Hello everyone hi welcome to the channel of WallStreetmojo or watch the video till the end also if you are new to this channel then you can subscribe us by clicking the bell ican friends today we are never going to learn a concept which is known as journals in accounting see journal is the most important concept in the accounting sea journal is like the is the base's of the building so for the accounting the pays is the journal if your journal goes wrong your ledger is going to go wrong if your ledger is going to go wrong then your trial balance will go wrong and so do your financial statement so this is like the base of the whole accounting system so why why this is so important let's understand this first let's understand what is journal so this is called a book of the original entry the journal entries have been passed where in any financial transactions of a company that occurs would get first recorded as a transaction in the journal okay no issue let's understand this in a complete detailed fashion see journal in accounting is named as the book of the original entry you can say that right now it's it's called the book of the original entry because if if any financial transaction that occurs the accountant of the company would first record the he will record the transaction right now and this transaction will be recorded where it will be recorded in the journal now that's why journal you can say in accounting is very important for any anyone to understand and no matter who you I mean who you would be accounted our finance enthusiast or on an investor you would like to understand the inherent transactions of the company so you need to understand how to pass a journal entry before anything else the first and the foremost thing that we need to understand is the double entry system because we are will be recording things in the double-entry system basis see all those big company means the big companies or the midsize companies they will surely go for the double-entry system but if they are an SME or the small companies or the small traders they will usually go for the single entry system which is not feasible when we talk about for the big companies so let's talk about double entry system before getting into channel because this is the thing that we need to unlearn so as to learn the journal so double entry system is basically the system that is used to record in the journal so it's you can say that you know let's understand you know what double entry system is all about see double entry system is is a system you know that has basically two parts the first part is the debit items and the second part is called the credit items so if you know what is debit and credit you would be able to understand the entire financial accounting quite effectively these are the two most important things in double-entry system okay let's understand the rules of the debit and credit briefly and then we'll see the example of journal entries see debit is the account when the asset or the expenses if they increase right again debit is going to be when when the liabilities and the revenue are going to decrease so this are the norms for the debit cases now let's see for the credit if you see for credit it is going to be vice versa case the asset and the expenses are going to reduce just the opposite of this and credit when your liability and your revenue is going to increase so this is just debit and creditor are opposite of each other right so this example you know will help you to understand you know how to debit in credit the accounts in the transaction we will look at these several examples before talking about the format of the journal entry let's have a look at the first example example number one now let's understand the format also I don't want to work no format the format is like date there's a folio number then we have particulars and then we have the debit items and the credit items let's increase decrease the folio number usually this is for the recording of where exactly the folio number is recorded very exactly it is situated and here the debit and credit amounts and this is the date so this is how the whole journal entry works now let's say there's a guy called M he buy his goods in cash so what would be the journal entry let's say the transaction is on 1-10-2018 and the folio number is 1 let's say so in the particulars here there's a guy called M he buys goods so what is coming in the goods and what is going out is the cash right what is coming in the goods and what is going out is the cash so the goods account will be debited and the cash count will be credited so debit amount let's say is $10,000 so this has to be $10,000 so what comes in debit what goes out credit so as we know the rules of debit and credit you know we can see you know M is expending cash that means cash is going out in lieu of the cash and he is receiving good that means cash is a current assets and is decreasing and purchased as an expense is increasing so as per the rule will credit the account when the asset decreases and will debit the account when the expenses increases so this is the journal entry let's say on 2-10-2018 there's another transaction that is happening let's say again M mr.

M or let's say John let's say this was for John and John is now selling the goods in cash so he what is going to come in cash account debit and goods are going out so goods account credit and let's say he is selling at 12000 right so over here John sells the goods in cash meaning cash is coming in and goods are going out so cash is an asset right which is increasing and sales or you can say good there's no goods account you can say sales and this is a purchases you can say this as the purchase account okay so sales is basically the revenue account which is increasing right so as per the rules debit and credit when asset increases right it is debited and when the revenue increases it is credited you can see cash in sales this is how it is recorded let's take another example let's say on 3rd of 10-2018 the folio number is 3 let's say you see mister mister John is paying cash I mean let's say mr.

John pays off his long-term debt in cash so what would be the journal entry see here you know we can see you know mr. John is paying cash that means the cash has to go out so cash credit right and as a result his long-term debt is also getting checked off that means the long-term debt which is a liability is getting decreased so as per the rules of the debit and credit when assets get reduced it is credited and then the liability gets reduced it is debited so journal entry is going to be long-term debt account debit to cash account credit let's say it was of $20,000 let's take the last example 4-10-2018 the folio number is for let's say more capital is being let's it John is basically you know he is investing into the company in the form of cash okay so in this account there are two accounts one is the capital and another is the cash so here cash is invested into the business so as we know the cash is an asset right and investing in the business means asset is increasing and at the same time you do the injection of more cash into the business the capital which is a liability is also increasing so when the liability increasing increases we credit the account so as for the rules of debit and credit the journal entry in the accounting will be something like this the cash account Debit and capital account is going to be credited and let's say he injected closely to $50,000 into his business so this is how the journal entry thing works based on your double entry concept this is a double entry concept there has to be always two effects right and these are the rules that you should know it very well so as to be really be effective and accurate on your journal entries I hope you have got a clearer idea regarding the journal entries remember one thing journal entry is the based then the ledger based.

On which the trial balance is prepared and the financial statement financial statement includes your balance sheets trial or cash flow statements and the profit and loss account that's the income statement and so on and so forth so that's it for this particular topic if you have learned and enjoyed watching this video please like and comment on this video and subscribe to our channel for the latest updates thank you everyone Cheers.