Mastering Voucher Entry: Manual Accounting with Three Golden Rules and Examples

Three Golden Rules of Accounting:

1. Debit (Dr.):

• The term “debit” refers to the left-hand side of an account.
• Increase in assets, expenses, and losses are recorded as debits.
• Decrease in liabilities, income, and gains are recorded as debits.

2. Credit (Cr.):

• The term “credit” refers to the right-hand side of an account.
• Increase in liabilities, income, and gains are recorded as credits.
• Decrease in assets, expenses, and losses are recorded as credits.

3. Dual Aspect:

• Every transaction affects at least two accounts, with a debit in one account and a credit in another.
• The total debits must always equal the total credits.

Steps for Voucher Entry (Manual):

Step 1: Identify the Transaction:

• Determine the financial transaction that needs to be recorded, including the date, parties involved, and the nature of the transaction.

Step 2: Analyze the Transaction:

• Apply the three golden rules of accounting to understand how the transaction affects the accounts involved. Identify which accounts will be debited and which will be credited.

Step 3: Prepare the Voucher:

• Write down the details of the transaction in a voucher format. Include the date, description of the transaction, the accounts affected, and the amounts.

Step 4: Apply Double-Entry:

• Record the appropriate debits and credits according to the three golden rules of accounting. Ensure that the total debits equal the total credits.

Step 5: Calculate Balances:

• Update the balances of the affected accounts by adding or subtracting the amounts based on the transaction.

Step 6: Post to Ledger:

• Transfer the details of the transaction from the voucher to the respective ledger accounts. Update the ledger balances accordingly.

Examples of Voucher Entries:

Example 1: Cash Purchase of Goods:

• Debit: Purchases Account
• Credit: Cash/Bank Account

Example 2: Sale of Goods on Credit:

• Debit: Accounts Receivable/Sales Account
• Credit: Sales Account/Accounts Receivable

Example 3: Payment of Rent:

• Debit: Rent Expense
• Credit: Cash/Bank Account

Example 4: Receipt of Interest Income:

• Debit: Cash/Bank Account
• Credit: Interest Income

Example 5: Payment of Salary:

• Debit: Salary Expense
• Credit: Cash/Bank Account

These examples illustrate how transactions are recorded manually following the principles of double-entry accounting. Each transaction impacts at least two accounts, with one account being debited and another being credited. Recording transactions accurately is essential for maintaining the integrity of financial records and producing reliable financial statements.