification of accounts yes we have six classification over here see de a le our dealer right so first let's understand what does each of these alphabets stands and then the meaning and the logic behind it okay so once you understand this technique properly then you will be easily able to pass the journal entries with no difficulty at all yeah so let's do this let's understand the C here B stands for drawings or dividends now we will say we don't know the meaning of that what does drawings or dividends mean see it's very simple when the owner invests the money into the business that's called capital isn't it when the owner invest the money into the business that's called capital and when the owner withdraws the money takes the money back for his personal use that is called drawings clear capital and drawings clear to you yes yes this will happen in a partnership business as well as single owner business yeah the capital will be called capital and drawings yeah but then when it comes to companies in companies what happens the capital is divided into small units called as chips yeah why because in company there is not a single owner there are thousands and thousands of owners right and joint stock companies I'm talking about yeah so those owners are called shareholders yeah what will happen is the company will issue the shares in the market then the people they will subscribe to these shares yeah they will pay the money and that's called contribution to capital that's how they will contribute to the capital of the company they will buy the ships by buying the share what will happen you know when the company issues for the first time IPO yeah what will happen is these people they will become the owners of that company and they will be called shareholders okay and there will be hundreds and thousands of them so now here as I said here we have shares concept so now here what these people get these people they get dividends in form of return okay because they have spent the money they have contributed to the capital of the company isn't it so now they should get something in return right so whatever profit the company makes a portion of that okay a portion of that it's distributed among the owners of the company the shareholders yeah and that is called dividends whatever that is distributed by the company to the shareholders okay that is what is difference and as I said here we don't have single capital here we have share capital okay so here we have equity share capital equity share capital and preference share capital okay these two types of capital we have okay and in total we call them just equity remember that okay he stands for equity or capital okay you clear with this equity or capital yeah so now we are clear with two different concepts D and E yeah drawings or dividends yeah drawings me whatever the owners they withdraw from the business whatever money they withdraw that's called drawings and whatever the shareholder the owners get in the companies that's called dividends so drawings or dividends the meaning of both these things are same only whatever the owners gets that's called drawings or dividends yeah dividends in form of company drawings in form of single owner business and partnership business clear so you are clear with drawings or dividends yes okay then we have e for expenses and a for assets so forth let's understand what does asset mean see here the definition of an asset an asset is a resource controlled by an entity as a result of past events and from which future economic benefits are expected to flow to the entity now what does this mean we didn't understand anything from this definition don't worry I will give you a simple example see here machinery trucks buildings furniture computers all these things what are these things to the company these things are why they are an asset because because the company has control over it yeah either they have purchased it or they have got it on rental basis your lease basis so they have control over these things and there is future economic benefit from them yeah what does future economic benefit means see here the company has purchased this machinery so now this machinery will be useful for let's say five to six years right so they will use that machinery in production and they will produce some products yeah and sell it in the market and generate sales yeah they will to sales and they will generate revenue so this machinery will be helpful to conduct the operations of the business isn't it so there is economic benefit not only economic benefit future economic benefit that's the main thing about the asset now these trucks the company expect the trucks to work for let's say ten years yeah ten years or eight years whatever is a useful life okay so they expect that these things will be useful to the company for many of years in future yeah so future economic benefit is there from these things for nature let it be building whatever it is yeah they will use the building for the space commercial space yeah to do do the business isn't it yes so that's what an acid is it is something that the company has control on and then there is future economic benefit these two things are there then that's an asset simple as that so you should be able to you know recognize what is an asset and what is not an asset yeah so if I say anything any word you should understand in which category it falls in okay all right so that's what an acid is okay control and future economic benefit then we have to understand what is an expense let's do that see here expense an expense is the cost of operations that a company incurs to generate revenue and from which no further benefit is expected yes that's what an expenses you know expense is the cost or expenditure that you incur to run your operations of your business smoothly you pay the rent of your business you pay the electricity bill you pay the salaries of your workers and then you pay the telephone bill and all these things are expenses but now you have to understand why these things are expenses yeah why they are not acid why they are not liability you have to understand this thing properly you know so that's because you know expenses have no future economic benefit that's the main thing about expenses if the expense has been incurred that means you have already taken the benefit yeah you are paying the let's say you are paying the rent of January you will pay it at the end of the January isn't it so that means you have already taken the benefit you have lived their entire month of January and then at last you are paying the rent yeah you are paying the electricity bill you are paying the electricity bill at the end of the month isn't it yeah you have already taken the benefit of the electricity then in the next month again you will have to pay but that's not the thing with the acid if you remember acid has future economic benefit if you purchase the machinery today with let's say 1 lakh or whatever the money it is yeah then you can expect that this machine we'll be helpful for you it will have future economic benefit isn't it you will be able to use it in your business for let's say ten years or so yeah it has future economic benefit that's why machinery is an asset but this are the expenses around electricity salaries and all these things why because there is no future economic benefit if you pay a 2000 olicity bill today yeah then again in the next month you will have to pay another electricity bill isn't it let's say you paid mm electricity bills so then can you expect that you will receive benefit from that mm in the next month also no the benefit of the mm which you paid today that's for this month yeah in the next month again you will have to pay the electricity bill so basically expenses what there is no future economic benefit the benefits of something which you have already taken up that's what an expenses that's the core thing about the expense no future benefit yeah asset half future economic benefit expense do not have future economic benefit clear so you should be able to know what is an expense what is not an expense okay telephone bills shipping charges all these are expenses because once you pay them again you will have to pay them whenever you need the benefit yeah you will not get the benefit once you pay them yeah you have already taken up the benefit clear it simple yes then let's understand what is a liability see here liability liability is what liability is nothing but just a financial obligation okay that's all liabilities you owe money to someone then that's your liability see here a present obligation of the entity to transfer an economic resource as a result of past event for example yeah you went to a bank and you got a loan right so now you have the money but now immediately you have an obligation also yeah you have an obligation that in future you have to pay that money back isn't it you have to pay that money back to the bank isn't it yes so that's a financial obligation you have now present financial obligation because of the past event past event means you went to the bank and asked for a loan yes and you got the loan so that was the past event and in future you have to transfer an economic reasons economic resources you have to pay something you have to pay cash yes so that's what a liability is simple as that okay loan creditors if you purchase goods from someone in business yeah and you don't pay money then that person from whom you have purchased your supplier he will be called as creditor because now you have to pay to that person and that person will be called credit are okay the person to whom you all the money that person is called credit up simple so that's what liability is okay you have a financial obligation because of the past event and you have to pay or do something okay simple as that that's what a liability is then let's see the capital now you already know what capital is capital is nothing but the money which is invested by the owners right see here efore equity or capital yes the money which is invested by the owner that's called capital simple as that yeah in companies what we have we have equity share capital and preference share capital in joint stock companies so commonly we call that as equity yeah equity or capital the same thing okay it's not different it's same thing right then we have revenue or income see here revenue revenue means what revenue means income yeah how do you earn the money now in business how do you earn the money either you make sales right that's how you earn the money you sell goods or services and that can be as well as on cash basis as well as on credit basis isn't it yes and then what do you do if you have space in your company which you don't use then you will rent it out to somebody else a third party so from there you can receive rent isn't it so rent received would be your revenue and then if you have invested money somewhere and you are getting some returns out of it you are getting interest whatever it is so then interest receive that will also be your revenue isn't it and then there are so many things discounted zip yeah if you're purchasing something and you get discount then that's also your revenue yeah so all these gains benefits which you get yeah all this income these are revenue but mostly sales is revenue okay so that's it yeah that's the revenue so now we have understood each and everything over here all these words drawings expenses asset liability this equity or capital revenue or income yeah so now we have understand the rules of debit and credit yeah let's do that so the rules of devaron credit are very simple see here what we have over here is this word right dealer so now I have drawn this here this dotted line why because this is one group and this is another group okay we have two groups over here and this group group of drawings expenses in asset DEA this has debit balance okay this has debit balance and liability equity and revenue they have credit balance fine now don't ask me why okay because there is no logical explanation for that it's just s from the beginning okay it's just a rule fine so these people have debit balance and these people have credit balance so to increase drawings expenses or asset yeah what you have to do you have to debit them yeah to decrease them you have to do opposite you have to clear it yeah and it is opposite here they have credit balance so to increase these guys you have to credit them and to decrease them you have to do opposite you have to debit them yeah that's what the trick is it's very simple see modern rules of debit and credit drawings have debit balance expense have debit balance asset have debit balance yeah so to increase them what you're going to do to increase them you are going to debit them yeah a debit debit debit yes and to decrease them opposite of that yeah for example you have purchased the acid so acid is increasing yeah so immediately to increase the asset account what you're going to do you are going to debit that if you have sold the acid asset is decreasing so you need to credit that asset account whatever acid you have sold yeah that's how you have to debit and credit now you will be you know getting the idea that what does debit and credit means debit and credit doesn't have any meaning you know they don't have any meaning these are the two abstract terms we use in accounting to reflect the duality concept you know here we have double-entry concept I told you right we record every transaction with a debit and a credit and both the effects of a transaction debit and credit are always equal okay so see here then here we liability equity and revenue these people have credit balance so to increase them we credit them and to decrease we do opposite debit debit debit yeah for example if you took a loan from the bank then your liability is increasing so to increase the liability what you're going to do you are going to credit the bank loan account so the main thing is you know the classification whatever item you have furniture what is furniture furniture is something you own and future economic benefit is there that's an asset so these rules will apply yeah bank loan what is bank loan bank loan means what you have to pay right so that's a liability so this rule apply yeah so now capital what is capital capital is equal to your capital yeah this rule will apply so whenever the capital comes into the business capital is increasing so you have to credit the capital account so you need to know yeah you need to know the classification properly you should be able to classify everything into these six items yeah whatever it is furniture car account yeah computers account whatever it is land and building account no word where does land and building comes asset because you can use the land and building there is a future economic benefit yeah you own it or you have it on lease basis whatever it is yeah you have control you have future economic benefit then that's asset so this will apply isn't it yes so this is what we have these six things only okay you should be able to categorize whatever you have into these six items only yeah if I tell you electricity then where does electricity comes here in expenses yeah whenever you have to pay the electricity bill the expense is increasing you have to debit that yeah simple yes and if there has been an error in recording the expense and you want to reverse that error then what you will do to decrease the expense you will credit that yeah mostly the expenses they never decrease but sometimes some error will happen in recording so to reverse the effect you have to credit that so this is the rule simple rule yeah whichever things has debit balance to increase them you have to debit and to decrease opposite to opposite credit that yeah so debit and credit doesn't mean anything yeah it doesn't mean debit is good that credit is bad something like that or plus minus no you know it depends upon the balances the these elements have if they have debit balance please you have to debit to decrease you have to credit if they have credit balance to increase you have to credit to decrease you have to debit now don't worry we'll solve the problem and we'll see practically how to use these tools properly and you know prepare the journal entries pass the journal entries yeah so this word will be helpful for you to remember all this dealer yeah drawing so dividends expenses asset liability equity or capital revenue or income yeah now don't go on looking the reason behind why these guys have debit balance and these guys have credit balance again because you know certain questions cannot be answered yeah if I ask you why milk is white can you tell me there is no reason for that it's just is you just have to understand yeah from the beginning it's just s yeah why sky is blue yeah there's no reason for that it's just as you have to just take it yeah these guys have debit balance these guys have credit balance that's all yeah yes so this is the rule so now let's pass some journal entries and let's see how to use these rules practically yeah let's go to a cushion now here we have got the question see the question over here journal eyes the following transaction we have got these ten transaction over here and these are simple one so here have taken simple transaction just to start off this journal entries thing yeah so before passing the journal entries for each of these transaction and making a recording in journal book before doing that let's just see this technique of generalizing yeah see here whenever you see a transaction and you want to pass journal entry of that transaction first what you have to do is first you have to analyze the transaction what is happening in that transaction you have to see yeah then the second step would be you have to identify at least two accounts that are involved in that transaction yeah that transaction because of the transaction which two accounts are getting affected you have to see and there would be at least two accounts yeah always because here in accountancy what we do we follow double entry system yeah what does double entry system says it says that each and every transaction will at least effect two accounts and you know every transaction will have a debit and a credit yeah two effects will be there so and the effects of debit and credit will always be equal but then the accounts will be at least two or it can be more - also yeah but at least it will be - fine so you have to identify at least two accounts that are involved in that transaction all right and then you have to see in which category they fall in yeah in which classification they fall in now I've already explained you write dealer how many classification do we have got we have got six classification right dealer drawings expense asset liability equity revenue so we have to see our account Falls in which category yeah Furniture Furniture falls in asset account category so this rule will apply like that yeah so first identify at least two accounts and then see in which category each of them fall in yeah what will happen sometimes see furniture purchased yeah if you purchase the furniture then furniture is an asset yeah and then if you purchase the furniture with cash then cash is also an asset yeah because they have future economic benefit and the company owns them right so both are asset so this rule will apply yeah so then you have to see whether they are increasing or decreasing if they are increasing and it's an asset you have to debit if it is decreasing you have to credit like that yeah you have to use the rules dealer rules yeah these with modern rules of debit and credit yeah so this is the technique of generalizing the transaction fine so now let's solve this problem okay now too much Shack now let's just solve this problem yeah let's just pass the journal entry see ya so the first transaction here we have goddess David started business with cash rupees one lakh yeah so this transaction here from this we come to know that this person has started the business with cash 1 lakh yes so two accounts that are involved that's what you have to see the first is cash no doubt about that because in this transaction cash word is coming so cash account is accepted yeah and then the second one would be what here the business is being started and he is the owner he has invested the money so capital account yeah so capital account is affected these two accounts are affected a cash account and capital account now capital account we already know it's equity or equity or capital so this rule will apply and then what is cash cash is an asset yeah the company owns that and company has future economic benefit from that because company can do whatever it wants with that cash yes so it is helpful for them in future so that's an asset right so as a rule applies or no what is happening here is cash increasing or decreasing cash is increasing because cash is coming into the business now here you are passing the journal entries as an accountant yeah accountant of this business so you have to see from the point of view of business all right point of view of business fine so cash is coming into the business cash is increasing if cash is increasing you have to debit yeah asset is increasing debit right so cash account will be debited and then capital capital is also increasing yeah in the business capital is coming in so capital is increasing so that means you have to credit credit the capital account so now how are you going to present this in the journal see is very simple CEO cash account debit yeah cash account debit and then yeah below that you will take to capital account - capital account means what it is credited okay you will leave a bit space over here cash account debit some space and then - capital account fine so one lakh one lakh yeah cash account is debited yeah this dr means what debited now you will say why are we using dr dot see here debit received like that okay it means like that but you know we use this acronym always okay for debit dr dot and for credit CR dot fine so cash account debit 1 lakh capital account credit 1 lakh simple double entry system debit is always equal to criteria H and every transaction will have to affects a debit and a credit and always they will be equal yeah it will be equal and then it will at least effect to account so that's what yes you clear with the first transaction yes then the second transaction we have a see here paid into bang 70,000 now what is this paid into Bank 70,000 it means that the owner has deposited the money into his bank account 70,000 so now here two accounts are affecting which ones tell me the first is Bank yeah bank account is increasing yeah because the money in the bank account is increasing but then cash in hand the cash is decreasing yeah because you have deposited cash into the bank so these are the two account that are being affected bank account and cash account yeah and what types of accounts are these in which classification in which category they fall in cash and bank both are asset account yeah both are asset account yeah so these acid account what will happen if they increase it will get debit if it decreases it will get credited yes so here cash account is getting big creased because we have put the cash into the bank and bank account is increasing so bank account is increasing asset account is increasing debit the bank account and then cash account is decreasing yeah asset is decreasing credit to the cash account simple as that so the entry would be bank account debit yeah money is increasing in the bank account we have deposited seventy thousand money in there but our cash in hand the cash has been reduced yeah so to cash account it will be credited yeah 70,000 70,000 simple yes then the third transaction see here bought goods for cash five thousand now let me tell you one thing whenever you purchase the goods right for resale yeah to sell the goods whenever you purchase something to sell in your ordinary course of business then you not use the term goods or like that yeah what you will use this you will use this term okay purchases what purchase product purchases purchase account fine purchase account and whenever you sell something yeah and those are your goods then you will use this term sales fine sales account yeah in the ordinary course of business fine yes so here what is happening bought goods for cash five thousand you have purchase goods worth five thousand would be simple what is happening to accounts are getting affected which ones approach is account you are purchasing the girls to sell them yeah and then what cash cash account because the cash is getting reduced you have bought that for cash so cash account is getting reduced and purchases account what is purchases account now purchases is an expense account okay it is an expense account yeah so that is also increasing yeah what is account is increasing but cash account is decreasing yes so the entry would be simple purchase account debit expenses increasing if expense increases you have to debit that yeah expense account so purchase account debit 5,000 and then cash is decreasing because you have paid the money right so your cash is decreasing cash is an asset account if it is degree you have to credit that simple as that now here I have not writing the narrations okay narrations are simple in the bracket you have to take you know being business started with cash yeah here being money deposited into the bank you can write it in your own words okay it doesn't matter there is no marking for that but you have to write it yeah if you don't write it then you will lose the marks but you know for the content that it doesn't have much yeah it's just that it's it's a requirement you just have to make that narration there yeah it's just a summary in your own words you can write that you know being goods purchase for cash five thousand yes some summary you have to write yeah so you can see that in your book and you can look at that yeah then let's see the next transaction see the next transaction over here fourth one sold goods fifty thousand now you are selling the goods so if you are selling the goods yeah then which accounts are affected see here you have sold the goods and you have to assume this is a cash transaction yeah because they haven't said anything else right so you have to assume this is a cash transaction you have got the cash because you have sold the goods and the another account that is being affected is sales account yeah sales account and cash account so now here what is happening to the sales account your sales have increased and your cash is also increased yeah both of these accounts are increasing now sales is what type of account I have told you sales is revenue account yeah if revenue is increasing what you have to do you have to credit that if Avenue is increasing you have to credit that and cash is also increasing because cash is coming into the business so cash is an asset account if it is increasing you have to debit that it's entered so the entry would be very simple cash account debit cash is increasing as it is increasing debit and then sales is what revenue account if revenue account increases you have to credit isn't it yes so since icon will be credited 50 thousand 50 thousand simple as that yeah then the fifth transaction see the fixed transaction properly this is very important bought goods yeah bought goods means what purchases accounts affected directly should come to know that whenever you see goods word that means those Goods are meant for resale okay so if it is meant for resale then purchases account is affected bought goods from X 55,000 now here this transaction is a credit transaction this is what this is a credit transaction Y and what does it mean by credit transaction it means that you have purchased goods from this person X and you haven't paid the money yeah you have promised him that you will pay him later okay that's called credit purchase yeah you're purchasing goods on credit fifty five thousand so now whenever this happens you know what happens is your purchases account is affected that's one thing and one more account that is affected is this account this person account X account yeah now who is this person X see here see this you have purchased goods on credit yeah purchase on credit whenever you purchase something on credit then what happens you have to pay to this person in future isn't it the liabilities arising over here and obligation is arising now we have a present obligation to pay to this person and this person will be our creditor because we owe money to him yeah so this creditor is liability it is what liability we have to pay to this person so that's Y so liability has credit balance right so if liability is increasing you have to credit that so here this X person is our credit our and liability is increasing so you have to credit his account all right and then what happened in the same transaction purchases account right so purchases is what purchases is expense ya purchase account is an expense so if expense is increasing you have purchased the goods right so purchases account is increasing so you have to debit that yeah so the entry would be very simple see here the entry would be purchases account debit your expense is increasing debit to X account now who is this X person this person is your creditor this liability account all right so if liability is increasing you have to what you have to credit that yes so X account will be credited fifty five thousand fifty five thousand simple alright okay then the six transactions see here sold goods to wife thirty thousand yeah you are selling the goods - y-yeah - this person and this is a credit transaction this is also a credit transaction why is that see here I will tell you one thing whenever you go to a shop right whenever you go to a shop and you purchase something let's say you purchase a pen yeah 10 rupees spend so now do you ask name to that person what is your name to that shopkeeper or does he ask you what is your name no right because it's a cash transaction you took the pen you pay the money and you came home right but if let's say you went there and you purchase the same pen 10 rupees or whatever it is let's say hundred will be something you purchased 100 rupees a little bit big value yeah so you purchase something and then you check your valid you have left the valid at your home only yeah you don't have the valid fine if you don't have the valid then what will happen you will have to promise the shopkeeper that I will pay you later isn't it yeah you have to promise him you will pay him later then what will happen this person will ask your name yeah he will ask your number he will ask your address isn't it of course they will because they don't know you right and even if they know you still they will ask everything yeah when are you going to pay back what's your name and everything yeah so that's the thing whenever you purchase something and you don't pay money then the name comes into the picture names number information comes into the picture so whenever in transaction here in the question names are given yeah and they haven't mentioned cash transaction or something like that then you have to understand that these are credit transactions yeah credit transaction means that money is not paid yeah it is yet to be paid right so here in the sixth transaction what is happening sold goods too why 30000 you have made these sales but these are credit sales this your customer why he has not paid you anything he is promising you to pay later yeah he's promising you to pay later this why person you have sold you know you have made sales isn't it you have made sales you have sold the goods but he's promising you to pay later so now this person will be called as dead are this person will be called as delta and delta is our asset why is it an asset because you know this person will P as the money in future so from this data we have a future economic benefit so that's why this person will be called an asset that are is an asset account all right yes so see here sold goods to y 30,000 here two accounts are getting affected one is the sales account the revenue account yeah revenue category yeah and then the another account that is being affected is data recomm why account yeah mr. Y account so mr. Y is the data and data is our asset yeah because he will pay us money in the future we have future economic benefit so that's an asset we have to debit that if it's increasing yeah here it is increasing now see the transaction yeah see whenever you sell something on credit to somebody yeah here in case it is who mr. y yeah so that person who owes money to you yeah he has to pay money to you so he would be your debt are and it is an asset account alright so here the two accounts that are being affected is what the first one is the sales account and the second one is the mr. Y account or you can say that our account or an asset account yes but here we will use his name okay wise account debit yeah why debit wide a bit because see here asset is increasing right he has to pay to us in future yeah when we made that sale right when we made that sale what happened immediately this data came to into picture isn't it so this is increasing now he has to pay us how much in this question thirty thousand he has to pay us thirty thousand yeah thirty thousand so now the data is increasing by thirty thousand so whenever data increases data means asset yeah data falls in asset category so it increases you have to debit that account so wise account debit yeah thirty thousand and sales will credit because sales is increasing you have just made the sales right and sales is what sales is revenue account its income right so you have to credit that yeah wise account debit 30 thousand sales account credit thirty thousand simple as that yeah okay then seventh transaction see here what seventh transaction do we have over here seven transaction is see here receive from Y thirty thousand now after some time we have received the money from this guy which guy our data we have sold right previously we have sold goods to disperse and wife now he has paid us that money thirty thousand so now see here before debtor increased right that are he increased isn't it he had to pay money to us yeah so it increased but now he has paid the money if he paid the money now now does he have to pay anything to us No so our debtor will get decrease yeah before when we made the sales he didn't pay us he has to pay right so acid was increasing yeah we were supposed to get money but once we get the money now we are not supposed to get anything so our debt our account will get decreased right so whenever that decreases letter is what it is an asset if it decreases you have to credit thaddeus isn't that our rule whenever an asset that are is an asset it decreases you have to credit that yes so that's what you have to do see here in this transaction here receive from why what we have received we have received cash cash account is being affected and then the another account is the Y account yeah the data is getting reduced yeah he has paid the money so our asset account is getting reduced so that's why we have to credit wise account cash account debit 30 thousand we have got the cash yeah cash is increasing debit that as it is increasing debit that and to wise account because we have what our debt are is decreasing so that's why we have to you know reverse is account here it was debited here you will credit and cancel his account because money is received that's it we are not going to receive anything more from this guy from Y yeah so we have the cancer is account debit equal to credit will cancel off all right yes then the ninth transaction sorry a transaction here we have is what the a transaction is paid to X 55,000 yeah now see previously in the fifth transaction we had purchased goods on credit right from X 55,000 worth of goods that was a credit transaction we promised him that we will pay in future so now in the a transaction if you can see we have paid him we have paid the money to this experts and our supplier yes so once you pay to your credit ah yeah your creditor from whom you purchased previously on credit yeah now you are making the payment paid if you pay him then you don't have to pay anything more right once you paid him then that's done right the liability will get reduced yeah if you pay to your credit ah whatever money that was outstanding if you make the payment then you don't have to pay him anymore yes so the liability the obligation will come down the liability will get reduced yeah so if liability reduces you have to debit right so here you are making a payment to the ex yes so X was your creditor X account was your credit or account liability account liability is getting reduced yeah liability is getting reduced and then what you have paid you have paid cash cash is an asset cash is also reduced so if liability reduces what you do liability reduces you debit that yes see the rules liability reduces you debit dot yeah see here X account debit yeah previously here the liability was increasing yeah you credited X account but now here you have paid him liability is reducing you are debating it and then the cash is also reducing because you are paying the cash so if cash is reducing cash is an asset asset reduces you have to credit that yes credit the cash fifty five thousand fifty five thousand yes then the nine transaction CEO purchase building seven lakh yeah purchase building seven line now here what is happening which two accounts are getting affected a building account of course yeah because here you can see building we have purchased the building yeah and here they are not saying this is a credit transaction or something here they haven't taken any names or something from whom we have purchased the building yeah so we can assume safely that this is a cash transaction yeah so you can see that cash account is getting affected your cash account and building account so here building is increasing you have purchased the asset yeah you have God the building building is increasing yeah I mean the building account is increased in values yeah and then cash account is decreasing because you have paid the money yeah cash account asset account decreasing credit got to cash account but then what is building account building account is also an asset isn't it future economic benefit is there we can use that building in our business yeah and we have a control over that we just have purchased it yeah we own that so that's an asset it is increasing debit that simple building account debit to cash account yeah the narration you can write anything okay it's it depends upon you you know being building purchase like that whatever you want you can write yeah it's simple in your own words you can write the narration then the 10 transactions see here sold for nature 30 thousand yeah now if you sell asset now furniture is an asset so if you sell the asset then asset will get reduced yeah so which to accounts are getting affected of course the furniture account and the another account er is the cash account yeah because here we have sold the furniture on the cash basis we are not credit basis here they are not given any names or nothing yeah nothing they have said so we can assume that this is a cash transaction same in the 9th round section yeah we can assume that this is a cash transaction so to account which are affected or furniture accountant cash account yeah so we have got the cash because we have sold the furniture so cash is coming into the business cash is increasing and then furniture we have sold it off so furniture account will get reduced by thirty thousand so if asset is reduces credit that credit the furniture account and cash is also no cash is increasing so you have to debit that yeah cash account debit 30 thousand cash is increasing and then furniture you have sold of the furniture it is getting reduced so when acid reduces you have to credit God simple entries here very simple entries yeah these are the simple entries in the coming videos we are going to you know see more advanced and Club entries your compound entries where you know three or four accounts are getting affected at once so how to pass those entries and all we will see so now you can practice yeah see it's very simple yeah so this remember whenever names are given you have to assume that these those are credit transaction unless otherwise they have given cash somewhere they have said you know bought goods from X on cash so then it's a cash strong yeah they have just given the name just to confuse you yeah so like that and then you should know this also yeah the person to whom you sell goods on credit that is your data and to the person from whom you have purchased goods on credit that is your creditor yeah you have to pay to this person and this person data is supposed to pay you you are supposed to receive the money yeah this is an asset account future economic benefit is there you are supposed to get the money and creditor means what you have to pay that's liability account yeah keep that in mind yeah see you in the next video yeah so far we have seen a lot of things now yeah just revised everything yeah okay then see you the next video now this video has been a really long video yeah okay then bye

Channel: Saheb Academy

Views: 499,120

Rating: 4.9410496 out of 5

Keywords: journal entries basic concepts, class 11, xi, ca foundation, bcom, b.com, how to pass journal entry, modern classification of accounts, golden rules of debit and credit, modern approach, solved example, debit balance, credit balance, drawings, expenses, asset, liability, capital, revenue, income, dealer technique, saheb academy, naresh aggarwal, jolly coaching, kauserwise, easy method, journal entries debit and credit, commerce, class 12, accounting basic, explained, debited, credited, simple

Id: NP99QtgkiOQ

Length: 45min 6sec (2706 seconds)

Published: Mon Jun 29 2020