In accounting, journal entries are required for recording each and every transaction. The journal will be certain proper by following rules for particular journal entries. These rules guide you on what account to debit and what account to credit. Without these rules, your accounting data may go in the wrong direction and your financial report will not present the actual position of the business. These are the basic journal entries rules that you use to determine what treatment is applied to each transaction. These rules are referred to as the golden rules of journal entry or journal entry golden rules of accounting. Their classification is based on the type of accounts involved: personal, real, or nominal. In journal entries for each type of account, you need to learn the debit and credit rules in journal entries. In this article you will read about journal entries rules, what it is doing, how to write a journal entry, and the full process of journal entries basic rules. The rules of journal entry in Tally rules will also be illustrated with examples.
What is Journal Entry in Accounting?
The first stage of documenting a business transaction Each business transaction is recorded by using a journal entry. It records the particulars of the transaction in the accounting records. You record every journal entry when money comes in or out.
Meaning of Journal Entry
You use a journal entry to write down all the financial transactions in a journal book. This record shows:
- Date of transaction
- Accounts affected
- Amounts debited and credited
- Explanation or narration
You need to use double-entry accounting — every debit must have an offsetting credit of equal value.
Why is it Important?
You use journal entries as the foundation of your accounting. Yes, you should be careful when entering the transaction—if you put it in wrong, all of your statements will reflect those bad values. Proper journal entries help you:
- Track all income and expenses
- Prepare financial statements
- Audit your books easily
- File taxes correctly
Moreover, journal entries also help in identifying the errors promptly, especially when we use a software like Tally or SAP, etc.
What is Included in Journal Entries?
Each journal entry must contain four main components. All these must be included whenever you record any transaction. If you miss a single element, you may end up confused (and/or inflating your accounting and paperwork errors).
Components of a Journal Entry
- Transaction date – The date in which the transaction took place.
- Accounts involved — Account to be debited Account to be credited
- Values – Debit & Credit have equivalent values
- Narration – A brief description of the transaction.
Let’s look at an example:
Date: 01-April-2025
Entry:
Rent A/c Dr ₹5,000
To Cash A/c ₹5,000
(Being rent paid in cash)
This entry plainly indicates what affected accounts, how much money is involved and what the transaction was about. To even make an entry like this you need to apply journal entries rules in accounting.
How to Make Journal Entry?
The first step to make a journal entry is to find out the Transaction. After that you have to determine what accounts are in the picture apply the account journal entries rules to reach your final debit and credit.
Steps to Make a Journal Entry
Follow these simple steps:
- Detect the transaction – Understand what occurred.
- Determine the accounts involved – Which account is paying and which is being paid.
- Classify the accounts – Is it personal, real or nominal?
- Use golden rules – Follow correct journal entries golden rules.
- Make that entry – Debit one account, credit the other.
- Add narration — Write a short note explaining the entry.
Example 1 – Cash Sales
You make cash sales of goods ₹8,000.
Cash A/c Dr ₹8,000
To Sales A/c ₹8,000
(Being goods sold for cash)
Cash is a real account and Sales is a nominal account here. So you did the right golden rules journal entry.
Example 2 – Goods purchased on credit from Ramesh ₹10,000
Purchase A/c Dr ₹10,000
To Ramesh A/c ₹10,000
(They are goods purchased on credit)
Ramesh is a personal account. Purchases are nominal. You wrote in the journal entry golden rules of accounting for both accounts.
Journal Entries Rules: Golden Rules of Accounting
Now let us understand the 4 most important journal entries rules. These is the base of accounting. You have to apply them correctly with every transaction.
Hence, these rules of journal entry is also known as the basic journal entries rules or the golden rules of journal entry.
Accounting Accounts Types
You have three kinds of accounts:
- Personal Account – Accounts related to individuals or businesses (e.g., Ramesh A/c, SBI Bank A/c)
- Real Account — Related to profit and loss (e.g., Rent A/c)
- Nominal Account – Expenses, income, or losses or gains (e.g., Salary A/c, Commission A/c)
| Type of Account | Debit Rule | Credit Rule |
| Personal Account | Debit the receiver | Credit the giver |
| Real Account | Debit what comes in | Credit what goes out |
| Nominal Account | Debit all expenses and losses | Credit all incomes and gains |
Every time you need to apply these rules with debit and credit rules in journal entries.
Example 1 – Personal Account
Paid ₹2,000 to Rahul
Rahul A/c Dr ₹2,000
To Cash A/c ₹2,000
You receive money from Rahul, therefore you debit him.
Example 2 – Real Account
Bought furniture ₹7,000
Furniture A/c Dr ₹7,000
To Cash A/c ₹7,000
Furniture arrived, cash flowed out.
Example 3 – Nominal Account
Paid salary ₹12,000
Salary A/c Dr ₹12,000
To Cash A/c ₹12,000
Salary is an expense, therefore you debit it.
And these are the real journal entries rules in accounting that works in every system.
Journal Entries Rules in Tally
Tally is an accounting software that is widely used in India. Also same accounting rules of journal entry in tally should be applied in Tally while entering data in software.
How to Pass Journal Entries in Tally
- Go to Accounting Vouchers
- Press F7 for Journal Voucher
- The account that benefits is debited
- Record the credit entry for the entity that provides the benefit
- Add narration and save
Example – Paid Phone Bill ₹500
- Debit: Telephone Expenses A/c
- Credit: Bank A/c
- Narration: Paid telephone bill through bank
Thus, this data follows the journal entries golden rules and is reflected in Tally’s reports automatically. Create correct ledger accounts in Tally for accurate reports. For most nominal accounts, use Indirect Expenses.
Mistakes People Make While Using Journal Entries Rules
Practicing rules of journal entries in accounts, people often commit mistakes. For flawless journal records, you need to stay away from them.
Mistakes to Avoid:
- Credits or debits to the wrong account
- Forgetting narration
- No account type classification
- Combining the guidelines of personal and genuine accounts
- Values entered incorrectly on mastercard or credit
Relevance to ACCA Syllabus
The rules of journal entries have to be applied appropriately during ACCA’s Financial Accounting (FA) and Financial Reporting (FR) papers, so this is something students must remember. These rules are fundamental for preparing accurate accounts, and also form the basis of double-entry systems, which ACCA examines at various levels.
Journal Entries Rules ACCA Questions
Q1: Nominal account rule?
A. Debit the giver, credit the receiver
B. Debit the money that is received, credit the money that is paid out
C. Debit all expenses and losses credit all incomes and gains
D. Debit the access, credit the offer
Answer: C
Q2: Which type of account is governed by the rule “credit the giver”?
A. Real account
B. Nominal account
C. Personal account
D. Asset account
Answer: C
Q3: Likewise, the general journal entry for paid in cash for rent is:
A. Rent A/c Dr; To Bank A/c
B. Cash A/c Dr; To Rent A/c
C. Rent A/c Dr; To Cash A/c
D. A/c Dr; To Rent A/c.
Answer: C
Q4: What is the golden rule for a real account?
A. Debit the balance coming in and credit the balance going out
But debit expenses, credit income
C. Debit receiver, credit giver
D. Debit to the buyer, credit to the seller
Answer: A
Q5: In a journal entry, the total of debits should:
A. Be more than credits
B. Be less than credits
C. Match the trial balance
D. Always equal credits
Answer: D
Relevance to US CMA Syllabus
In US CMA Part 1: Financial Planning, Performance and Analytics, journal entries rules knowledge is useful in making financial statements, budgeting, and cost tracking. When debits and credits are understood these result in good audit trails and accurate performance reporting.
Journal Entries Rules US CMA Questions
Q1: When you debit an expense account?
A. Income increases
B. Assets increase
C. Expenses increase
D. Liabilities increase
Answer: C
Q2: What account does “debit what comes in” refer to?
A. Nominal
B. Real
C. Personal
D. Liability
Answer: B
Q3: What account is impacted when a business collects cash from a customer?
A. Bank A/c
B. Cash A/c
C. Sales Return A/c
D. Capital A/c
Answer: B
Q4: When goods are purchased for cash, the entry would be:
A. Cash A/c Dr; To Purchase A/c
B. Purchases A/c Dr; To Cash A/c
C. Sales A/c Dr; To Cash A/c
Sales a/c Dr; To D. Inventory A/c
Answer: B
Q5: What type of account is “Commission Received”?
A. Real
B. Nominal
C. Personal
D. Asset
Answer: B
Relevance to US CPA Syllabus
In CPA FAR (Financial Accounting and Reporting) section, journal entry rules will determine adjusting entries, what accounts get classified and how reconciliation works. CPAs then rely on these principles to help ensure compliance with US GAAP and accurate financial disclosures.
Journal Entries Rules US CPA Questions
Q1: What account do you credit when recording the capital introduced into the business?
A. Capital A/c
B. Cash A/c
C. Revenue A/c
D. Drawings A/c
Answer: A
Q2: In a journal entry, the following must always be equal?
A. Income and liabilities
B. Assets and expenses
C. Debits can total and credits can total
D. Sales and purchases
Answer: C
Q3: What is the entry for to receive interest income cash?
A. Bank A/c D, Interest Income A/c To
B. Bank A/c Dr; To Interest Income A/c
C. Cash A/c Dr; To Debtor A/c
D. To Interest A/c Dr; To Revenue A/c
Answer: A
Q4: The account classification for “Accumulated Depreciation” is:
A. Expense
B. Asset
C. Contra-asset
D. Liability
Answer: C
Q5: What is the impact if a CPA courts income by debiting instead of crediting it?
A. Income is overstated
B. Expenses are understated
C. Income is understated
D. Liabilities increase
Answer: C
Relevance to CFA Syllabus
Being familiar with the rules that govern each type of journal entry will help you understand financial statements and analyze how transactions will affect the income statement, balance sheet and cash flow in CFA Level I. Those skills help facilitate proper valuation and equity analysis.
Journal Entries Rules CFA Questions
Q1: Which statement shows the effect of journal entries over time?
A. Balance Sheet
B. Income Statement
C. Trial Balance
D. General Ledger
Answer: B
Q2: “Debit all expenses” intersects which financial metric?
A. Net profit
B. Working capital
C. Current ratio
D. Retained earnings only
Answer: A
Q3: A company gets a cheque from a debtor. What is the journal entry?
A. Debtor A/c Dr; To Bank A/c
B. Bank A/c Debited; Debtor A/c Credit
C. He also read in the newspaper that his company was in trouble.
D. Capital A/c Dr To Debtor A/c
Answer: B
Q4: What is the golden rule for income earned but not received?
A. Credit revenue, debit accounts receivable
B) Debit income, credit accounts payable
C. Debit cash, credit capital
D. Credit cash, debit revenue
Answer: A
Q5: What will happen if sales are recorded without balanced debit?
A. Assets increase
B. Liabilities increase
C. Journal is imbalanced
D. Capital is overstated
Answer: C
