Journalising Transactions

To journalise a transaction correctly, follow these steps in order:

1. Identify the two accounts involved in the transaction.
2. Classify each account (Personal/Real/Nominal, or Asset/Liability/Capital/Revenue/Expense).
3. Apply the relevant rule to each account to decide which is debited and which is credited.
4. Record the entry with the account to be debited first (written with "Dr." against it), followed by the account to be credited (indented and preceded by "To"), and the amount in the appropriate column.
5. Write a narration in brackets, briefly stating the nature of the transaction.

For example, "Purchased goods for cash ₹10,000" — Goods (Purchases) coming in is a Real Account rule (debit what comes in), Cash going out is also a Real Account rule (credit what goes out):