Short Notes — Ch 5 Double Entry, Journal & Rules of Journalizing
⚡ Ch 5 — Double Entry, Journal & Rules of Journalizing
FAA 2022 = the real Finance Account Assistant paper, 6 Mar 2022 — FAA-2022-paper 2024 = the FAA paper of 28 Jan 2024 — 2024-paper PAA 2020 = the Panchayat Accounts Assistant paper of 10 Nov 2020 — a different post, kept as practice, with the official JKSSB key. Its questions were previously mislabelled "2022" and duplicated under two booklet numberings; de-duplicated 1 Sep 2026. See Four-Paper-Comparison.
PYQ: 7 questions — PAA 2020·Q85, Q92, Q95, Q96, Q98, Q101, Q104. ⭐⭐ The single biggest chapter in the 2022 paper (7 of 30 marks). MCQ bank: 34 questions (Q52–72 · Q317–329). If you master one chapter, make it this one.
1️⃣ The core
Double entry: every transaction has two aspects — debit and credit, both recorded. At least two accounts are affected. Invented by Luca Pacioli; the only scientific system.
Debit = LEFT side · Credit = RIGHT side Assets + Expenses = Liabilities + Capital + Income
Journal — from the French jour (day). The book of original / first entry; records transactions chronologically. Journalising = the act of recording in it. Posting = transferring from journal → ledger.
2️⃣ ⭐⭐ Types of Accounts + the Three Golden Rules
| Account type | Covers | Golden Rule |
|---|---|---|
| Personal | persons, firms, companies | Debit the receiver · Credit the giver |
| Real | all assets / properties | Debit what comes in · Credit what goes out |
| Nominal | income, expenses, losses, gains | Debit all expenses & losses · Credit all incomes & gains |
Personal accounts split three ways
| Sub-type | Example |
|---|---|
| Natural | Ram, Rahim |
| Artificial (Legal) | Reliance Ltd, a club |
| ⭐ Representative | Outstanding salary, Prepaid rent/insurance, Accrued interest |
Outstanding salary A/c · Prepaid rent A/c look like expenses but are Representative Personal Accounts — they represent a person (the one owed / who owes). Real = Impersonal too. Accounts split into Personal and Impersonal; Impersonal = Real + Nominal.
Quick classification drill
| Account | Traditional | Modern |
|---|---|---|
| Building, Cash, Investment | Real | Asset |
| Bank Fixed Deposit | Personal | Asset |
| Rent, Salary, Interest, Discount, Bad Debts, Depreciation | Nominal | Expense |
| Sales | Nominal ✅ | Revenue |
| Purchases | Nominal ✅ | Expense |
| Rent Outstanding, Prepaid Salary, Rent received in advance | Personal (Representative) | Liability / Asset |
| Capital, Drawings | Personal | Capital |
The illustration on page 26 prints Purchases and Sales as Real accounts. The author's corrigendum corrects this: "read Purchases account & Sales account as Nominal Accounts under Traditional Approach." Use Nominal.
3️⃣ Modern Approach (Accounting Equation Approach)
Five categories: Asset · Liability · Capital · Expense/Loss · Revenue/Gain
| Account type | Normal balance | Debit when | Credit when |
|---|---|---|---|
| Asset | Debit | Increase | Decrease |
| Expense | Debit | Increase | Decrease |
| Drawings | Debit | Increase | Decrease |
| Liability | Credit | Decrease | Increase |
| Capital | Credit | Decrease | Increase |
| Revenue | Credit | Decrease | Increase |
Memory hook: things you own or spend (Assets, Expenses, Drawings) → Debit balance. Things you owe or earn (Liabilities, Capital, Revenue) → Credit balance.
4️⃣ 🎯 PYQs from this chapter (all 7 from 2022)
PAA 2020 · Q85 — Drawings account is classified under
a) Real Account · b) Personal Account · c) Impersonal Account · d) Nominal Account → Ans: B Drawings = Personal account.
PAA 2020 · Q86 — What does a Nominal account having debit balance Represent ?
a) Income/Gain · b) Cash · c) Asset · d) Expenses/Losses → Ans: D A Nominal account with a debit balance is an expense or loss.
PAA 2020 · Q102 — Nominal account is classified under
a) Impersonal Account · b) Real Account · c) Personal Account · d) Representative Personal Account → Ans: A Nominal → Impersonal. Impersonal = Real + Nominal.
PAA 2020 · Q110 — Which one out of the following best explains doubts entry system?
a) Purchase increases debit; income decrease credit · b) Expense increases debit; income decreases credit · c) Receiver is debit; giver is Credit · d) Receiver is credit; giver is debit → Ans: C The Personal-account golden rule: debit the receiver, credit the giver.
⭐ From the REAL FAA 2022 paper (6 Mar 2022) — added 1 Sep 2026. See FAA-2022-paper.
FAA 2022 · Q50 — In the double-entry book keeping system:
a) same transaction recorded in two people's accounts b) two books are kept c) recording a transaction and giving it debit & credit entry d) recording the transaction twice → Ans: C The dual aspect — every transaction has an equal debit and credit.
PAA 2020 · Q107 — Goods given as charity should be
a) Credited to Purchases account · b) Debited to purchases Account · c) Not recorded in purchase account · d) Credited to sales account → Ans: A Goods given as charity are credited to Purchases (i.e. deducted from purchases).
5️⃣ Journal entries you must know cold
| Transaction | Entry |
|---|---|
| Owner brings capital | Cash/Bank A/c Dr · To Capital A/c |
| Goods bought on credit from Z | Purchases A/c Dr · To Z's A/c |
| Credit sale to Ahmed | Ahmed's A/c Dr · To Sales A/c |
| Salary/wages paid | Salary A/c Dr · To Cash/Bank A/c |
| Rent received | Cash/Bank A/c Dr · To Rent A/c |
| Rent paid to landlord | Rent A/c Dr · To Cash A/c ⭐ (credit Cash — not the landlord) |
| Goods withdrawn by owner | Drawings A/c Dr · To Purchases A/c |
| Goods given as charity | Charity A/c Dr · To Purchases A/c |
| Bad debts recovered | Cash A/c Dr · To Bad Debts Recovered A/c |
| Office computer sold (used asset) | Cash A/c Dr · To Computer A/c (not Sales) |
| Prepaid adjustment | Prepaid Expense A/c Dr · To Expense A/c |
6️⃣ High-frequency MCQ traps
| MCQ | Point |
|---|---|
| Q52 / Q320 | Capital brought in → credit Capital A/c |
| Q53 | Transactions are initially recorded in the Journal |
| Q55 | Credit sale to Ahmed → debit Ahmed's A/c (the person, not Sales) |
| Q56 / Q318 | Every transaction affects at least two accounts |
| Q60 | Goods bought on credit from Z → credit Z's account |
| Q61 | Office computer sold → credit Computer A/c |
| Q62 | Bad debts recovered → Cash Dr, Bad Debts Recovered Cr |
| Q70 | Rent paid to landlord is credited to Cash A/c |
| Q71 | Written evidence of a transaction = Voucher |
| Q65–68 | Building = Real · Interest, Salary = Nominal · Investment = Real |
| Q78 | Journal → Ledger = Posting |
| Q317 | Cash withdrawn by proprietor → credit Cash A/c |
| Q315 / Q316 | Outstanding salary / Prepaid rent = Representative Personal |
7️⃣ If you remember nothing else
Debit the receiver, credit the giver (Personal) · Debit what comes in (Real) · Debit expenses & losses (Nominal) · Impersonal = Real + Nominal · Drawings = Personal · Outstanding/Prepaid = Representative Personal · Purchases & Sales = Nominal (per corrigendum) · Journal = book of original entry, Posting = journal→ledger
🔗 Related
- Full notes: L-5-DOUBLE ENTRY SYSTEM OF ACCOUNTING, JOURNAL & RULES OF JOURNALIZING · MCQs Q52–72, Q317–329 in MCQs
- Prev: SN-4-Accounting-Equation · Next: SN-6-Voucher-Approach
