What is a compound journal entry?

A compound journal entry is one that involves more than one debit or more than one credit (or both) in a single entry. Example: Goods worth ₹10,000 purchased; ₹6,000 paid in cash and ₹4,000 on credit: Purchases A/c Dr. 10,000; To Cash A/c 6,000; To Creditor A/c 4,000. This combines two separate entries into one.

What is the purpose of a narration in a journal entry?

Narration is a brief explanation written in brackets below each journal entry explaining the reason for the transaction. It is important because: (1) it serves as a reference for auditors; (2) it explains why the entry was passed; (3) it helps in understanding transactions years later. Without narration, entries lose context.

What are the limitations of a trial balance?

A trial balance that balances DOES NOT mean accounts are 100% correct. It fails to detect: (1) Errors of omission — transaction not recorded at all; (2) Errors of commission — entered in wrong account (e.g., ₹500 credited to Ram instead of Sam); (3) Compensating errors — two equal errors that cancel out; (4) Errors of principle — wrong classification (e.g., capital expenditure treated as revenue).

Journal Entries and Ledger

Recording of Transactions • Class 11 Accountancy • NCERT • CBSE

Journal is the book of original entry — every transaction recorded in chronological order with date, accounts debited/credited, amount, and narration. Ledger is the book of secondary entry — all journal entries posted to individual account T-format ledger accounts. Trial Balance verifies arithmetic accuracy.

Key Formulas

Assets = Liabilities + Capital
Debit Balance = Total Dr. side > Total Cr. side

Frequently Asked Questions

What is a compound journal entry?: A compound journal entry is one that involves more than one debit or more than one credit (or both) in a single entry. Example: Goods worth ₹10,000 purchased; ₹6,000 paid in cash and ₹4,000 on credit: Purchases A/c Dr. 10,000; To Cash A/c 6,000; To Creditor A/c 4,000. This combines two separate entries into one.
What is the purpose of a narration in a journal entry?: Narration is a brief explanation written in brackets below each journal entry explaining the reason for the transaction. It is important because: (1) it serves as a reference for auditors; (2) it explains why the entry was passed; (3) it helps in understanding transactions years later. Without narration, entries lose context.
What are the limitations of a trial balance?: A trial balance that balances DOES NOT mean accounts are 100% correct. It fails to detect: (1) Errors of omission — transaction not recorded at all; (2) Errors of commission — entered in wrong account (e.g., ₹500 credited to Ram instead of Sam); (3) Compensating errors — two equal errors that cancel out; (4) Errors of principle — wrong classification (e.g., capital expenditure treated as revenue).

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