Journal — Important Questions

Cash Account

Step 1: When a business is started with cash, two accounts are affected — Cash A/c and Capital A/c. Step 2: Cash is an ASSET. The rule for assets: 'Debit when it increases, Credit when it decreases.' Step 3: Cash is coming INTO the business, so cash is INCREASING — therefore Cash A/c is DEBITED. Step 4: Capital is the owner's contribution — it is a LIABILITY of the business. Since Capital is increasing, Capital A/c is CREDITED. Step 5: Bank A/c and Profit A/c are not involved in this transaction. Entry: Cash A/c Dr. / To Capital A/c.

Narration

Step 1: After writing the debit and credit accounts in a journal entry, a brief explanation is written in the Particulars column. Step 2: This brief explanation is called 'Narration'. Step 3: Narration helps anyone reading the journal understand WHY the transaction was made. Step 4: Folio refers to the page number — specifically, L.F. (Ledger Folio) is the page number of the ledger. Step 5: Posting means transferring journal entries to the ledger. Caption is not a standard accounting term. So, 'Narration' is the correct answer.

Cash Account

Step 1: In 'Goods purchased for cash', two accounts are affected — Purchases A/c and Cash A/c. Step 2: Purchases A/c is an expense account. When an expense increases, it is DEBITED. So Purchases A/c is debited. Step 3: Cash A/c is an asset. Cash is going OUT of the business (decreasing), so Cash A/c is CREDITED. Step 4: Sales A/c is credited when goods are sold, not when goods are purchased. Step 5: Capital A/c is not involved here. Journal entry: Purchases A/c Dr. / To Cash A/c. Therefore Cash A/c is credited.

Ledger Folio

Step 1: The third column in the Journal format is abbreviated as 'L.F.' Step 2: L.F. stands for 'Ledger Folio'. The word 'Folio' means page number. Step 3: When a journal entry is transferred (posted) to the Ledger, the page number of the Ledger on which the account appears is written in this column. Step 4: This helps in cross-referencing — if someone wants to check the ledger entry for a journal transaction, they can directly go to the page number written in L.F. Step 5: Options B, C, and D are all incorrect full forms that have no meaning in accounting.