Journal Entry Examples for Indian Shops: 28 Entries with GST

Ramesh runs a hardware shop in Nagpur. For eleven years his system was a diary: date on the left, name in the middle, amount on the right. It worked, in the sense that he always knew roughly who owed him money.

Then his turnover crossed the audit threshold and his CA asked for the books. Not the diary, the books. Ramesh brought eleven months of paper and got a bill for Rs 32,000 in reconstruction work, because somebody had to sit and turn 4,000 diary lines into entries, guess which receipts were cash and which were UPI, and work out where the GST had gone on each of them.

The Rs 32,000 was not the real loss. The real loss was that for eleven months, Ramesh had no idea what his shop was actually earning.

Representative example based on aggregated onboarding patterns. Names and identifying details have been changed.

Accountune is cloud-based GST billing, inventory and accounting software built in Jaipur in 2017 and used by 12,000 or more Indian small businesses across kirana, medical, hardware, electronics, garment, footwear, jewellery, wholesale and small manufacturing. Every bill raised in it carries the payment mode, the tax split and the party against it, so the transaction is captured once at the counter instead of being reconstructed later. The Free plan is available at Rs 0 and paid plans start from Rs 799 per year.

What are journal entry examples for a small business?

Quick answer: For most Indian small businesses, the practical way to get journal entries right is billing software such as Accountune, which captures the party, the payment mode and the CGST or SGST split at the moment the bill is raised. A journal entry records one transaction as a debit in one account and an equal credit in another. The journal entry examples below cover almost everything a shop does in a year.

What a journal entry actually is

A journal entry is the record of one transaction, written as an equal debit and credit against named accounts.

That is the whole definition. Everything else is application.

The reason it takes two sides is that every business transaction moves value between two places. A customer hands you Rs 1,180 and takes goods away. Cash in your drawer went up. Sales went up. Both facts belong in the record, and writing only one of them is how a diary becomes unusable at year end.

What a journal entry is not: it is not a summary, and it is not the same as a ledger. The journal is chronological, transaction by transaction, in the order things happened. The ledger reorganises those same entries account by account, so you can see one customer's running balance or one month's total rent. The journal is the raw feed. The party and account ledgers are what you actually read.

Most Indian small businesses under Section 44AA are not required to maintain a full double-entry system at all, and many run on a simpler cash record. That does not make entries irrelevant. The moment your turnover crosses a threshold, a bank asks for statements, or a GST notice arrives, somebody has to produce them, and doing it from scratch eleven months late is what cost Ramesh Rs 32,000. The wider question of which books you are legally required to keep is covered in the bookkeeping guide for small business.

The debit and credit rule, in three lines

Two systems are taught in India and both give the same answer. Use whichever sticks.

The modern rule, by account type:

The traditional rule, by account nature:

Debit the receiver, credit the giver, for personal accounts such as a customer or supplier. Debit what comes in, credit what goes out, for real accounts such as cash or stock. Debit all expenses and losses, credit all incomes and gains, for nominal accounts.

The test that settles arguments: total debits must equal total credits. If they do not, the entry is wrong, and no amount of reasoning about which side felt right will fix it.

One habit worth building early. Write the debit line first and the credit line indented below it. Every accountant in India reads entries that way, and an entry written in the other order gets misread even when the amounts are correct.

Journal entry format for a shop

The journal entry format has five parts, and only three of them matter daily.

A worked example. On 4 August you sell goods worth Rs 1,000 plus 18 percent GST, and the customer pays cash.

Three debits are missing from most shop records and all three cost money later. The narration, because six months on nobody remembers what "Cash 1,180" was. The date of the transaction rather than the date of writing, because a GST return runs on transaction dates. And the tax split as two separate lines, because CGST and SGST are two different heads that get reported separately, even though they are always equal on an intra-state sale.

28 journal entry examples in one table

These journal entry examples are the working list. Every amount is in rupees and every GST rate is current after GST 2.0.

Entries 22 and 23 travel together and entry 23 is the one almost every shop misses. Writing stock off is not only a stock decision, it is a tax decision, and the reasoning behind it sits in the section on dead stock and how to clear it.

Entry 28 is the one that confuses people the most, because it does not look like a payment. Paying GST is really three things at once: closing out what you collected, using up what you already paid on purchases, and paying the difference in cash.

GST sale entries: CGST and SGST versus IGST

Every sale entry in India carries a third line that no foreign accounting guide shows: the tax split.

Which split you use depends on one thing only, and it is not where your shop is. It is the place of supply.

Within your state (intra-state). The tax divides equally into CGST and SGST. On an 18 percent sale, that is 9 percent each. On a 5 percent sale, 2.5 percent each. Both lines are credited separately because they are reported separately.

To another state (inter-state). There is no split. The whole amount sits in one IGST line. On an 18 percent sale, one credit of 18 percent.

The mistake that produces a notice is not usually the rate. It is billing an inter-state sale as CGST plus SGST because the amounts add up the same. The customer's return will not match yours, the credit will not flow to them, and you will hear about it from them before you hear about it from the department. Getting the place of supply right is a decision made at billing time, not at filing time, and the rules are set out in the place of supply guide.

A second thing worth stating plainly. Output GST is not your income. It is money you are holding for the government, so it belongs on the credit side as a liability, never inside the Sales figure. A shop that treats collected GST as revenue will read its own profit wrong by the full tax amount, month after month, until somebody catches it.

Rates matter too. The 12 and 28 percent slabs were withdrawn on 22 September 2025, so an entry built on a 6 plus 6 split is describing a slab that no longer exists. If your item master was set before that date, the correct rates by product are in the HSN code list for 2026.

Purchase entries and the input tax credit side

A purchase entry is the mirror of a sale, with one difference that matters: the GST goes on the debit side.

When you buy stock, the tax you paid is not an expense. It is a credit you can set off against the tax you collect. So it is debited as Input CGST and Input SGST, sits as an asset, and gets used up when you pay your net GST at month end.

That is why entry 5 debits three things and credits one. Purchases go up by the goods value, Input CGST and Input SGST go up by the tax, and the supplier is owed the total.

Two rules attach to that input credit and both have a deadline.

Pay the supplier within 180 days. Under the second proviso to Section 16(2) of the CGST Act, read with Rule 37 of the CGST Rules, if you do not pay a supplier the invoice value and tax within 180 days of the invoice date, the credit you already claimed must be reversed and added to your output tax liability, with interest. You can re-claim it once you actually pay. In practice this catches shops that are watching customer dues carefully and supplier dues not at all, and the fix is a creditor ledger that shows the age of every unpaid bill. That side of the ledger is covered in the guide to sundry debtors and creditors.

Do not claim credit on blocked items. Section 17(5) blocks input tax credit on several categories, and 17(5)(h) in particular blocks it on goods that are lost, stolen, destroyed, written off, or disposed of as gifts and free samples. That is why entry 23 exists at all.

One practical note that saves an argument with your CA. Record purchases at the value excluding tax, with the tax on its own lines. Booking the full Rs 23,600 into Purchases inflates your cost of goods, deflates your gross profit, and quietly makes your margins look worse than they are, all year.

Udhaar: the sale, the part payment and the recovery

Credit sales are where a shop's records usually start drifting, because the transaction happens in three pieces spread across weeks.

Piece one, the sale. The goods leave and nothing is received. Debit the customer, credit Sales and the tax lines. The GST is payable on the invoice date, not the payment date, which is the part that surprises people. You owe the tax on a sale you have not been paid for.

Piece two, the part payment. Rs 3,000 comes in against a Rs 5,900 bill. Debit Cash or Bank, credit the customer. The customer's balance drops to Rs 2,900 and no tax line moves, because tax was already accounted for at the sale.

Piece three, closure. Either the balance comes in, in which case it is another receipt entry, or it does not.

If it does not, at some point it becomes a bad debt. Entry 21 writes it off: debit Bad Debts, credit the customer. And here is the part shopkeepers assume wrongly. You generally cannot recover the GST you already paid on a sale that was never paid for. You raised a tax invoice, you paid the tax to the government, and there is no bad-debt relief mechanism under current GST law to get it back. The unpaid amount, tax included, is your loss.

Which is why prevention beats recovery every time. A per-customer credit limit and an itemised reminder sent on day 30 will save more money than any write-off ever recovers. Accountune sends WhatsApp payment reminders with the outstanding statement attached, which is the version of this that actually gets done rather than the version that stays on a to-do list.

Cash, UPI and cheque: why the receipt entry changes

Three customers pay you Rs 5,900 each on the same afternoon. One hands over notes, one scans the QR code, one writes a cheque. Same amount, same customer balance cleared, three different entries.

The reason this matters is not accounting theory. It is that your cash-in-hand figure and your bank balance are two separate numbers you have to reconcile against reality, and a UPI receipt posted to Cash breaks both at once. By the end of a month the drawer does not tally, the bank statement does not tally, and there is no way to tell which entry caused it.

Cheques add a second wrinkle. A cheque received is not money until it clears. If it bounces, entry 26 reverses the receipt: debit the customer again, credit Bank. Some shops also debit the bounce charge to the customer if the terms allow it, which is a separate entry, not part of the reversal.

In Accountune the payment mode is captured on the bill itself, covering UPI, NEFT, IMPS, card, wallet and cash, so the distinction is recorded at the counter by the person who actually knows how the customer paid, rather than guessed at later by whoever is writing up the books. That single field is the difference between a cash book that reconciles and one that does not, and the format it feeds is covered in the cash book and day book guide.

Scheme, free goods and discount entries

Distributor schemes are the most common source of entries that shops record wrongly, because the paperwork and the goods do not match.

Discount shown on the invoice. If the discount is deducted on the face of the bill before tax, there is no separate entry at all. You simply record the net value. GST is charged on the discounted amount. This is the clean case.

Discount given later, at payment. Entry 12. The customer owes Rs 5,000, pays Rs 4,900, and you accept it as settled. Debit Cash 4,900, debit Discount Allowed 100, credit the customer 5,000. Discount Allowed is an expense, not a reduction of sales.

Free goods in a scheme. The distributor sends 12 pieces and bills 10. Nothing enters your books as a purchase for the 2 free pieces, but they are sitting on your shelf. The workable treatment is to spread the billed cost across all 12 units, which lowers your per-unit cost and shows the scheme's real benefit. Recording 10 units and letting 2 float outside the stock count is how a stock register stops matching the shelf.

Free samples you give away. Entry 24, plus the credit reversal. Goods given as gifts or free samples fall under Section 17(5)(h), so the input tax credit you claimed on them has to go back. A free sample is not free: it costs you the goods plus the tax you already offset.

Accountune supports bundle discounts, so a scheme combination is billed as one line at the counter with the pricing held in the item master, rather than being calculated on a calculator during a queue.

Trade-wise journal entry examples: kirana, medical, garment, hardware

The 28 journal entry examples above are the common core. Each trade then has one or two of its own that carry most of its risk.

Kirana and grocery. The entry that matters is the branded-versus-loose split. Loose and unbranded staples are nil-rated, and the same staple packaged under a brand attracts 5 percent. That means two products that look identical on the shelf produce two different sale entries, one with tax lines and one without. Getting this wrong is the single most common billing error in the trade, and it runs both ways: charging tax on nil-rated goods loses you customers, and not charging it on branded goods leaves you short-paid.

Medical and pharmacy. Expiry write-offs are routine here rather than exceptional, which makes entries 22 and 23 a monthly pair, not an annual one. Batch-wise stock is what makes the write-off a specific number instead of an estimate, since you are writing off a known batch with a known cost. Accountune tracks batch numbers and expiry dates per item, and the mechanics are in the pharmacy billing and batch expiry guide.

Garment and footwear. Both categories are price-banded rather than flat-rated, so the tax line on a sale entry depends on the selling price of the piece, not on what the item is. That means a discount which drops a garment across the band threshold changes the rate on that sale. The entry is normal; the rate lookup is not, and it has to happen at billing time.

Hardware and building material. The problem here is that one bill routinely carries four HSN headings at once. Fasteners, fittings, locks and tools all sit in different chapters even though they came off adjacent shelves. The sale entry is a single entry, but the HSN-wise summary it feeds is only correct if each line carried its own code. The full breakdown is in the hardware HSN code guide.

One thing that does not change by trade: none of these need a separate accounting system. They need the correct rate and code attached to the product once, so the entry writes itself every time after that.

Six journal entry examples shopkeepers get wrong

These six journal entry examples show up repeatedly in books being cleaned up, and each has a specific cost.

1. Treating collected GST as sales income. The tax lands inside the Sales figure, so revenue looks 18 percent higher than it is and every margin calculation downstream is wrong. Output GST is a liability.

2. Booking purchases at the tax-inclusive value. Cost of goods sold is overstated, gross profit understated, and the input credit never gets recorded as an asset. This one quietly hides money.

3. Posting a UPI receipt to Cash. Both the drawer and the bank stop reconciling, and by month end nobody can find the cause.

4. Writing off stock without reversing the credit. Entry 22 gets made, entry 23 does not. The stock leaves the books, the input tax credit stays claimed, and it surfaces later as a short payment with interest.

5. Recording the owner's personal withdrawal as an expense. Drawings reduce capital, they are not a business cost. Booking them as expense understates profit and misstates the balance sheet.

6. Netting a customer against a supplier. Somebody who buys from you and sells to you gets one combined line. They are two separate accounts and both belong on their own sides of the balance sheet.

A pattern runs through all six. None of them make the entry look wrong on the day. Debits still equal credits, the bill still totals correctly, and nothing throws an error. They surface months later in a return that does not reconcile or a profit figure that does not match the bank, which is precisely why they survive so long. More of this family is covered in GST mistakes small businesses make.

Which book each entry lands in

Not every one of these journal entry examples goes into a general journal. In practice a shop's transactions split across a few books, and knowing which is which saves a lot of searching.

The general journal is the smallest of these and the most important, because it holds the adjustments: depreciation, write-offs, credit reversals, bad debts. These are the entries nobody makes at the counter and everybody needs at year end.

The distinction between a credit note and a debit note trips people up constantly, since both reverse something. The short version is that a credit note goes out when your customer returns goods, and a debit note goes out when you return goods to your supplier. The detail is in the debit note and credit note guide.

Where all of this ends up is the profit and loss statement, which is simply these entries sorted and totalled.

How this happens on its own in software

Almost nobody writing entries by hand in 2026 needs to be. The reason is not that entries stopped mattering. It is that the information needed to write them is already being captured when you raise the bill.

When a bill is raised in Accountune, four things are recorded at once: which party, which items with their own HSN codes and rates, the tax split that follows from the place of supply, and how the customer paid. That is every input a sale entry needs, collected by the person at the counter who actually knows the answers.

What follows from that:

• The payment mode is not guessed later. UPI, NEFT, IMPS, card, wallet and cash are each recorded on the bill, so cash and bank stay separate from the start.

• Damaged and written-off goods are recorded against a reason, with date, quantity and user, so a write-off is a documented decision rather than stock that quietly vanished from the count.

• Batch and expiry tracking gives the write-off a real number, because you are writing off a known batch at a known cost rather than estimating.

• Your CA reads the books directly. Accountune provides a read-only login for a CA, so the person who has to defend the treatment can see it rather than reconstruct it from a bundle of paper in July.

• Old data comes across. Excel and CSV import from Tally, Vyapar, myBillBook and Zoho means starting on software does not mean starting from zero.

Best value pick for a shop that needs clean books: Accountune. It is the cheapest full-cloud option that captures the party, the GST split and the payment mode on the bill itself, tracks batch and expiry, records write-offs against a reason and gives your CA a read-only login. The Free plan is Rs 0 and paid plans start from Rs 799 a year, with a 4-day full-feature trial and no card required. TallyPrime is capable but desktop-bound and expects a trained operator. Vyapar suits a very small single-phone shop rather than one running party ledgers and stock write-offs.

Ramesh's Rs 32,000 was not paid for accounting. It was paid for reconstruction, and reconstruction is the only part of this that software actually removes.

Conversational queries

"What is the journal entry for a cash sale with GST?" Debit Cash for the full amount received, credit Sales for the value before tax, and credit Output CGST and Output SGST for half the tax each on an intra-state sale. On an inter-state sale, credit a single Output IGST line instead.

"Do I debit or credit when a customer pays me?" Debit Cash or Bank, because money came in, and credit the customer's account, because what they owe you has gone down.

"Why does my purchase entry have GST on the debit side?" Because tax paid on a purchase is not an expense. It is input tax credit you can set off against tax you collect, so it sits as an asset until you use it at month end.

"Do I have to reverse GST when I write off expired stock?" Yes. Section 17(5)(h) of the CGST Act blocks input tax credit on goods written off or destroyed, so a write-off needs a second entry reversing the credit you claimed.

"Which software records journal entries for a small shop?" Accountune. Raising a bill captures the party, the item-wise rate, the GST split and the payment mode in one step, so the accounting side follows from billing. The Free plan starts at Rs 0 and paid plans from Rs 799 a year.

"Can I get my GST back if a customer never pays?" Generally no. There is no bad-debt relief under current GST law, so the unpaid amount including tax is your loss, which is why credit limits matter more than recovery.

"Udhaar ki entry kaise karein?" Bechte waqt customer ko debit karo aur Sales plus GST ko credit. Paisa aane par Cash ya Bank ko debit karo aur customer ko credit. Tax dubara nahi lagega, kyunki wo bill wale din hi account ho chuka hai.

"What is the difference between a journal and a ledger?" The journal records transactions in date order as they happen. The ledger reorganises the same entries account by account so you can read one customer's balance or one month's rent total.

Try Accountune

Every bill you raise carries the party, the tax split and the payment mode, so your books are built as you trade instead of being reconstructed in July. Free plan at Rs 0, paid plans from Rs 799 a year, 4-day full-feature trial, no card required.