3 Common Types of Journal Entries/ Contra Entry
Common Types of Journal Entries :
There are the basic or essential types of Journal entries and it is usually used in Accounting. First entry is called the Single entry and the other one is called the Double Entry and the third one is Compound entry system then contra entry. I will discuss them one by one :
1. Single Entry System :
It is that system in which business transactions are recorded as a single instead of using Double entry . it is not an appropriate way for recording the economic events because if we record transactions according to this system then it is impossible for us to make trail balance. This system is usually focus on cash receipt and cash payments. The perfect instance / example of single entry system is Cash Book. This system does not consider Assets and liabilities. Using Double entry system is more valuable or accurate for recording them rather than single entry system.
1. Double Entry System :
As its name, it is a simple entry or in simple words we can say that it is a single entry system in which one is debited and the other item is credited. For instance Aqsa purchased Furniture for RS/- 3,000.
Furniture Account Debited with RS/- 3,000
Cash Account Credited with RS/- 3,000
Rims pay rent for RS/-7,000
Rent Account Debit with RS/-7,000
Cash Account Credit with RS/-7,000
In this entry assets is increased in the form of furniture and assets is decreased in the form of cash so it is a single entry.
It is that type of entry which have more than one debit account and more than one credit account. For instance we purchased building of RS/-4,000 and pay RS/-2,000 in cash and promise to pay the rest of the amount on next day.
Building Account Debit with RS/-4,000
Cash Account Credit with RS/- 2,000
Creditor Account Credit with RS/-2,000
Another example of Compound entry is that supposed that Abdullah had purchased computer of RS/- 8,000 in which Marry has give him a concession/Discount of RS/-600 which he previously billed.
Cash Account Debit with RS/-7,400
Discount Allowed Account Debit with RS/-600
Abdullah Account Credit with RS/- 8,000
So, in compound entry we will have more than one debit or credit accounts.
4. Contra Entry:
Contra entry is the entry which has two accounts named Bank Account and Cash Account or which has impact on both accounts . it is write down for the purpose of reversing the entry. If we recorded entry on debit side then we will reversed this by recording it on credit side and if we recorded entry on credit side and wants to reverse it then we will record it on debit side . For instance Cash is withdraw from bank for personal expenses:
Cash Account
Bank Account
So, this is the contra entry in which cash account has a impact on bank account. It is most commonly used in cash book. It usually tell us withdraws from bank and deposits into bank.
