NARRATION

 The narration is the explanation of the entry and facilitates quick understanding. The length of the narration depends on the complexity of the transaction and whether management wants the journal itself to contain all relevant information. Most often narration are in brief.

➢ Compound Entry: When more than two accounts are involved in a transaction and the transaction is recorded by means single journal entry instead of passing several journal entries, such single journal entry is termed as 'Compound Journal Entry'. A compound journal entry may also be passed if there are more transactions of the same nature, taking place on the same date. It may be recorded in the following three ways:

a) by debiting one account and crediting two or more accounts; or

b) by debiting two or more accounts and crediting one account; or

c) by debiting several accounts and crediting several accounts.

 

         Example:- Paid Rs. 920 to Mr. Gopal in full settlement of his account of Rs. 1,000.

                  Gopal A/c             Dr.                 1,000

                      To Cash A/c                                                          980

                      To Discount received A/c                                    20

 

➢ OPENING ENTRY:-- A journal entry by means of which the balances of various assets, liabilities and capital appearing in the balance sheet of previous accounting period are brought forward in the books of current accounting period is known as ‘Opening Entry’.

While passing an opening entry. All those accounts which denote what the business possesses (assets) are debited and all the accounts showing amounts due by the business (liabilities) are credited.

 

Þ If capital is not given, it can be easily found out by deducting liabilities from assets. Opening entries are the following:

   

     Cash Account - Dr.

     Cash at Bank Account - Dr.

     Sundry Debtors Account - Dr.

     Stock Account - Dr.

                To Sundry Creditors Account

                To Capital Account

 

▪ The opening entry is made in the journal. At the end of the trading period, closing entries are made, the object being to close the books.

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