Understanding Journal Entries and Ledgers

What is a Journal Entry?
A journal entry is the first step in the accounting cycle. It records each financial transaction in the journal (also known as the book of original entry) using the double-entry system.

Key Features:
Every entry affects at least two accounts (debit and credit).

Maintains the accounting equation:
Assets = Liabilities + Equity

Format:
Date Particulars L.F. Debit (₹) Credit (₹)
DD/MM/YYYY Account to be debited Amount
To Account to be credited Amount

Example:
Bought furniture for ₹10,000 in cash

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Date Particulars L.F. Debit (₹) Credit (₹)
01/06/2025 Furniture A/c Dr. 10,000
To Cash A/c 10,000
(Being furniture purchased for cash)
🔹 What is a Ledger?
The ledger is the book where all journal entries are posted account-wise. It is also called the book of final entry. Each account (like Cash, Sales, Rent, etc.) has its own page or section.

Ledger Format:
Each account in the ledger is prepared in T-shape or two-column format.

Cash A/c
Date
----------
01/06

🔹 Summary of Flow:
Transaction → Journal Entry → Ledger Posting → Trial Balance → Financial Statements