Journal Entries for Two-Curtain System?

📌 CONCEPT: In the two-curtain system, transactions are recorded in two stages: first, in the 'Purchases Book' or 'Sales Book' for the external transactions, and then in the 'Journal Proper' for internal transactions.

📐 RULE / FORMULA: The two-curtain system requires separate recording of purchases and sales, and also separate recording of cash and credit transactions.

💡 WORKED EXAMPLE: Akash Ltd. purchases raw materials worth ₹ 50,000 on credit. The journal entry for this transaction would be: Debit 'Purchases A/c' ₹ 50,000 and Credit 'Creditors A/c' ₹ 50,000. Later, when the company pays the creditor, the journal entry would be: Debit 'Cash A/c' ₹ 50,000 and Credit 'Purchases A/c' ₹ 50,000. Similarly, when the company sells finished goods worth ₹ 75,000 on credit, the journal entry would be: Debit 'Sales A/c' ₹ 75,000 and Credit 'Sales Returns and Bad Debts A/c' ₹ 75,000.

⚠️ COMMON MISTAKE: Students often forget to record internal transactions in the Journal Proper, or mix up the external and internal transactions.