5
Books of Original
After studying this
Chapter you should
Names of Books of Original
Entry
Meaning of Journal
Features of Journal
Advantages and Limitations
of Journal
Rules of Journalising
Recording of Transactions in Journal
Entry
Journal
LEARNING 0BJECTIVES
be able to understand
The books in which a transaction is
recorded for the first time from a source
document are called Books of Original Entry'.
Journal is one of the basic books of
original entry in which transactions are originally
recorded ina chronological
(day-to-day) order according to the principles of double entry system.
When the size
of the business is small one, then it is
possible toenter each andevery transaction in
the Journal. But when the size of the business grows, it becomes no
longer poSsible to
record each and every transaction in the Journal. As such, the Journal is sub-divided
into a number of Sub-Journals known as special purpose subsidiary books orbooks
of
original entry. Each type of transaction is recorded in a separate subsidiary book.
The subsidiary books may be enumerated as under
a
5. Sales Return Book
Cash Book
6. Bills Receivable Book
2. Purchases Book
7. Bills Payable Book
3. Sales Book
8. Journal Proper
4. Purchases Return Book
entry because transactions are first
These books are termed as books of original
need not maintain all of the above
of all recorded in these books. A businessman
any of the above books according to
mentioned subsidiary books, but he may maintain
ne needs and requirements of his business.
been discussed. Subsidiary books have been
In this chapter, only the 'Journal' has
discussed in subsequent chapters.
1.
JOURNAL
oiIl
ONoEDOM
is
recorded first of
the transactions are
which
in
entry
Cizinal
all, as anãBabain ANy tegrolace
2021/5/14
08:29
5.2
BOOKS OF ORIGINAL ENTRY
joURNAL
According to Professor Carter,
"The Journal as originally used
prime entry in which transactions are copied in order of date from mee book
a
andumo
waste book. The entries as they are copied are classified into debits and
or
credits
to facilitate their being correctly posted, afterwards in the ledger.
s02
-
O
is a
30OK
(iii
Thus, the Journal provides a date-wise record of all the transactions
de
withdetails
the accounts debited and credited, and the amount of each transaction.
Prion of
rior
recording in Journal, the transactions may also be recorded in
a rough book
called
Waste book or Memorandum book. Maintenance of waste book is
not necese
but where the number of everyday transactions is so large that it is
c
not possihlefor
businessman to remember all of them, the use of waste book may prove helpful, Ia a
on with the help of waste book recording is made in Journal.
LO
Features or Characteristics of a Journal:
The Chief features of journal may be stated as under:
()
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
Journal is a book in which the transactions are recorded first of all, as and when
they take place. For this reason, it is called a book of original entry.
A journal is only a b0ok of primary (original) entry. All the transactíons
recorded in the journal are subsequently transferred to ledger which is the
principal book of accounts.
A journal is a daily accounting record, i.e. each day's transactions are recorded
in the journal on the same day.
In journal, transactions are recorded in a Chronological order, i.e. in a date-wise
order.
It maintains the identity of each transaction and provides a complete picture of
the same in one entry.
A journal records both debit and credit aspects of a transaction according to the
double entry system of book-keeping.
Each entry in the journal is followed by a brief explanation of the transaction
which is called 'Narration.
(viii) A single journal entry is capable of recording more than one transaction
involving more than two accounts. Such an entry is called compound entry.
Functions of a Journal:
transactions.
O
To keep a chronological (i.e. date-wise) record of all
double
entry
by
using
aspects
and credit
(i) To analyse each transaction into debit
system of book-keeping.
ledger.
(ii) To provide a basis for posting into
transaction by keeping a complete record
each
identity
the
of
maintain
To
(iv)
on a permanent basis.
each transaction at one place
)
Adantages of a Journal
can
a journal and the transactions
to
maintain
necessary
not
Although it is
still is used for the following
journal,
a
accounts,
ledger
recorded directly in the
reasons
place,
th
they take
are entered as and when
journal
in
transactions
(i) As
accounts is minimized.
books
of
the
in
transaction
a
possibility of omission of
(iv
(v
Sok
ndum
of
s,S0or
as
ails
ior of
to
called
essary
fora
Later
ROOKS OF ORIGINAL
ENTRY- JOURNAL
(ii) As transactiorns in journal are
locate a particular transaction recorded in chronological order,
when required.
(ii) By analysing each transaction
(v)
(v)
(vi)
(vii)
5.3
it
is
very easy to
into debit and credit aspects, the journal
facilitates the posting into
ledger.
Each entry in the journal carries narfation
which gives a brief explanation of the
transaction. Hence, postings
in the ledger can be made without
explarnation.
Journal facilitates cross checking
ledger
of
accounts
in
case
a
trial
balance does
not agree.
Since entire transaction is
recorded at one place in the journal, the identity or
each transaction is maintained
on a permanent basis.
Once the transaction is recorded
in journal, posting in the ledger can be made as
and when convenient.
Limitations of Journal:
hen
ons
1ons
the
ded
Ise
of
(i) When the number of transactions is large, it is not possible to
record all thee
transactions in Journal. It will become bulky and voluminous. Hence, the usual
practice 1s to have separate journals or books for different classes of transactions
such as purchase b0ok, sales book etc.
(ii) Many transactions are repetitive in nature and if all transactions are recorded in
journal it will involve debiting and crediting the same accounts time and again.
It will involve repetitive posting labour also.
(ii) In order to ascertain cash balance everyday, cash transactions are usualy
recorded in a separate book called 'Cash book'. Thus cash transactions need not
be recorded in journal.
(iv) Journal does not provide the required information on prompt basis.
Format of Journal
e
JOURNAL
Date
Particulars
(1)
(2)
n
Ledger
Folio
(3)
Dr
Amount
Cr.
(4)
(5)
Amount
is written up,
only to show how the Journal
The columns have been numbered
numbered.
otherwise the columns are not
is entered. The year and
column, the date of the transaction
1. Date :-In the first
dates and months
change. The sequence of the
they
till
once,
only
is written
the month
maintained.
should be strictly
one account
atTects two accounts out of which
transaction
debited is
2. Particulars: Each
name of the account to be
The
credited.
account is
In the
the end of the column.
is debited and the other
towards
writen
"Dr. 1s also
account starts
Written first and the word account to be credited is writen. The credit
from the
second line, the name of thespace away from the margin to make it distinct
words 'Dr.' and
few
omit the writing of the
to
with the word To', a
developing
practice is now
debit account (A
To'
from Journal entries).
RS
E
ORIGINAL
LENTRY
SRIGINALENYOURNAL
JOURN
After cach entry, a brief explanation of the transa
tiontogether
with necessary details is given. This explanation is called "N
Narration' The
helps to know in future the reason for the entry and also as to why a partiet
tion
was debited or credited. It is necessary to write the narration after each acoun
h entry
should be short, complete and clear
and
Narration
O
Folio or L.F. :-All entries from the Journal are later posted int
intothe LO
ledger accounts. The page number or folio number of the ledger account whe
posting has been made from the Journal is recorded in the LF. column the herethe
of I
or example, if we make a posting in Machinery A/c which is prepared at page d0
the ledger, we shall write 40 in the L.F. column against Machinery A/c
in theJoum
There are many advantages of writing the folio numbers
1.
The L.F. column in journal shows whether an entry has been posted or not.
Ifte
number ot the ledger does not appear against an entry, it will indicate that
te
entry has not been posted to the ledger, so far.
II. Page number written in the L.F. column in Journal is
indicative of the pag
number of ledger where such posting has been made. It helps in understanding and
checking the ledger posting at a glance in future.
III. If the trial balance does not agree, the posting of each and every entry
hasto
be checked. Such checking will not be possible without the help of L.F. column.
(4) Amount Dr. :-In the fourth column, the amount of the
account being debited
is written.
(5) Amount Cr.: In the fifth column, the amount of the account being creditedis
written.
3. Ledger
Steps in Journalising
(1) Before recording a Journal entry, it is essential to analyse a transaction in order
to determine the two accounts which are affected. Then, on the basis of rules of
journalising, it must be decided as to which account is to be debited and which account
is to be credited.
(2) It is not necessary to use the word Account' or A/c after the personal accounts.
(3) After every Journal entry, a line should be drawn in particulars column, so that
each entry 15 separated from the preceding one.
(4) At the end of each page, both the Dr. and Cr. columns are totalled up just
front of each other. These totals must be equal because the amount debited in eae
entry equals the amount credited. These totals are carried forward to the next pa
progressively uptothe end of accounting period. For this purpose, the words
forward or C/F are written in particulars column at the end of each page and the wons
carri
Brought Forward or B/
are written at the start of each
page.
Rules of Journalising
On the basis of the rules discussed in the chapter on double entry system
accounts to be debited or credited will be determined. The same rules are agal
explained here in a simplified manner :
Accounts
Personal
account
personal
of the person to
According to the rule of 'Debit the receiver', the
whom we give some money or goods is debited. F
n
ner
ular xration
ch acoum
entry
and
sted
into
t where
the
theJoumal.
the
page
40
theJournal
of
r not.
ate Ifthe
that
the
f the
page
nding
and
try has
mn.
to
g debited
redited is
in order
rules of
account
counts.
so that
just in
n
each
Tpage
arried
words
n the
again
the
.For
BOOKSOFORIGINAL
ENTRY- JOURNAL
example, if we gave R2,000 to Gopal,
the entry will
Gopal
To Cash A/c
(Cash paid to Gopal)
In the
Dr.
5.5
be
:
O
CO
2,000
2,000
same way,
according to the rule of "Credit the giver', the personal account
of the person fronm whom we receive some money or g0ods is credited. For example,
LO
ifwe received R5,000 from Govind,
Cash A/c
To Govind
(Cash received from Govind)
the entry will
Dr.
5,000
be-
5,000
(2) Real Accounts:- According to the rule of
'Debit what comes in and credit
what goes out, the account of the cash or other property which is received by the
business firm is debited and in the same way, the account of the Cash or other property
which goes out of the business is credited. For example, if Machinery is bought for
R10,000
Machinery Ac
Dr.
10,000
To Cash A/c
10,000
(Machinery purchased for cash)
(3) Nominal Accounts-According to the rule of 'Debit all Expenses', the
accounts of all expenses and losses are debited. For example, if 72,000 are paid for
salary, the entry will be
Salary A/c
2,000
Dr.
AWc
To Cash
2,000
(Salary paid)
Similarly, according to the rule of "Credit all Incomes', the accounts of all
incomes and profits are credited. For example, if R500 are received for commission.
The entry will be :500
Dr.
Cash A/c
500
To Commission A/c
(Commission received)
Meaning of Goods
Goods are those things which are purchased for resale. In other words, goods are
example, if a cloth merchant
the commodities in which the business deals. For
But if the same cloth merch:ant
purchases cloth, the cloth will be termed as 'purchases'.
set for the seating of customers, the
purchases some furniture, say chairs and a sofa
purchases, but will be an asset of his
furniture so purchased will not be termed as
be debited instead of "Purchases A/, i
business and in this case Furniture A/e will
are not termed as purchases in accour.cing
means that the purchases of asset
not meant for sale.
terminology because these assets are
the
five accounts for the purpose of passing
Goods Account is classified into
Journal entries
debiting Goods Ae
goods are purchased, instead of
A/c:-When
) Purchases
account and while passing a
debited. Purchase A/c is a nominal
Purchase A/c' is
F ORIGINAL
all Exxpenses urchasee Jc' shoulo
ENTRY
always e debited
and Losses."
JOURN
because of the
(I) Sales A/c:
rule ofDeit
When goods
is credited. Sales
are
sold,
A/c' should alwaysA/c is a nominal accountinstead of crediting Goods
A/c 'Sales A OO
and while passing
be credited because
a Journal
(III) Purchases
ofthe rule
entry
is a nominal accountReturn A/c: This account of "Credit all Incomes and Sale
Gaing
is also named as
and should always
are reduced.
'Return
be credited because
Outward
purchases
i.e., expenses
LO
(IV) Sales Return
A/c:- This
nominal account
and should always account is also named as 'Return
Inward'.
be debited because
(V) Stock A/c
sales i.e., incomes are Itisa
reduced
ImportantConsiderations:
In the transactions
relating to the purchase
whether a transaction
and sale of goods, it has
is for cash or for
to be decided
credit, because the entry
Following points should
is passed accordingly.
be considered for this
1. If, in the transaction
relating to purchase or
sale of goods, the name of purchaser
or seller is not given,
it is considered as a cash transaction.
For example, Goods sold
for R50,000.
2. lf, in the transaction
relating to purchase
or seller is given alongwith cash, it is or sale of goods, the name of purchaser
considered as a cash transaction.
For example, 'Goods sold to Gopal
for Cash
3. If, in the transaction relating
to purchase or sale of goods, the name purchaser
of
or seller is given and it is not stated whether it is a cash
or credit transaction, it
is considered to be a credit transaction
For example, 'Goods sold to Gopal'.
In Case of Expenses : Even if the name of party receiving or making payment is
given, it is still considered as a cash transaction.
Forexample: Salary paid to Mukesh R10,000. The entry will be:
Salary A/c
10,000
Dr.
To Cash A/c
10,000
ILLUSTRA TION 1.
Enter the following transactions in the Journal of Siya Ram & Sons
2020
April 1 Siya Ram & Sons started business with cash
2 Purchased goods for cash
4 Purchased goods from Subhash
5 Purchased Furniture for cash
7 Sold goods for cash
9 Sold goods to Mahesh
10 Paid cash to Subhash
12 Received cash from Mahesh
16 Purchased goods from Ravi for cash
goods from Ravi
17 Purchased
18 Sold goods to Suresh for cash
O
50,090
20,000
12,
6,g0
13,000
15,G0
8,000
10,0
7,500
5,000
12,60
BO
Ale
BOOKS OF
Sdes
Gains
19 Sold goods to Suresh
20 Bought Machinery
cash
24 Withdrew cash fromforoffice
ward.
expenses
27 Paid rent
29 Paid wages
30 Paid salary to Gopal
30 Received Commission
.isa
educed.
SOLUTION
Date
ecided
ingy
haser
naser
aser
n,
ORIGINAL ENTRY
URNAL
O
5.7
for personal
7,000
8,000
2,500
400
450
1,200
200
use
JOURNAL OF
SIYA RAM &
SONS
Particulars
L
2020
F
April 1 Cash A/c
Amount
Dr.
To Capital A/c
Dr.
(Cash brought into
the business by Siya
Ram & Sons as
capital)
April 2 Purchases A/c
Dr.
To Cash A/c
(Goods purchased for
cash)
April 4 Purchases A/c
Dr.
To Subhash
(Goods purchased from Subhash
on credit)
20,000
Dr.
6,000
April
5
it
April 7
t is
April 9
April 10
April 12
April
16
Furniture A/c
To Cash A/c
(Furniture purchased for cash)
Cash A/c
To Sales A/c
(Goods sold for cash)
Mahesh
To Sales A/c
(Goods sold to Mahesh on credit)
Subhash
To Cash A/c
(Cash paid to Subhash)
Cash A/c
To Mahesh
(Cash received from Mahesh)
50,000
50,000
20,000
12,000
12,000
6,000
Dr.
13,000
13,000
Dr.
15,000
15,000
Dr.
8,000
8,000
Dr.
10,000
10,000
Dr.
Purchases A/c
7,500
7,500
To Cash A/c
(Goods purchased for cash)
April 17 Purchases A/c
To Ravi
(Goods purchased from Ravi on credit)
Dr.
5,000
5,000
Dr.
April 18 Cash A/c
To Sales A/c
(Goods sold for cash)
Amount
Cr.
12,600
12,600
Carried Forward (C/F)
1,59,1001,59,100
LO
BOOKS OF ORIGINAL
ENTRY
JOURNA
Brought Forward (B/F)
1,59,100
5.8
April 19 Suresh
Dr.
To Sales A/c
(Goods sold to Suresh on credit)
April 20 Machinery A/c
To Cash A/c
(Machinery purchased for cash)
7,000
159A0
10M
Dr.
8,000
8,000
April 24 Drawings A/c
To Cash A/c
(Amount withdrew for personal use)
April 27 Rent A/c
To Cash A/c
(Rent paid)
April 29 Wages A/c
To Cash A/c
(Wages paid)
Dr.
2,500
400
450
450
April 30 Salary A/c
To Cash AVc
(Salary paid)
April 30 Cash A/c
To Commission Received A/c
(Commission received)
Dr.
1,200
1,200
Dr.
200
200
Total
of r
LOcre
as
ac
400
Dr.
Nsale
be
2,500
Dr.
BOC
1,78,8501,78,850
Explanation of the above mentioned entries
April 1. Siya Ram & Sons started business with cash:- A business unit is
always considered to be separate and distinct from the proprietor. All the transactions
are recorded in the books of the business from the point of view of the business. Cash
coming into the business will be debited according to the rule of real account, ie,
debit what comes in'. Proprietor is the giver of cash to the business, therefore, his
capital account will be credited according to the rule of personal account, i.e., 'Credit
the giver.
The two accounts affected in this
April 2. Purchased goods for Cash:transaction are Purchases A/c' and "Cash A/e'. Purchases A/c is a nominal account
and will be debited because of the rule of 'Debit all expenses'. Cash A/c is a rear
account and will be credited because of the rule of 'Credit What goes out'.
April 4. Purchased goods from SubhashWhenthe name of thesellerisgivera
and it is not mentioned that the goods have been purchased for cash, it will be assumea
that the goods have been purchased on credit. Purchases A/c will be debited accordin
goo
to the rule of nominal account ie. 'Debit all expenses'. Subhash is the giver of
as such, his personal account will be credited according to the rule of 'Credit tho
giver'
Both the accounts involved, 1.e
April 5. Purchased Furniture for Cash
u
furniture account and cash account are real accounts. Furniture is coming nto
business, therefore, it will be debited and as cash is going out, it will be credited.
BOOKS OF ORIGINAL ENTRY
JOURNAL
5.9
April 7. Sold goods for Cash
The
affected are Cash Alc and
Sales A/c. Cash is coming into the business two accounts
it will be debited as per the rule
and
of real account i.e. Debit what comes in'. Saleshence
is a nominal account and will be
A/c
credited as per the rule of 'Credit all
incomes'.
April 9. Sold goods to Mahesh
In this transaction the name of the purchaser
and it is not mentioned that the goods
given
is
have been sold for cash and hence it will
be assumed that the goods have been sold on credit. Mahesh is the receiver of goods,
as such, his personal account has been debited according
the rule of personal
account, i.e., "Debit the receiver'. Sales A/c will credited to
according to the rule of
be
nominal account i.e. 'Credit all incomes
April 10. Paid Cash to Subhash: Subhash is the receiver of cash, as such, his
personal account has been debited according to the rule of 'debit the receiver'. Cash
going out, hence, it will be credited according to the rule of real account 'Credit what
goes out.
is
A50
1200
200
8,850
anit is
tions
Cash
,
i.e,
his
redit
this
unt
real
ven
ed
ng
ds
he
April 12. Received Cash from Mahesh
Cash is coming into the
therefore, the account of cash will be debited. Mahesh is the giver of cash,
the account of Mahesh has been credited.
business,
therefore,
April 16. Purchased goods from Ravi for Cash
Purchases Alc will be
debited according to the rule of nominal account i.e. 'Debit all expenses'. Cash A/c
will be credited because of the rule of 'Credit what goes out'.
word 'cash' is not mentioned in
April 17. Purchased goods from Ravi-The
this transaction, as such, it will be treated as a credit purchase of goods from Ravi
Purchases A/c will be debited as per the rule of nominal account ie. 'Debit all
expenses. Ravi is the giver of goods and hence the account of Ravi will be credited as
per the rule of personal account, i.e. "Credit the giver'.
in
April 18. Sold goods to Suresh for Cash-The two accounts affected this
it will be
transaction are Cash and Sales. Cash is coming into the business, therefore,
of nominal account ie.,
debited and sales account will be credited according to the rule
Credit all incomes
word 'cash is not mentioned in this
April 19. Sold goods to Suresh:-The
a credit sale of goods to Suresh. Suresh is
transaction. Therefore, it will be treated as
account of Suresh will be debited as per the rule of
the receiver of goods, as such, the
Sales A/c will be credited as per the rule of
receiver.
the
account
Debit
i.e.
personal
UD
incomes
nominal account i.e., 'Credit all
involved, ie.,
for Cash:- Both the accounts
Machinery
Bought
20.
April
Machinery is coming into he
Account are real accounts.
Cash
and
Account
Machinery
it will be Credited.
debited and as Cash is going out,
will
be
it
business, therefore,
proprictor
personal use : When the
for
office
from
April 24. Withdrew cash
capital account and when he
his
to
credited
is
it
business,
Drawing
introduces cash into the
use, it is debited to his
personal
his
for
business
withdraws cash from the
proprietor. In this transaction
the
of
account
a personal
cash. C2sh
account. Drawings account is
proprietor is the receiver of
the
as
debited,
business.
Drawings account will be
going out of the
is
it
because
account will be credited
AL
JOURNAL
EN
IKI- JO
April 27. Paid Rent:-This transaction
affects
Rent
account
and cash acCco
Rent is a nominal account and because this
count
is an expense of business, as
such. the b
account will be debited according to the rule of
Rent
debit all expenses. Cash account
be credited, as cash is going out of the business.
April 29. Paid Wages
Wages is a nominal account and
because this i
expense of business, as such, Wages account
an
will be debited according to
the rulee
debit all expenses'. Cash account will be credited,
as cash is going out of the busines
April 30. Paid salary to Gopal
The two accounts affected in this transaction
are 'Salary account' and 'Cash account'.
Purpose of paying to Gopal is 'salary' and
when purpose of payment is given in the
question, the personal account of receivernd
is
not debited.
Salary is a nominal account and because
this is an expense of business, as
such, the
Salary account will be debited according
to the rule of "debit all expenses'.
Cash
account will be credited, as cash is going
out of the business.
April 30. Received Commission: The
two accounts affected in thistransaction
are 'Cash account and 'Commission Received
account'. Cash account will be debited,
as cash is coming into the business. Commission
is a nominal account and because this
is an income, as such, Commission
Received account will be credited according to the
rule of 'credit all incomes'.
ILLUSTRATION 2.
Record the following transactions in the Journal of Vishal Bros.
2020
May
1
2
3
4
8
12
Commenced business with cash
Goods purchased from Mohan for cash
Goods purchased from Ajay
Goods returned to Ajay
Goods sold to Rajiv
Rajiv returned 10% of goods
sOLUTION
Date
2020
May 1
May 2
May
3
May 4
5,00,000
50,000
1,20,000
5,000
40,000
JOURNAL OF VISHAL BROS.
Particulars
Amount
Amount
Dr.
Cr
5,00,000
Cash A/c
To Capital A/c
(Amount brought in by Vishal Bros. as capital)
Purchases A/c
To Cash A/c
(Goods purchased from Mohan for cash)
Dr.
Purchases A/c
To Ajay
(Goods purchased from Ajay)
Dr.
1,20,000
Ajay
To Purchases Return A/e
(Goods returned to Ajay)
Carried Forward (C/F)
Dr.
5,000
5,00,000
Dr.
50,000
50,000
1,20,000
6,75,000
5,000
6,75,000
O
LO
BO
ccount
heRent
ant
BOOKS OFORIGINAL
is
ulean
Brought Forward
Rajiv
(B/F)
To Sales A/c
(Goods sold
to
May 12 Sales Return Rajiv)
A/c
To Rajiv
(10% of goods
10% of 40,000 sold to Rajiv returned by
him:
R4,000)
wil
May
of
iness.
ction
and
er
is
the
ash
n
ENTRY- JOURNAAL
5.11
8
Total
Dr.
6,75,000 6,75,000
40,000
40,000
Dr
LO
4,000
4,000
7,19,000
7,19,000
Discount
It is an allowance given
by the seller of
goods
price or catalogue price) or
a deduction for makingout of selling price (also called list
prompt payment.
Discount is of two types
(1) Trade Discount, and
(2) Cash Discount
(1) Trade Discount:- This
is allowed by wholesaler or
to the retailer at a fixed percentagediscount
manufacturer
on the listed price of goods.
It is allowed when
goods are purchased in bulk, i.e., large
This discount is allowed both on
credit as well as cash transactions since quantity.
it is related to the purchases and
not to the
payment. No separate entry is passed for
the Trade discount, as it is deducted from
the
cash memo or invoice of the goods. For example,
if a trader sells goods of the list price
of F10,000 at 20% trade discount for cash, the entry
will be:
Cash A/c
Dr.
8,000
To Sales A/c
8,000
If the goods sold at trade discount are returned by the customer,
the amount of
trade discount is again deducted from the list price of the returned goods.
(2) Cash Discount
This discount is allowed to the customers for making
prompt or early payment. In other words, cash discount is allowed only if the customer
makes the payment within a fixed period. Such discount motivates the customer to
make the payment at the earliest. As the discount is allowed at the time of making
payment, so the entry for cash discount is recorded alongwith the entry for payment.
Discount is a nominal account and as such, it is debited when it is allowed to a
customer and credited when it is received.
Distinction between Trade Discount and Cash Discount
Cash Discount
Trade discount is allowed by Cash discount is allowed ifO
wholesaler or manufacturer the customer makes the
immediately or
the retailers at a fixed payment
fixed period.
percentage on the printed within a
Trade Discount
Basis of Distinction
1. Meaning
to
pricelist.
2.
When allowed?
ety
are It is allowed when payment
It is allowed whèn gbods
on or before a
purchased in a specified is made
quantity.
Specified date.
1S
allowed to encourag
to enab them quick or p
romptpayment,
to make some profit even if|
they sell the goods at their
catalogue price.
Recording in the
It is not recorded separately |It is recorded
books of
separatel
in the books of accounts.
the books of accounts.
accounts
the retailers
Deduction from
Invoice
It
is
deductedfrom the It is not deducted
from
invoice.
invoice.
Sometimes, a customer is
allowed both the discounts, i.e.,
as cash discount. In
trade discount as w
such a case, first trade discount
is
to
be
deducted from the price
the goods and then, cash
discount is to be calculated on the
balance of the amount
For example, if a trader
sells goods of the list price
of 20,000 at 10% trade
discount and 2% cash discount,
the net amount will be calculated as
under
e
List Price
Less
Trade Discount @ 10%
20,000
2,000
18,000
Less
Cash Discount @ 2% 18,000
x100
It means that 17,640 will be paid
if the payment is made in cash.
360
17,640
Advantages of Trade Discount:
To the Retailer:
1.
2
It reduces the cost of purchase and thus,
increases the margin of profit.
It enables the retailer to make some profit
even if he sells the goods at their
catalogue price.
To the Wholesaler or Manufacturer:
1.
It increases sales by encouraging the retailers to
make bulk purchases by
offering higher rate of discount for orders of large quantities.
2. A change in the rate of trade discount may prove to be
an effective weapon to
face competition.
N
3. Different prices can be charged from regular customers
and occasssngn
customers simply by altering the rate of trade discount.
4. Change in rate of trade discount is an easy method to make changes in price
without reprinting of catalogues.
Advantages of Cash Discount:
To the Seller:
receives the amount within a stipulated time because cash discoun
allowed only ifthe customer makes the payment within the specified perio
2. Cash received in time improves the cash inflow of the business and the o
may be put to better use.
1.Seller
BOOKSOF ORIGINAL ENTRY
5.13
JOURNAL
3. The possibility of bad debts is minimised.
4. Prompt payment reduces the clerical work of maintaining
and of sending frequent reminders to debtors.
Sunts.
of debtors accounts
To the Buyer:
etfirom
unt
e
theas
pice
amounm
The earlier the buyer pays the higher he earns in cash discount.
2. A buyer whoearns higher cash discount can sell the goods to his customers
lower rates.
3. Early payment enhances the reputation or goodwill of the buyer.
1.
at
Rebate
20,000
lt is also a reduction in the value of goods sold allowed by the seller. It is allowed
forthe reason other than for which trade discount and cash discount are allowed. For
example, rebate is usually allowed for inferior quality of goods sold or goods being not
as per specification. As such, it is different from trade discount and cash discount.
Trade discount is usually allowed by the seller on higher volume of goods purchased
by the purchaser and cash discount is allowed on prompt payment.
2,000
Accounting Treatment:
8,000
Usually, no separate entry is passed for rebate because it reduces the sales value
goods just like trade discount.
However, if rebate is allowed after the entry for sale of goods has already been
passed then a separate entry will be required in the books of seller as well as purchaser:
Seller will pass following entry for rebate allowed
Dr.
Rebate Allowed A/c
To Purchaser
Purchaser will pass following entry for rebate received
10%
i
wade
360
,640
of
:
at their
Seller
To Rebate Received A/c
Dr.
Compound Journal Entries
es by
on to
onal
ices
one particular account take place
Sometimes, two or more transactions relating to
of passing separate entries for all such
on the same date. In such cases, instead
a Journal entry is termed as Compound
transactions, only one entry is passed. Such
R50,000 are paid for salaries and R20,000
Journal Entry. For example, on 31st March
are paid for rent, the entry will be:50,000
Dr.
31st March Salary A/c
20,000
Dr.
Rent A/c
70,000
To Cash A/c
(Expenses paid)
three ways
in either of the following
passed
be
can
entries
Such
crediting two or more accounts.
and
account
one
debiting
1. By
accounts.
account and debiting two or more
suca as
2. By crediting one
or more accounts,
two
crediting
and
accounts
more
3. By debiting two or
the Opening Entry
LLUSTRATION 3.
NNAL
Record the following transactions in the
Journal of Naresh & Co.
2018
June
1
June 4
June 10
June 12
June 14
June 20
June 23
Paid cash to Mahesh
and discount received from him
9,600
Received cash from Arun
400
and discount allowed to him
4,900
Goods sold to Harish
100
30,000
Harish returned goods
2,000
Received cash from Harish F27,500 in full
settlement ofhis account.
Sold goods to Gopal of the list price
of 760,000 at 10% trade discount.
Purchased goods from Ravi of the list price
of F20,000 at 15% trade discount.
SOLUTION
JOURNAL OF NARESH & CO.
Date
Particulars
2018
June 1 Mahesh
To Cash A/c
To Discount Received A/c
(Cash paid to Mahesh and discount received)
Dr
Amount
Amount
Dr
Cr
10,000
9600
400
June 4 Cash A/c
4,900
Discount Allowed Ac
To Arun
(Cash received from Arun and discount allowed)
June 10 Harish
Dr.
100
5,000
Dr.
30,000
30,000
To Sales A/c
(Good sold to Harish)
June 12
Dr.
Sales Return A/c
To Harish
(Goods returned by Harish)
2,000
2,000
June 14 Cash A/cC
Discount Allowed A/c
To Harish
(Cash received from Harish and discount allowed to
him)
Dr.
Dr.
27,500
500
28,000
Dr.
June 20 Gopal
To Sales A/c
(Goods of the list price of T60,000 sold at 10% trade
discount)
54,000
June 23 Purchases A/c
17,000
Dr.
54,000
17,000
To Ravi
(Goods of the list price of R20,000 purchased at 15%
trade discount)
Total
1,46,000
1,46,000
U
S
Sons
Tor
he
following transactions in the books of Partap
Kal &
2020
March 2 Cash purchases
March 3 Sold goods to Vasudey
March 6 Returned defective
goods by Vasudev
March 8 Received cash from Vasudev
48,000
10,000
1,006
nd Discount allowed
March 9 Chanderkant sold goods to us
March 10 Pritam purchased goods from us
March 10 Paid insurance premium by Cheque
March 12 Paid for Life Insurance Premium of Sh.
Partap Rai by Cheque
March 15 Paid Cash to Chanderkant
and Discount allowed by him
March 18 Bought goods from Pawan, list price 15,000 less 20% trade
discount
March 22 Paid to Pawan
March 26 Received Cash from Pritam
March 31 Paid wages 2,000, Advertisement Expenses 2,500 and
Salaries paid F9,000
March 31 Received Interest
March 31 Received Commission
sOLUTION:
2020
March 2
L
F
Purchases A/c
To Cash A/c
(Goods purchased for cash)
Dr.
March 3
Vasudev
To Sales Alc
(Goods sold to Vasudev)
Dr.
March 6
Sales Return Alc
To Vasudev
(Goods returned by Vasudev)
March 8
March 9
220
8,000
6,000
500
2,000
JOURNAL OF PARTAP RAI & SONS
Particulars
Date
8,800
200
20,000
12,009
50
2,000
13,780
Amount
Dr.
Amount
Cr
48,000
48,000
10,000
10,000
Dr.
1,000
,C0
Dr.
Dr.
Cash A/c
Discount Allowed A/c
To Vasudev
Vasudev and discount allowed)
from
received
(Cash
Dr.
Purchases A/c
To Chanderkant
Chanderkant)
(Goods purchased from
C/F
8,800
200
20,000
29,900
88,000
8*000
March 10
March 10
S
Pritam
B/F
To Sales Alc
(Goods sold
to Pritam)
Insurance
Premium
To Bank A/c
(Insurance
March 12 Drawings
OFORIGINAL
ORIGINAL
O
ENTRY
NTRY - JOURNAL
JOURNAL
88,000
Dr.
88,000
12,000
12,000
A/c
Dr
premium paid)
500
A/c
To Bank Alc
(Life Insurance
March 15 Chanderkant
Dr.
2,000
Premium paid)
2,006
To Cash A/c
To Discount Received
A/c
(Cash paid to Chanderkant
March 18 Purchases
Dr.
14,000
13,780
220
and discount received)
A/c
To Pawan
(Goods purchased less trade discount)
Dr.
12,000
12.000
March 22 Pawan
Dr.
To Cash A/c
8,000
8,000
(Amount paid to Pawan)
March 26 Cash A/c
Dr.
6,000
To Pritam
(Cash received)
6,000
March 31 Wages A/c
Dr.
Dr.
Dr.
Advertisement Expenses A/c
Salaries A/c
To Cash A/c
(Expenses paid)
2,000
2,500
9,000
13,500
Dr.
March 31 Cash Ac
2,500
500
To Interest Received Alc
To Commission Received A/c
(Income received)
2,000
Total
1,58,500 1,58,500
ILLUSTRA TION 5.
transactions in the Journal of Hari & Co.
following
the
Enter
2020
trade
price of F40,000 at 10%
list
the
Vinod
of
goods from
R1,000.
April 1 Purchased
Vinod ofthe list price of
to
goods
Returned
of his account.
April
1n ull settlemet
k34,000
to Vinod
2
April 6 Paid Cash
discount.
ay 13
May
13 Sales
Sales Ref
Return
Retum
JURNAL
B/F
Alc
A/c
To Kailash
Dr.
(Goods of the list
Actual price beingprice of R4,000 returned by Kailash,
R4,000 less 15%
May 18 Cash
trade discount)
A/c (See Note 1)
Dr
Discount Allowed
A/c
Dr.
To Kailash
(Cash received from Kailash
and discount allowed
to him)
85,000
CBOC
3,400
77,520
4,080
81,600
1,70,000 1,70,000
Total
Note 1.
85000
3,400
Cash received from Kailash has been calculated as follows
Sales
Less Sales Return
Amount due from Kailash
Discount allowed to him: 81,600
85,000
3,400
81,600
5
4,080
100
77,520
Cash received from Kailash
LLUSTRATION 7.
Pass Journal Entries for the following transactions
T10,000 at 15% trade discount.
()Bought goods from Mohan of the list price of
cash, under a discount of 4%.
(ii) Settled the account of Mohan by paying
at 20% trade discount and 5%
Bought goods for cash of the list price of 50,000
ki)
cash discount.
at 10% trade discount and 3% cash
price
20,000
list
of
the
cash
of
for
goods
(iv) Sold
discount.
sOLUTION
JOURNAL OF
)
Purchases A/c
To Mohan
(Goods of the list price of l0,000
discount)
(ii)
Amount
Particulars
Date
Sr. No.
***
Dr
Dr.
Cr
8,500
bought at 15% trade
Dr.
Mohan
To Cash A/c
Received A/c
R8,500)
To Discount
received @ 4% on
discount
paid and
(Cash
Amount
C/F
8,500
17,000
8,10
170
LO
12,000
BOOKS OF ORIGINAL
ENTRY- JOURNAL
SOLUTION
s00
5.17
JOURNAL OF HARI
& CO
Date
Particulars
Amount
2020
2,000
3,780
220
,000
Dr
Amount
Cr.
April 1 Purchases A/c
Dr.
To Vinod
(Goods of the list price
of R40,000 purchased 10%
at
trade discount)
36,000
36,000
April 2 Vinod
Dr.
To Purchases Return
900
A/c
(Goods of the list price of T1,000,
returned to Vinod;
Actual price being 71,000 less
10% trade discount)
April 6 Vinod
Dr.
To Cash A/c
To Discount Received A/c (See Note 1)
(Cash paid to Vinod and discount received
from him)
900
35,100
34,000
1,100
Total
000
Note
1.
72,000
Discount received from Vinod has been calculated as follows
Purchases
00
12,000
Less: Purchases Return
Net Amount due to Vinod
Less: Amount paid in full settlement of his account
Discount received from him
36,000
900
35,100
34,000
1,100
ILLUSTRA TION 6.
Enter the following transactions in the Journal of Gaurav Bros.
2020
May 10 Sold goods to Kailash of the list price of 1,00,000 at trade discount of 15%.
May 13 Kailash returned goods of the list price of 4,000.
a
discount of 5%.
May 181 Received from Kailash the amount due from him, under cash
SOLUTION
JOURNAL OF GAURAV BROS.
Date
Amount
Dr.
Particulars
2020
Dr.
May 10 Kailash
To Sales A/c
R1,00,000 sold at 15% trade
(Goods of the list price of
discount)
C/F
Amount
Cr.
85,000
85,000
85,000
85,000
LO
3A00
BOOKS OF ORIGINAL
ENTRY
JOURNAL
5.19
(ii) Purchases A/c
B/F
To Cash A/c
To Discount Received
1,600
(Goods of the list price
Dr.
A/c
of R50,000 bought
discount and 5% cash
discount
List Price
Less Trade Discount
@ 20%
,000
Less
17,000
C
17,000
CO
40,000
38,000
2,000
at 20% trade
LO
50,000
10,000
Cash Discount @ 5% on 740,000
40,000
2,000
38,000)
(iv) Cash A/c
Dr.
Discount Allowed AVc
Dr
To Sales A/c
(Goods of the list price
of R20,000
discount and 3% cash discount: sold at 10% trade
List Price
20,000
Less: Trade Discount @ 10%
2,000
18,000
Less : Cash Discount @ 3% on
18,000
540
17.460)
Total
17,460
540
18,000
75,000
75,000
TLLUSTRATION
8.
Pass journal entries for the following transactions in the jourmal of Himanshu
Chauhan.
2019
April
Himanshu Chauhan started business with cash 1,50,000, Furniture 10,000
and Goods R60,000.
4 Sold goods to Partap of the list price of R20,000 at trade discount of 10%
6 Partap returned goods of list price of R2,000.
10 Received from Partap R16,000 in full settlement of his account.
15 Purchased furniture for 12,000.
15 Purchased goods from Sahdev of the list price of R 50,000 at 12% Trade Discour
18 Returned goods to Sahdev of the list price of R4,000.
20 Cleared the account of Sahdev by paying cash at a discount of 5%.
21 Sold goods to Aakriti 20,000 and Shikha 32,000.
in full settlement of her account.
24 Received cash from Aakriti R19,600
Paid insurance premium 1,500.
for proprietor.
25 Paid 72,400 for insurance premium
cash at a trade discount of 10% and cash
26 Purchased goods for R16,000 for
discount of 2%.
at a discount of 5% in full settlement of his
Received full payment from Shikha
1
27
account.
salaries 8,000 and rent 71,600.
28 Paid for advertisement 2,000,
Commission F1,000.
30 Received
Particulars
2019
April 1 Cash
A/c
Furniture A/c
Purchases A/c
(or
4
10
KNAT
auian
B
Amount
Dr
Dr
Stock A/c)
Dr.
To Capital A/c
(Business started
with cash, furniture
Dr
and goods)
Partap
To Sales A/c
(Goods of the list
price of F20,000
discount)
sold at 10%
Amowt
Cr
1,50,000
10,000
60,000
2,20.000
Dr.
18,000
18.000
Sales Returns A/c
To Partap
Dr.
(Goods returned for R2,000
1ess 10% trade
discount)
Cash A/c
Dr.
Discount Allowed A/c
(Note 1)
Dr.
To Partap
(Cash received from Partap and
discount allowed to
him)
, 15 Furniture A/Jc
Dr.
To Cash AA/c
(Furniture purchased for cash)
Purchases Ac
15
Dr.
To Sahde
(Goods of the list price of 750,000 purchased at 12%
1,800
1,800
16,000
200
16,200
12,000
12,000
44,000
44,000
trade discount)
18
Sahdev
20
Sahdev
21
Dr.
3,520
To Purchases Returns A/c
(Goods returned for 4,000 less 12% trade discount)
Dr.
To Cash A/c
To Discount Received A/c
received)
(Cash paid to Sahdev and discount
Aakriti
40,480
38,456
2,024
Dr.
Dr.
20,000
32,000
52,000
Shikha
To Sales
(Goods sold on credit)
24
3,520
Cash A/c
Discount Allowed A/c
To Aakriti
discount allowed)
(Cash received and
Dr.
Dr.
19,600
400
20,000
4,28,000 4,28,000
C/F
LO
ENT
-
OURNAL
5.21
24
220
000
18.000
1,800
5,200
000
B/F
Insurance Expenses
A/c
ToCash A/c
Dr
(Insurance premium
paid)
25 Drawings A/c
To Cash
Dr.
(Paid for insurance
premium for proprietor)
Purchases
AWc
26
To Cash A/e8)
Dr.
To Discount Received
A/c
(Goods purchased at 10% trade
discount and 2% cash
discount)
27 Cash A/c
Dr
Discount Allowed A/c
Dr.
To Shikha
(Cash received and discount allowed)
28 Advertisement Expenses A/c
Dr.
Salaries A/c
Dr.
Rent A/c
Dr.
To Cash A/c
EXpenses paid)
30 Cash A/c
Dr.
To Commission Received Ac
(Commission received)
1,500
1,500
2,400
2,400
14,400
14,112
288
30,400
1,600
32,000
2,000
8,000
1,600
11,600
1,000
1,000
4,90,900 4,90,900
Total
00
4,28,000 4.28,000
Note
(1) Discount allowed to Partap is calculated as follows:
Sales
Less Sales Returns
Amount due from Partap
settlement
Amount received from him in full
Discount allowed
from Sahdev
(2) Discount received
Purchases
Less: Purchases Returns
Sahdev
Net amount due to
Discount
is caleulated as
40,480 x
received from him:
full settlement
Amount paid to him in
purchased
goods
(3) Invoice price of
Discount@ 10%
Less: Trade
Less: Cash
Discount @2%
18,000
1,800
16,200
16,000
200
follows:
44,000
3,520
40,480
5
2,024
38,456
16,000
1,600
14,400
288
14,112
N
ON
Passjournal entries for the following:
2019
March
1
Bought goods from Vishwas worth
1,00,000 at 20% trade discount
and so
untand
discount. Paid full amount at the time of purchase itself.
5%cash
3
March Bought goods from Trisha for R2,00,000 at 5% cash discount
and 10
discount. Half of the amount paid by cheque at the time of purchase.
trade
4
March Sold goods to Nupur for 750,000 at terms 4% cash discount and 20% trade
LO
discount. Half the amount received by cash and balance half by
on
cheque the
same day.
March 6 Sold goods to Anuradha for R1,00,000 on terms 10% trade discount
and 5% cae
discount if the payment is received within fifteen days. 80% payment is received
on March 18th by cheque.
March 20 Sold goods to Sudha for 1,00,000 at 20% trade discount and 10% cash
discount if the payment is received within ten days. She paid half the amount on
March 26th and 30% of the remainder on March 31st.
SOLUTION
JOURNAL
Date
2019
March
Particulars
1
Amount
Dr.
Purchases A/c
Dr.
Amount
Cr.
80,000
To Cash
To Discount Received A/c
(Goods purchased from Vishwas at 20% trade
discount and 5% cash discount)
AMe
76,000
4,000
March 3 Purchases A/c
Dr.
To Bank A/c
To Discount Received A/c
To Trisha
(Goods purchased from Trisha at 10% trade discount
and 5% cash discount on half of the amount paid)
1,80,000
March 4 Cash A/c
Dr.
Bank A/c*
Dr.
Discount Allowed A/c
Dr.
To Sales A/c
(Goods sold to Nupur at 20% trade discount and 4%
cash discount)
19,200
March 6 Anuradha
90,000
Dr.
85,500
4,500
90,000
19,200
1,600
40,0U
90,000
To Sales A/c
(Goods sold at 10% trade discount)
C/F
3,90,000 3,90,0(0
Cash received:
March 20
BOOKS OF ORIG INAL ENTRY
80% of 790,000
Less:Cash Discount @5%
JOURN
205
3600
Invoice price of goods
Less:Trade Discount @20%
Cash received on March 26th
Less Cash Discount @10%
68A400
1,00,000
:
2000
80,000
1/2 of 80,000
40,000
LO
4,000
TLLUSTRATION
36,000
10.
Journalise the following transactions in the books of Mathur Bros.
2018
Feb. 1|Started business contributing 750,000
in cash; R4,50,000
1n
cheque
and building
valued R20,00,000.
Feb. 5 Purchased goods from Manohar Lal of the list price of 50,000 for 746,000
Feb. 17 Purchased goods costing 1,00,000 from Sahil & Co. Paid 60%%
immediately by
chequeto avail 5% discount.
Feb. 24 Sold goods to Kishore & Co. of the list price of R40,000 for R38,000.
Feb.26 Sold to Kanika & Co. goods costing 1,00,000 at 20% profit, allowing 10%trade
discount and 5% cash discount. Kanika & Co. made 40% payment immediately
by
cheque
SOLUTION:
Date
JOURNAL OF MATHUR BROS.
Particulars
Amount
Dr.
Amount
Cr.
2018
Feb.
1 Cash A/c
Dr.
Dr.
Dr.
Bank A/c
Building Alc
To Capital A/c
(Started business with Cash, Cheque and Building)
Feb. 5 Purchases A/c
Dr.
To Manohar Lal
(Goods of list price of 750,000 purchased for
46,000)
Feb. 17 Purchases A/c
Dr.
To Bank A/c
To Discount Received A/c
To Sahil & Co.
Goods purchased paying 60% availing 5%
discount)
Feb. 24 Kishore & Co.
Dr.
To Sales A/c
Goods of list price of F40,000
sold for
50,000
4,50,000
20,00,000
25,00,000
46,000
46,0
1,00,000
57,C20
3,08
40,06)
38,000
38,00
38,000)
C/F
26,84,000 26,84,00
cash
ONGlNAL ENTRY
RNAL
March
18
To Anuradha
trade
ash
ved
Bank A/c*
Discount Allowed
5.23
B/F
A/c
3,90,000 3,90,000
Dr.
Dr.
(80% amount due
from Anuradha
allowing 5%
received after
cash discount)
March 20 Sudha
To Sales A/c
Dr.
(Goods sold at
20% trade discount)
March 26 Cash A/c
Discount Allowed
Dr.
A/c
To Sudha
Dr.
(Half of the amount due
from Sudha received
allowing 10% cash discount)
after
March 31 Cash A/c
Dr.
To Sudha
(Receipt of 30% of
the remainder amount of 740,000)
Total
68,400
3,600
72,000
80,000
80,000
36,000
4,000
40,000
12,000
12,000
5,94,000
5,94,000
*In case there is no information
as
cheque is deposited into the bank to the date of deposit of the cheque, it is assumed that the
on the same day.
Working Notes:
March
1
Invoice price of goods
Less: Trade Discount @20%
1,00,000
20,000
80,000
4,000
76,000
Less Cash Discount @5%
March
3
Invoice price of goods
Less: Trade Discount @10%
)
2,00,000
20,000
1,80,000
Cash Transaction (1/2 of 1,80,000)
Less : Cash Discount (@5%
90,000
4,500
85,500
90,000
(i) Credit Transaction (1/2 of 1,80,000)
50,000
March 4 Invoice price of goods
Less : Trade Discount @20%
Less
1,600
: Cash Discount @4%
Cash:
1/2 of 38,400
38,400
719,200; Cheque: 1/2 of
goods
March 6 Invoice price of
Trade Discount @10%
Less:
10,000
40,000
38,400
T19,200
1,00,000
10,000
90,000
F ORIGIN
In case the ab
GINAL ENTRY
above chneque is
URNAL
allowed to the
shonoured
customer will
the iscount
Customer's Personal
also be withdrawn.
Alc
To Bank Alc
When payment is
To Discount Allowed
made by issue
Ale
of a cheque.
-
10.
11.
When expenses are
CBO
CO
Ma
Personal Alc
paid by the issue
of a cheque.
When cash is withdrawn
To Bank Alc
Expenses A/c
To Bank Alc
LO
personal
use of the proprietor.from the bank for the Drawings
,
Ac
12. A When interest
is
charged by the bank.
12. B When interest
is allowed by the
13
bank.
To Bank Alc
Interest A/c
To Bank Alc
D
Bank A/c
DE
To Interest Received Alc
when bank charges some amount
for the services Bank Charges A/C
rendered by the bank.
To Bank A/c
Dr
ILLUSTRATION 11.
Pass Journal Entries for the following:
2020
March
1
Paid into bank for opening a Current Account
5 Goods purchased and payment made by cheque
8 Cash sales 40,000, out of this amount F30,000 deposited in bank.
10 Withdrawn for private use
12 Withdrawn from bank for private use
15 Withdrawn from bank
20 Placed on fixed deposit account at bank by transferring from Current
Account
Particulars
2020
Amount
Dr.
Cr.
25,000
Dr.
Purchases A/c
To Bank A/c
(Goods purchased and payment made through
cheque)
Dr.
March 8| Cash A/c
Dr.
Bank A/c
To Sales A/c
(Cash sales)
C/F
10,000
5
20,000
Amount
Dr.
March 1 Bank A/c
To Cash A/c
(Cash deposited into bank)
March
5,000
4,000
12,000
JOURNAL
sOLUTION:
Date
25,000
10,000
25,000
10,000
10,000
30,000
40,000
75,000
75,000
wed
Alc
BOOKS OF
RIGINAL
ENTRY- JOURNAL
5.27
March
Dr
Dr
Alc
Dr.
10
B/F
Drawings A/c
To Cash Alc
Dr.
(Amount withdrawn
for private use)
March 12 Drawings A/c
To Bank Alc
Dr.
(Amount withdrawn
from bank for
private use)
March 15 Cash A/c
To Bank Alc
Dr.
(Amount withdrawn
from bank for office
use)
March 20 Fixed Deposit A/c
Dr
To Bank A/c
(Amount transferred from
current account to fixed
deposit account)
75,000
5,000
5,000
4,000
4,000
12,000
12,000
20,000
20,000
Total
,000
,000
,000
000
000
900
75,000
1,16,000
1,16,000
Opening Entry
Every firm starts its new books in the
beginning of each year. Since the closing
balances of last year have to be carried forward to the
next year, the first entry in each
year's Journal will be to record the previous year's closing balances of all the assets
and liabilities. As it is the first entry, it is called the opening entry. In
this entry the
accounts of all assets are debited because assets always show debit balances and the
accounts of liabilities and capital are credited because they always show credit
balances. If the balance of the capital account is not given in the question, it will be
found out by deducting the total of liabilities from the total of assets. On the contrary,
if the total of liabilities exceeds the total of assets, the difference will be treated as the
amount of Goodwill and the same will be debited in the opening entry.
For example, the following balances appeared in the books of Gopal Traders on
Ist April 2020:
Assets: Cash 8,000; Bank Balance T20,000; Stock T54,000; Debtors R47,000
(Ashok 12,000, Pawan 15,000, Vivek R20,000); Machinery 60,000.
Liabilities Creditors 20,000 (Chaman Lal R7,000, Om Pal 13,000), Capital
2,00,000.
0
Opening Entry will be
The
L.
Particulars
Date
2020
April
:
1
Cash A/c
Bank A/c
Stock A/c
Ashok
Pawan
Vivek
Machinery A/c
F.
Amount
Dr.
Dr.
8,000
20,000
54,000
Dr.
Dr.
12,000
15,000
Dr.
Dr.
20,000
60,000
Dr.
Dr.
UU
Amoun
Cr.
U
3,600
8A00
BOOKS OF ORIGINAL ENTRY
O00
O00
IOUPNT
NAL
Feb. 26 Bank A/c* (Note 1)
Discount Allowed A/c
B/F
Dr
Kanika & Co.
To Sales A/c
(Goods sold and discount
allowed)
000
000
D00
00
N
5.25
Dr.
Dr
Total
26,84,000 26,84,000
41,040
2,160
64,800
1,08,000
c
27,92,000 27,92,000
LO
It is assumed that the cheque
is deposited into
the bank on the same day.
Working
Note:
(1) Cost of goods
1,00,000
Add: 20% of R1,00,000
20,000
1,20,000
Less Trade Discount: 71,20,000 x
12,000
100
1,08,000
Cash Sales: 40% of T1,08,000
Less: Cash Discount (5% of R43,200)
Amount Received
43,200
2,160
Credit Sales: 60% of 1,08,000
64,800
41,040
Recording of Banking Transactions
1.
Entry
Transaction
S.No.
When cash is deposited into the bank.
Bank A/c
When cash is withdrawn from the bank.
Cash A/c
Dr.
To Cash A/c
Dr.
To Bank Alc
Dr.
the customers Bank A/c
When cheques, drafts etc. received from
A/c
Personal
To Customer's
are deposited into the bank on the same day.
Dr.
from the customers Cash A/c
When cheques, drafts etc. received
A/c
Personal
To Customer's
not sent to bank on the same day.
are
6
Dr.
sent to Bank A/c
above cheques, drafts etc. are
when
date
Alc
the
To Cash
On
the bank.
Dr.
A/c
deposits the amount in our Bank Customer's Personal A/c
directly
customer
To
When a
account.
bank
Customer's Personal A/c Dr.
deposited into the bank is
previously
To Bank A/c
When a cheque
dishonoured.
Dr.
customer and Bank A/c
a
from
Dr.
A/c
is received
is Discount Allowed
cheque
8. A When a cheque
the
Personal A/c
him, and if
To Customer's
discount is allowed toon the same day.
bank
deposited into the
g igure)
(i.e. Total of
iabilities 2,20,000
less Total of Assets
R1,89,000)
To Chaman Lal
To Om Pal
To Capital
(Assets and liabilities
brought
Dr.
31,000
7.000
13,000
2,00,000
forward)
LO
Bad Debts
when
the goods are sold
to a
recoverable due to his insolvency orcustomer on credit, and if the amount becomes
for some other reason, the amount not recovered
Is called bad
debts. For recording it.
bad debts account is debited and the customer's
account is
credited.
For example, Ravi
who
rupee is received from his owed us 10.000 is declared insolvent and
estate. The journal entry will be
Cash A/c
Bad Debts A/c
To Ravi
Dr.
Dr.
30 Paise in a
3,000
7,000
(30 p. in the rupee received from Ravi on
his insolvency)
10,000m
TLLUSTRATION12 (A
The following balances appeared in the books of Vishal Stores on 1st April 2020
Assets :
Cash F15,000; Bank balance 75,000; Stock 40,000; Furniture
R3,600; Debtors R24,000 (X R6,000; Y R8,000 and Z 710,000).
Liabilities
Bank Loan T10,000; CreditorsT12,500 (Ajay 75,000, Vijay
77,500).
Following transactions took
April
place during April 2020
2 Bought goods
from Kailash for 20,000 at a trade discount of 10% and cash
discount of 2%. Paid 60% amount immediately.
Sold goods to X for 79,000.
Received R14,800 from X in full settlement of his account.
Cash deposited into bank RI10,000.
Cheque received from Y for 7,850 in full settlement his
of
account. This cheque
was immediately deposited into bank.
April 10 Received a cheque from Z F2,000.
April 12Cheque received from Z deposited into bank.
April 15 Cheque received from Y dishonoured.
April 16 Cash sales15,000; Out of
this amount 12,000 deposited into bank.
April 16 Amount due to Ajay paid
by Cheque.
April 18 Old newspapers sold
750.
Old furniture sold 750
April 20Z became insolvent and 40
paise in
cheque which is deposited into bank. a rupee could be received from his estate by
April 4
April 5
April 6
April 8
the
amount
amount
bests
d and notre
Tessvse
thecust
ntand
BOOKS OF ORIGINAL ENTRYJOURNAL
5.29
April 22 Purchased goods
from Gopal and
paid by cheque 78,000.
April24 Sold half of
the above goods to Chanderkant at a
profit of 30% on cost.
April 25 Proprietor withdrew private
for
use 2,000 from ofice and 3,000 from
April30 Paid salary to Motilal
bank.
by Cheque 2,000.
April 30 Paid Rent by cheque 1,500.
April 30 Paid trade expenses R 500.
sOLUTION
Date
Particulars
15,000
Dr.
Dr.
Dr.
Dr.
Dr.
5,000
40,000
3,600
6,000
8,000
10,000
Dr.
Dr.
10,000
5,000
7,500
65,100
To Loan from Bank
To Ajay
To Vijay
To Capital (balancing figure)
(Assets and liabilities brought forward)
Ist April2020
,000; Fumiture
Vijay
Amount
Cr.
Amount
Dr.
2020
April 1 Cash A/c
Bank A/c
Stock A/c
Furniture Alc
R5,000,
Dr.
April 2 Purchases A/c
To Cash A/c
18,000
10,584
216
7,200
To Discount Received A/c
To Kailash
(Goods purchased and discount received)
10% and
LO
JOURNAL OF VISHAL STORES
30Päise
n
CO
cash
April 4
9,000
9,000
To Sales A/c
(Goods sold on credit)
April
This cheque
Dr.
X
5
Dr.
Cash A/c
Discount Allowed Alc
To X
allowed)
(Cash received and discount
Dr.
14,800
200
15.006
Dr.
10,000
April 6 Bank A/c
,03
To Cash A/c
(Cash deposited into Bank)
April 8 Bank A/c
Discount Allowed A/c
To Y
deposited into bank)
(Cheque received and
C/F
Dr.
7,850
Dr.
150
3,000
1,47,600
1500
BOOKS OF ORIGINAL ENTRY- JOURN
April 10
Cash A/c
To Z
(Cheque received)
April 12 Bank
A/c
To Cash Alc
(Cheque received from Z now deposited into
April 15 Y
Dr
18
CBO
Note
CO
2,000
2,000
Dr.
2,000
Bank)
To Bank A/c
To Discount Allowed Alc
(Cheque dishonoured, and discount withdrawn)
April 16 Cash A/c
Bank A/c
To Sales Alc
(Cash sales)
April 16 Ajay
To Bank A/c
(Cheque given to Ajay)
April
NAL
1,47,600 1,4766
2,000
B/F
Dr
1,850
3,000
Dr
Dr.
12,000
15,000
5,000
Dr.
5,000
800
Dr.
Cash A/c
LO
8,000
To Miscellaneous Income A/c
To Furniture A/c
(Old newspapers and old furniture sold)
150
3,200
4,800
Dr.
April 20 Bank A/c
Bad Debts A/c
To Z
(Amount received and bad-debts written off)
April 22 Purchases A/c
To Bank A/c
(Goods purchased by cheque)
April 24 Chanderkant
Dr.
8,000
Dr.
8,000
Dr.
5,200
Dr.
5,000
To Sales A/c
(Goods sold on credit)
April 25 |Drawings A/c
To Cash A/c
To Bank A/c
(Amount withdrawn for private use)
Dr.
Dr.
April 30 Salary A/Jc
Rent A/c
To Bank A/c
(Expenses paid by cheque)
Dr.
April 30 Trade Expenses A/c
To Cash A/c
(Expenses paid in cash)
8,000
5,200
2,000
,000
2,000
1,500
500
500
2,10,600Q0,600
Total
00
2,000
BOOKSOF ORIGINAL
2,000
ENTRYJOURNAL
5.31
Note:
(1)
Total Amount
Less: 10% Trade Discount
20,000
B,000
2,000
1850
150
000
D00
15000
5,000
0
750
8,000
7,200
TLLUSTRA TION 12 (B).
You are required to journalise the
following transactions
Balances in the books of Rahul, a computer
dealer
on 1st April, 2017
Bank Overdraft 1,000;: Debtors 77,000; Building6,500,
Computers 3,500.
On the same day, he sold a computer, the
book value of whích was 2,000 for
1,950.
(1.S.C. Specimen Question Paper, 2019)
Date
2017
April 1
8,000
216
10,584
:
sOLUTION
50
JOURNAL OF RAHUL
Particulars
LF
Cash A/c
Debtors A/e
Dr.
Dr.
Dr.
Dr.
Building A/c
Stock (Computers) A/c
To Bank Overdraft AVc
To Capital A/c (Balancing Figure)
(Assets and liabilities brought forward)
2,000
3,000
Dr.
500
0,600
Amourt
Cr.
500
7,000
6,500
3,500
1,950
1,950
To Sales A/c
(Goods sold for cash)
Some Special Entries
so happens that the bad debts
(1) Bad Debts Recovered-Sometimes, it
recovered. In such cases, the tollowing entry
previously writen off are subsequently
passed
Dr.
3,500
Amount
Dr.
1,000
16,500
Cash A/c
5,200
LO
10,800
Credit Purchase 40% of
18,000
Cash500;
00
18,000
Cash Purchases : 60%
of 18,000
Less: Cash Discount (2%
of 10,800)
Amount paid
Cash A/c
A/c
To Bad Debts Recovered
be crediteod
account of the debtor should not
personal
the
that
taken
Care should be
passing the entry for bad
have been credited while
must
account
because the Debtor's
be
debts.
common for a business enterprise to
quite
is
-It
Expenses
accounting year die
(2) Outstanding
at the end of the
paid
be
to
yet
are
which
expenses. These
eft with some expenses
termed as outstanding
are
expenses
Such
to one reason or the other.
are the expenses
BOOKSOF
RIGINAL EN RY
not been paid. which should have been
0)OKS
JOURN
For
paid
during the year example, if an employee during the current year
but which h
cOTUs
is paid
only 11 months'
1,000 for one month
salary amountingsalary @1,000 per month,ane
P
to I1,000 has
will be the outstanding
been
Salary A/c
paid tohim
salary. The entry
(1)
will be To Outstanding
Dr.
1,000
Salary A/c
(2)
Outstanding
Salary Account
1,000
sentative personal
LO
is a liability. It has
been
account,
credited
paid.
because it arepr
representing the employees
to whom salariesisare
to he
) Prepaid
year but have Expenses
There are certain expenses
been paid during
which are related
expenses. The
the current year in advance.
tothe ne
benefit of such expenses
These
are
called prepai
year. For example,
will be received during
Insurance premium
the next accounting
for one year. Entry
amounting to 71,200 is
paid on Ist July,2019
on 1st July, 2019 will
made as under
be
Insurance Premium
A/c
Dr.
1,200
To Cash A/c
1,200
When the books will
be closed on 31st March, 2020,
months, i.e., from 1st
insurance premium for 3
April, 2020 to 30th June, 2020
will be treated as
insurance and the following entry
will be passed for it on 31st March, 2020 prepaid
Prepaid Insurance A/c
Dr.
300
To Insurance Premium A/c
300
Prepaid lnsurance Account is an asset. It has been
debited because it is a
representative personal account and represents those persons to
whom payment has
been made in advance.
(4) Depreciation-It is the permanent and continuing decrease in the value of
an asset on account of wear and tear and passage ot time. It is a business expense
though it is not paid in cash. Depreciation is a nominal account since it represents a loss
and hence is debited. Asset account will be credited as its value is reduced due to
depreciation. Journal Entry will be
Dr.
Depreciation A/c
To Asset A/C
it
(5) Interest on Capital : In order to ascertain the true efficiency of the business
capital. Profits le
is a normal practice to charge business with interest on proprietor's by the business
real profits earned
after charging the amount of such interest are the
business and therefore according
Such interest is a loss from the point of view of the the Journal entry. The amount c
is debited in
the rule of nominal accounts Interest A/c
increased
the proprietor. His capital is
view
of
point
the
of
from
gain
a
is
such interest
account is credited in the Journs
capital
the
therefore
and
by the amount of interest
:
entry.
should al
interest on capital, it
allows
firm
the
expense ro
interest is an
(6) Interest on Drawings If
an
Such
proprietor.
tne
made by the
charge nterest on drawings the business. Hence an entry is made by debiting
gain to
the proprietor and a crediting interest account.
:
drawings account and
h,and
tohimit
arepre
e to
be
enext
repaid
unting
AL ENTRY-JOURNAL Y0
D
eo
TLLUSTRA7ION 13.
Pass Journal Entries for the following
7AD
(1) Received R20,000 from Subhash, which
were written off as bad debts
previous year.
(2) Salaries due to clerks 50,000.
(3) Out of the rent paid this year, 10,000 related next year.
to
(4) Provide 10% depreciation on furniture iscosting 750,000.
(5) Provide 12% interest on capital amounting to 10,00,000.
(6) Charge interest on drawings 8,000.
eddou)
sOLUTIOw
Date
paid
is
Particulars
L.
F
(1)
Cash A/c
Dr.
To Bad Debts Recovered A/c
(Cash received from Subhash, previously written off
as bad debts)
(2)
Salaries A/c
To Outstanding Salaries A/e
(Salaries due to clerks)
Dr.
(3)
Prepaid Rent A/c
To Rent A/c
(Rent paid in advance)
Dr.
(4)
Depreciation A/c
To Furniture A/e
(Depreciation provided on furniture)
Dr.
Interest on Capital A/c
To Capital A/c
(Interest provided on capital)
Dr.
a
has
of
nse
e
(5)
oSS
to
s
it
eft
SS.
to
(6)
Drawings A/c
A/c
To Interest on Drawings
drawings)
(Interest charged on
Amount
Amount
Dr.
Cr
20,000
20,000
50,000
50,000
10,000
10,000
5,000
5,000
Dr.
Total
1,20,000
1,20,000
8,000
8,000
2,13,000 2,13,000
Building:
Machinery and on the erection ofexpenditure
of
installation
Expenditure on the
business. As such, any expenses,
the
of
assets
are the
transit
Machinery and Building
macnineySuchasreight,
Or
as cap:al
installation
nstallation etc.isireated
Incurredon thecarriageand
expenses,wages paid for the
expenditure
Account. Similarly, any
Machinery
the
to the
purchase of materials and
as
expenditure and is debited
the
such
construction of a Building expenditure and as such debited te ihe
the
incurred for
capital
is already
also treated as
on an asset which
are
wages
incurred
payment of
However,(repair charges
BAdcks,
Building Account.
repairs account,
to
debited
are
books
4ppearing in the
installation
al
in the
JOURNAL
2019
for 3
L5.33
BOOKSOF ORIGINAL ENTRYJOURNAL
TLLUSTRATiON 15
Enter the following transactions
in the
A
5.35
Journal of Shankar StoresS
2019
April 1 Started business with
5,00,000; paid into bank 4,00,000.
April 4 Purchased goods for 71,40,000
in all, out of which half the goods was on credit
from Mr. Sudhir.
April 7 Purchased building for
2,00,000 and paid 2% brokerage on its purchase.
incurred k24,000 on its registration. Payment
was made
cheque
and brokerage and registration charges were paidforinbuilding
cash.
April 12 Sold goods to Arun for R2,00,000.
Arun pays one-fourth anount in cash.
April 14 A cheque of R1,48,000 is received from
Arun in full settlement and the cheque 1s
immediately deposited into bank.
April 16 Paid stationery expenses 180.
April 17 Paid fire insurance premium on building by cheque 1,000 and Shankar's
life
insurance premium by cheque 74,000.
April 20 Paid for office cleaning 7200.
April 28 Received a sum of 2,500 being rent for a portion of the building let out.
April 28 Paid for advertisement in The Hindustan Times 2,000.
Al
by
S1
SOLUTION
JOURNAL OF SHANKAR STORES
2019
April
April
Amount
Dr.
Particulars
Date
1
Cash A/c
Bank A/c
To Capital Alc
(Business started with 5,00,000 and out of this
amount4,00,000 deposited into bank)
4 Purchases A/c
To Cash A/c
To Sudhir
(Goods purchased)
Dr.
Dr.
Amount
Cr.
1,00,000
4,00,000
5,00,000
Dr.
1,40,000
70,000
70,000
Dr.
April 7 Buílding A/c
2,28,000
2,00,00
To Bank A/C
To Cash Alc
and paid brokerage
Purchased building for 2,00,00024,000 on it)
at 2% and registration charges of
Dr.
April 12 Cash A/c
Dr.
Arun
28,00
50,000
1,50,000
2,00,00
To Sales A/c
(Goods sold to Arun)
C/F
10,68,000 10,68,00
Discount Allowed
To Arun
Dr
Ac
(Cheque received from
April 16 Stationery
Alc
Dr.
Drawings A/c
1,5000
Arun in full settlement)
To Cash A/c
(Payment made for
stationery)
April 17 Insurance Premium
1,48,000
2,000
A/c
To Bank A/c
The payment of fire insurance and life
insurance
premium)
April20 Office Expenses
A/c
To Cash Alc
(Expenditure on office cleaning8)
April 28 Cash A/c
Dr.
180
Dr.
Dr.
1,000
LO
4,000
S
Dr.
200
Dr.
2,500
To Rent Received A/c
(Rent received for letting out a portion of the building)
April 28 Advertisement Expenses A/c
Dr.
To Cash A/c
(Payment made for advertisement in The Hindustan
2,500
2,000
2,000
Times)
Total
12,27,880
12,27,880
ILLUSTRATION 16.
Journalise the following transactions in the books of Murlidhar & Sons, timber
merchant, giving suitable narrations
(
Received a Cheque from J. Peterson R5,450. Allowed him discount 7150. Cheque
is immediately deposited into bank.
i
Returned goods to Sudershan of the value of 7350.
Giin Issued a Cheque in favour of M/s Karanvir Timber Co. on account
purchase of Timber of R7,500.
i)
Purchased machinery for T50,000 by cheque and installation cha
machinery R2,500 paid in cash.
R1,00,000 from Ajay and supplied it to V
21.20,000. Out of this Vijay returned goods worth 36,000 which in tu
returned to Ajay.
(Purchased goods for
was
O
.LUSTRA TION
F
14.
OR
RIGINAI
IGINAL ENTRY-JOURNAL
NTRY-1 URNAL
Journalisethe
Suitablenarrations followingitems in the books
of Radha Kamal
& Sons giving
() Bought goods
from Nilesh for
Cash 50,000.
carriage.
Also paid 1,000
G) Paid to Sita
for their
9,650 in full paymerit
(iin) Purchased a
machinery by giving ofher dues of t10,000.
acheque of 3,00,000 and paid
Cash as wages on
its installation.
25.000 in
(iv) Bricks for
15,00,000 and timber
construction of building.
for 10,00.000 purchased
The payment
for
the
was made by cheque.
Purchased an old machinery
20,000 on its immediate for 1,00,000 and spent 5,000 on its carriage and
repairs,Entire payment
(vi) Paid R2,500 for
is made by cheque.
repairing the office furniture
(V)
sOLUTION
Date
JOURNALOF RADHA
KAMAL& SONS
Particulars
S. No.
()
(i)
(i)
(iv)
(V)
(vi)
Purchases A/c
Carriage Inwards AWc
To Cash A/c
(Goods purchased for cash)
Dr.
Dr.
Amouwn
Amount
Dr
Cr
50,000
1,000
51,000
Sita
Dr.
To Cash A/c
To Discount Received A/c
(Cash paid to Sita and discount received)
Machinery A/c
Dr.
To Bank A/c
To Cash Alc
(Machinery purchased for 3,00,000 and wages for
25,000 paid for its installation.)
Building A/c
Dr.
To Bank Alc
(Bricks for 15,00,000 and timber for R10,00,000
purchased for the construction of building)
Machinery Alc
Dr.
To Bank A/c
(Machinery purchased for-R1,00,000 and spent R5,000
onits carriage and 20,000 on its.repairs)
Repairs A/c
Dr.
To Cash A/c
10,000
9,650
350
3,25,000
3,00,000
25,000
25,00,000
25,00,000
1,25,000
1,25,000
2,500
2,500
Payment made for the repairs of old furniture)
Total
30,13,500 30,13,500
ENTRY-
JOJRNAL
a:
trade discount 10% and cash discoum
(iv) Sold goods to Kitty list price 20,000,
and availed the cash discount.
5%. He paid the amount on the same day
to Shakuntla, issued invoice at 10%
ah.
% above
(v) Supplied goods costing 6,000
BOOKS OF ORIGINAL
5.38
Co
less 5% trade discount.
---
C
O
JOURNAL OF CHANDAN BROS.
sOLUTION
Dr
Amount
Cr
LO
S. No.
()
(i)
(ii)
(iv)
(v
Dr.
Cash A/c
Dr.
Discount Allowed A/c
To Krishan Swaroop
(Cash received from Krishan Swaroop after allowing
him discount of 2,000)
38,000
2,000
Cash A/c
To Dushyant
(Cash received from Dushyant on account)
38,000
Dr.
Shakuntla
40,000
38,000
Cash A/c
Dr.
Bad-debts A/c
Dr.
To Biroo
(Cash received and Bad-debts written oft)
Cash A/c
Dr.
Discount Allowed A/c
Dr.
To Sales A/c
(Goods of the list price of T20,000 sold at 10% trade
discount and 5% cash discount)
Dr.
9,750
5,250
15,000
17,100
900
18,000
6,270()
To Sales A/c
(Goods sold to Shakuntla at 10% above cost and
allowed 5% trade discount)
Total
Note:1
Cost of Goods
Add: 10% of 6,000
5
6,270
1,17,270
1,17,270
6,000b
600
6,600
Less 6,600X
100
100
330
6,270
)
ofE
Sal
Amount
Particulars
Date
BO
Special Transactions Relating
to Goods
Drawings in Goods:-Sometimes the
proprietor withdraws goods
business for his personal use.
from the
The entry for recording
this transaction will be:
Drawings A/c
Dr.
To Purchases A/c
(Goods taken for personal
use)
ve
cost
nt
000
00
pOOKS OF ORIGINAL
ENTRY- JOURNAL
Purchase account is
5.39
credited because
as
of purchases ot the businesS
a
result
the transaction the net a
t
salehas not taken place. AlsOis reduced. Sales accountofshould
not be credited since the
when the goods
account should be
go out
credited and not
Sales account. of business at cost price, purcnase
(2) Goods given away as
suchcharity account will be Charity :-Charity is an expense of the
hence purchases are reduceddebited. Goods are going out of the business business, as
at cOst
credited. The entry will be : to that extent and as such, purchases account prieb
wi
Charity A/c
To Purchases A/c
Dr.
(Goods given away as Charity)
(3) Goods distributed as free
sample:-Sometimes
the goods are distributed as
free samples to the potential buyers in
order
to promote sales. As such, free samples
canlegitimately be treated
as expenses on advertisement.
The entry will
Advertisement Expenses
A/c
Dr
To Purchases A/c
(Goods distributed as free
samples)
44) Loss of goods by Theft or Loss
by fire
The entry will beLoss by Theft A/c
Dr.
Loss by Fire A/c
Dr.
To Purchases A/c
(Goods lost by theft and goods destroyed by fire)
In case goods were insured
Insurance Company or Insurance Claim A/c
Dr.
To Loss by Theft or Loss by Fire
(Insurance Claim lodged with the Insurance Co.)
be
If the full amount of claim is received from the Insurance Company
Bank A/c
Dr.
To Insurance Company
(Insurance Claim received)
If the Insurance Company does not admit full claim:
(Amount received for claim admitted)
Dr.
Bank A/c
(Claim not admitted)
Dr.
Profit and Loss A/c
To Insurance Company A/c
(Insurance claim partially admitted and received)
TLLUSTRATiON 18.
Pass Journal Entries for the following
use
() Proprietor withdrew for his personal
cash20,000
and goods worth
T10,000.
away as Charity. (Sale Price F60,000)
2) Goods for 50,000 were given
were distributed as free samples.
8) Goods worth 25,000
LO
N
SOLU
Particulars
Date
L
Amount
Dr
Amow
S. No.
(1)
(2)
(3)
(4)
(5)
Drawings A/c
Dr.
To Cash Alc
To Purchases A/c
(Cash and goods taken away for personal use)
Charity Alc
To Purchases A/c
(Goods given away as Charity)
Advertisement Expenses A/c
To Purchases A/c
(Goods distributed as free samples)
Loss by theft A/c
To Purchases A/c
To Cash A/c
(Goods and Cash stolen by an employee)
30,000
20.000
10,000
LO
Dr
50,000
50.000
Dr.
25,000
25,000
Dr.
70,000
50,000
20,000
Loss by Fire A/c
To Purchases A/c
(Goods destroyed by fire)
Dr.
1,00,000
1,00,000
Insurance Company
Dr.
To Loss by Fire A/c
(Insurance claim lodged with the Insurance Company)
1,00,000
Bank A/c
Dr.
Dr.
Profit and Loss A/c
To Insurance Company
(Insurance claim of R1,00,000 accepted and received at
60,000)
60,000
Total
1,00,000
40,000
1,00,000
4,75,000 4,758
TLLUSTRATION19.
Journalise the following transactions in the books of Harpreet Bros
(a) 10,000 due from Rohit are now bad debts.
(6) Goods worth R20,000 were used by the proprietor.
(C) Charge depreciation10% p.a. for two months on machine costing R3,00,9
Provide interest on capital of 15,00,000 at 6% p.a. for 9 months.
(e) Rahul who owed us 720,000 becomes insolvent and a final dividend of 60 p
in a rupee is received from his estate by cheque.
) Goods costing 80,000 sold to Mohan for 71,00,000.
a
URNAL OF
JOUF
SOL
Date
18
Particulars
S.No.
()
5,000
(iil)
200
()
S00
00
RLIDHAR &SONS
Amount
Dr
Amount
Cr.
Bank A/c
Dr
Discount Allowed A/c
Dr
To J. Peterson
(Cheque received and discount
allowed)
Sudershan
Dr
To Purchase Returns A/c
(Goods returned to Sudershan)
Purchases A/c
Dr
To Bank A/c
[Cheque issued for timber (goods) purchased]
Machinery A
Dr.
To Bank A/c
To Cash A/c
(Machinery purchased for R50. 00 and installation
charges of R2,500 paid in cash)
Purchases A/c
To Ajay
(Goods purchased from Ajay)
Vijay
To Sales A/c
(Goods sold to Vijay)
Dr.
Sales Return A/c
To Vijay
(Goods returned by Vijay)
Dr.
Ajay
Dr.
5,450
150
5,600
350
350
7,500
7.500
52,500
50,000
2,500
1,00,000
,00,000
Dr.
1,20,000
1,20,000
36,000
36,000
30,000
30,000
To Purchases Return A/c
(Goods returned to Ajay)
Total
3,51,950
3,51,950
was purchased for 1,00,000. Hence, goods
sold to Vijay for R1,20,000
,00,000 36,000 R30,000
for
was
purchased
R36,000
for
1,20,000
returned by Vijay
Note
(1)-Goods
00onx
ILLUSTRA TION 17.
the books of Chandan Bros.
Journalise the following transactions in
for
Krishan Swaroop in full settlement of his account
(i) Received 38,000 from
740,000.
Dushyant on his account for 740,000
from
38,000
Received
(i)
Ise in a rupee2S
is declared Insolvent and 65
us
15,000
owed
(ii) Biroo who
his estate.
received as final dividend from
BOOKS OF HARPREET
BROS.
JOURNAL
Date
S. No.
(a)
000
JOn
(6)
(c)
(d)
(e)
)
Particulars
Amount
Dr.
Bad Debts A/c
Dr
To Rohit
(Amount due from Rohit
written off as bad debt)
Drawings A/c
Dr.
To Purchases A/c
(Goods taken away by proprietor
for personal use)
Depreciation A/c
Dr.
To Machine A/c
(Depreciation charged on machine)
Interest on Capital A/c
Dr.
To Capital Alc
(Interest provided on Capital)
Bank A/c
Bad Debts A/c
To Rahul
(Cheque received and bad debts written off
Mohan
To Sales
(Sold goods on profit)
Dr.
Dr.
10,000
10,000
LO
20,000
20,00
5,000
5,000
67,500
67,500
12,000
8,000
20,000
Dr.
Total
ILLUSTRATION
Amount CO
Cr.
1,00,000
1,00,000
2,22,500
2,22,500
20.
Prepare Journal from the transactions given below:
of machine
(a) Cash paid for installation
(b) Goods given away as charity
@7% p.a. when total capital was
(c) Interest charged on capital
a
bad debt written off last year.
of
12,000
(dReceived
fire
(e) Goods destroyed by
Rent outstanding
(g) Interest on drawing
has failed to pay the amount.
30,000
me
owed
who
(h) Sudhir Kumarcompensation of 45 p. in a i by cheque.
He pays me a
000
20300
C00
2900
1C300
n9000
nouRt
Date
S. No.
(a)
(b)
(c)
(d)
Dr
Dr.
Machine A/c
S,000
Dr.
To Purchases A/c
(Goods given away as charity)
20,000
20.000
Interest on Capital A/c
Dr.
49000
Cash A/c
Dr.
Bad Debts Recovered A/c
received of bad debt written off last year)
Loss by Fire A/c
Dr.
To Purchases A/c
(Goods destroyed by fire)
LO
49,000
To Capital A/c
(Interest charged on capital)
To
Cr
5,000
To Cash A/c
machine)
(Cash paid for installation of
Charity A/c
Amount
N
12,000
12,000
(Amount
(e)
RentRent A/c
Dr.
20,000
20,000
10,000
To Outstanding Rent A/c
10,000
(Rent outstanding)
(g)
Drawings A/c
To Interest on drawings A/c
(Interest charged on drawings)
Dr.
9,000
9,000
wu
(h)
Bank A/c
Dr.
Dr.
Bad Debts A/c
To Sudhir Kumar
13,500
16,500
30,000
(Cheque received and bad debts written off)
Total
1,55,000 1,55,000
ILLUSTRATION 21.
On July 1, 2019, Rathore & Sons started business as a computer dealer by
investing R40,000 in cash, R2,00,000 cash at bank, computers worth 75,00,0009,
furniture worth 1,20,000 and his private car worth 1,00,000 which will hencefcrh
be used solely for business purposes.
He entered into the following transactions during the month of July 2019:
July 2 Employed Mr. Vimal, at an agreed salary of R25,000 per month to be paid at id
end of each month.
July 3 Purchased 10 computers@R40,000 each from Zed Computers for stock.
July5 Purchased 2 computers@30,000 each from Zed Computers for businessuse
use to Zed
July 8 Returned one computer from stock and another from business
Computers
tnt
00
OURNAL
July 8 Computers
5.43
for 8,60,000
Payment made
kept
in
stock insured for
by
6,45,000 at 17o pre um.
July 10 Invested further cheque.
capital
huly 12 Loss on insured
50,000.
goods due to
fire R40,000.
July 20 Insurance Company
admits a claim
which is duly deposited
into the bank.of 730,000 and pays the amount by cnequ
July 20 Sold 5 computers
@
Tasly
21 Settled the account 50,000 each for cash. Banked 2,00,000
of Zed Computers
July 25 Paid landlord by
by cheque.
cheque R30,000
by the proprietor for
for rent. One-fourth
of the premises is ocCupled
his own residence.
July 26 Issued a cheque for
R20,000 in favour
in the previous month.
of s. Kumar for goods purchased from him
July 28 Sold old office equipment
for 75,000 and deposited
bank account.
the proceeds in his private
July 31 Paid Vimal his salary
for the month
of July.
Show journal entries to record
the above transactions.
SOLUTION:
Books of Rathore &
JOURNAL
Date
2019
July
SonsS
Particulars
1
Cash A/c
Bank A/c
Purchases (or Stock) A/c
Furniture A/c
Motor Car A/c
Amount
Dr.
Dr.
Dr.
Dr.
Dr.
Dr.
9,60,000
Dr.
July 3 Purchases A/c
To Zed Computers ANc
Purchase of 10 computers @ 740,000 each on
credit for stock purposes)
4,00,000
Dr.
Office Equipment A/c
To Zed Computers A/c
each on
(Purchase of 2 computers @30,000
credit for use in the office)
Dr.
A/c
Computers
Zed
To Purchases Return A/c
A/c
To Office Equipment
returned from stock and
(Computer worth 40,000
office use)
worth 30,000 from
C/F
60,000
5
July 8
Cr
40,000
2,00,000
5,00,000
1,20,000
1,00,000
To Capital A/c
(Business started with sundry assets)
July
Amount
4,00,000
60,000
70,000
40,00
30,00
14,90,000
14,90,000
July 8|Insurance Premium A/c
To Bank A/e
(Payment of insurance premium 1%
6,45,000)
July 10
Cash
6,450
Dr
50,000
Dr
40,000
905
on
A/c
To Capital A/c
(Cash introduced as further capital)
July 12 Loss by F'ire A/c
To Purchases A/e
Loss by
Dr.
LO
40
0090
fire)
July 20 Insurance Company A/c
To Loss by Fire A/c
(Insurance Claim lodged with the insurance
company)
July 20 Bank A/c
Profit and Loss A/c
To Insurance Company A/c
(Cheque received from insurance company
deposited into bank)
July 20 Cash A/c
Bank A/c
To Sales A/c
(Sale of 5 computers @50,000 each)
July 21 Zed Computers A/c
To Bank A/c
(Payment made to Zed Computers 73,90,000,
Dr
40,000
40,0900
Dr.
Dr.
30,000
10,000
40,000
Dr.
Dr.
50,000
2,00,000
2,50,000
Dr.
3,90,000
3,90,000
i.e.
R4,00,000+ R60,000-70,000)
July 25 Rent A/c (3/4 of R30,000)
Dr
Drawings A/c (1/4 of F30,000)
Dr.
To Bank A/c
(Rent paid to landlord, 1/4th of the premises
occupied by the proprietor for own residence)
July 26 S. Kumar
Dr.
22,500
7,500
30,000
20,000)
To Bank
(Payment made to S. Kumar for goods purchased
from him in the last month)
July 28 Drawings A/c
To Ofice Equipment A/c
(Sale of old office equipment and proceeds
deposited in private bank account)
July 31 Salary A/c
Dr.
5,000
Dr.
25,000
To Cash A/c
(Paid salary to Mr. Vimal)
Total
23,86,450
23,8
,450
00
00
OURNAL
Note (1): Purchase A/c wa
d
in the
oited and
the last
purchased in
last month. Hene
5.45
Hence, S.
Kumar"'sS.Kumar's Alc vas credited
Alc is debited
when goods were
on payme
ILLUSTRA TION 22,
ment being made.
Pass Journal Entrie
2018
March 2.
March 3.
March 4.
March 5.
March 6.
March 7.
March 8.
March 15.
March 20.
March 25.
March 31.
forthefollowing
Purchased an
lron Safe for business
Purchased filing
cabinet for office for 1,00,000 and payment made by
cnequ
Purchased a
use R40,000
Computer from
and paid 200 as cartage on
Radha Kishan
Purchased an electric
& Co, for 80,000 on Credit
fan for R20,000.
Purchased a 'Horse
forbusiness for 1,50,000
Purchased Post
and payment made by Cheque
Cards for 250; Envelopes
Pruchased office
for
500 and Stamps for1,000
stationery for R4,000.
Gave as CharityCash
R2,000 and Goods
74,000.
The horse bought on
March 6 died, its carcass
was sold for 710,000.
Sold household furniture
for 1,00,000 and paid
the money into business.
Paid to Landlord by cheque
71,20,000 for rent. One
occupied by the proprietor
third of the building is
for residential
t
use.
sOLUTION:
Date
2018
March 2
JOURNAL
Particulars
LAmount
F.
Office Equipment Alc
Dr.
To Bank Alc
(Iron-safe purchased)
March
3
Office Equipment Ac
To Radha Kishan & Co.
(Computer purchased)
March
Fixtures A/c
5
Dr
Cr
1,00,000
40,200
40,200
80,000
80,000
Dr.
20,000
20,000
To Cash A/c
(Electric fan purchased)
Dr.
March 6 Live Stock A/c
To Bank A/c
business)
(A horse purchased for
March 7
Amount
1,00,000
Office Equipment A/c
Dr.
AVc
To Cash
(Filing cabinet purchased for R40,000 and cartage
paid on it 7200)
March 4
Dr.
1,50,000
1,50,000
Dr.
1,750
1,750
Postage A/c
To Cash A/c
stamps purchased)
and
envelopes
(Post Cards,
CF
3,91,950 3,91,950
SURNAL
JOU
March 8 Stationery
A/c
B/F
3,91,950 3,91,950
4,000
Dr.
To Cash A/c
(Stationery purchased for
office use)
March 9Charity
A/c
Dr.
To Cash Alc
To Purchases A/c
(Cash and goods given
as Charity)
Jan.20 Cash A/c
Dr.
Profit& Loss A/c
Dr.
To Live Stock A/c
(Cash received for sale of Carcass
of dead horse)
Jan. 25 Cash A/c
Dr.
To Capital A/c
4,000
CO
6,000
2,000
4,000
10,000
1,40,000
1,50,000
1,00,000
1,00,000
Sale proceeds of house furniture paid into the
business)
Jan. 31
Rent A/c (2/3rd of R1,20,000)
Dr.
80,000
40,000
Drawings A/c
Dr.
To Bank A/c
(Rent paid to landlord, 1/3rd of the building is
Occupied by the proprietor for residential use)
1,20,000
7,71,950 7,71,950
Total
ILLUSTRATION 23.
Journalise the following transactions:
(i) Sold goods costing 760,000 to Dinesh against cheque at a profit of 40% on cost
less 20% Trade Discount and paid carriage 7500 (not to be charged from the
customer).
(i)
Sold goods costing 45,000 to Manoj at a profit of 33 on cost less 20% Trade
Discount and paid carriage 400 (to be charged from the customer).
(iil) Paid by Cheque R6,000 as fire insurance premium for a period of 12 months
starting 1st July 2017. Financial year closes on 31st March every year.
(iv) Spent R300 for refreshment of a customer.
sOLUTION
JOURNAL
Particulars
Date
F
Amount
Dr
AmoA
Cru
S. No.
(
Bank A/c*
Dr.
67,200
To Sales A/c
(Goods sold to Dinesh against Cheque)
Carriage Outwards A/c
67206
Dr.
500
C/F
67,700
To Cash A/c
(Carriage paid)
67,
NTRY - JOURNAL
,000
Manoj
To Sales A/c
To Cash A/c
(i)
2,000
4,000
B/F
(Goods sold
to Manoj on
his behalf)
Credit and
(iin)
2017
July
1
50,000
paid carriage
Insurance Premium
To Bank A/c A/c
(Paid Insurance
premium)
(Prepaid insurance
(iv)
from 1st April
2018)
Sundry Expenses A/c
To Cash
(Amount spent for
D00
67,700
48,400
Dr
48,000
400
on
Dr
6,000
6,000
Dr.
1,500
1,500
2018 to 30th June
Dr.
refreshment of a
300
300
customer)
Total
1,23,900|
assumed that the cheque
is deposited into
the Bank on the same day.
Working Notes (1):
Cost
Add: Profit 40% on F60,000
It is
Less: Trade Discount: 20% on T84,000
st
67,700
LO
2018
March 31 Prepaid Insurance
A/c
To Insurance Premium
A/c
0,000
50
5.47
1,23,900
60,000
24,000
84,000
16,800
67,200
2)
Cost
Add: Profit: 45,000
45,000
xx
100
15,000
60,000
12,000
48,000
Less: Trade Discount 20% on F60,000
Add: Carriage
400
Total
48,400
(3)
Insurance Premium paid from Ist July 2017 to 30th June 2018
Since accounts will be closed on 31st March 2018, insurance premium
2018 will be
for 3 months i.e., from 1st April 2018 to 30th June
prepaid: 6,000
ILLUSTRA TION
in the books of
Journalise the following transactions
2018
ar
arch
5
1,559
12
24.
and tools worth
Purchased furniture worth 20,000
6,00
Ganesh & Co.
R5,000.
0,U00.
March 16 Withdrawn from bank by
Ganesh for personal use
March 18 Withdrawn from bank R40,000.
10,000.
March 22 Bought shares in 'Colgate
Ltd." for 50,000
and brokerage paid @ 2%. All
payment is made by cheque.
tco
March 24 Purchased postage 100.
March 25 Paid to Ashok out of business
funds for the repair of Ganesh's
residential hou
R4,000
March 28 Paid electricity bill
1,800 and miscellaneous expenses 120.
March 31 Salaries unpaid R15,000
LO
and rent due to landlord 3,000.
March 31 Provide interest on
capital (2,00,000)
@ 8% p.a. from 1st April 2017 to 31st cN
March 2018.
sOLUTION:
Date
JOURNAL OF GANESH & CO.
Particulars
LAmount
F
2018
March 5 Furniture A/c
Tools A/c
To Cash A/c
(Amount paid for the purchase of assets)
March 10 Bank A/c
To Cash A/c
(Amount deposited in Dena Bank)
Dr.
Dr.
Dr.
Amount
Cr.
20,000
5,000
25,000
Dr.
5,000
5,000
March 12 Bank A/c
To Cash A/c
(Amount deposited into bank)
Dr.
March 16 Drawings A/c
To Bank A/c
(Amount withdrawn from bank for personal use)
Dr.
1,00,000
1,00,000
10,000
10,000
Dr.
March 18 Cash A/c
To Bank A/c
(Cash withdrawn from bank for office use)
Dr.
March 22 Investments A/c
To Bank A/c
(Purchase of shares in 'Colgate Ltd.' for R50,000 and
brokerage paid @ 2%.)
March 24 Postage A/¢
40,000
40,000
51,000
ON
31,0
Dr.
100
March 25 Drawings A/c
Dr.
To Cash ANc
(Amount paid for the repair of proprietor's residential
house)
4,000
To Cash A/c
(Amount spent on postage)
F
O00
O
2,35,100 2,35,100
LUSTRATION
25.
Journalise the following:
2018
March 1 Mukesh Bros. invested 72,00,000 in business of general stores.
March 2 Paid into Current Account 1,20,000.
March 4 Purchased goods for T60,000 and paid 2,000 for carriage on these goods.
March 6 Purchased goods for 1,00,000 on credit from Raghunath Brothers, paid 1,200
for carriage on these goods.
March 10 Purchased machinery for 710,000 and spent 100 for its carriage.
March 12 Received an order of goods for R1,25,000 from Sunil.
March 13 Payment made to Raghunath Brothers by cheque after getting 10% discount for
prompt payment.
March 15 Sunil's order was executed and cartage 73,000 was paid in this connection.
March 16 Additional cash introduced by the proprietor 750,000.
March 17 Spent 25,000 for showcase.
March 20 Purchased goods from Ravi for F12,000 and the payment was made by cheque.
March 22
March
28
Soldth of above goods at a profit of33%on cost.
Bank charges for its services 200.
SOLUTION:
JOURNAL OF MUKESH BROS.
O
N
O00
Bank A/c
To Cash Alc
(Amount deposited into Banky
Purchases A/c
Carriage Inwards A/c
To Cash A/c
(Goods purchased and carriage paid)
() Purchases A/e
To Raghunath Brothers
(Goods purchased on credit)
Dr
1,20,000
Dr
60,000
Dr
20
2,000
2,0
1,00,000
1.00.00m
Dr
(i) Carriage Inwards A/c
To Cash Ac
(Carriage paid for the purchase of above goods)
Dr.
Machinery A/c
To Cash A/c
(Machinery purchased for 10,000 and carriage
paid for the same 100)
1,200
20
10,100
10,106
No Entry
Dr.
Raghunath Brothers
1,00,000
90,00
lo Bank Alc
10,006
To Discount Received A/c
(Settlement of his account of T1,00,000 under
10% discount)
Dr.
Sunil
To Sales A/c
To Cash A/c
(Goods sold and carriage paid)
Dr.
Cash A/c
To Capital A/c
(Additional capital invested by the proprietor)
Dr.
Furniture A/c
To Cash A/c
(Amount spent for show-case)
1,28,000
1,25,000
3,000
50,000
50,00
25,000
25,000
Purchases A/c
To Bank A/c
(Goods purchased from Ravi)
Dr.
12,000
Cash A/c
To Sales A/c
Dr
3,200
th
3,200
on
of the above goods sold at a profit of 33
cost)
Bank Charges A/c
To Bank A/c
(Recording of bank charges)
12,000
Dr.
Total
200
200
8,11,700 8,11,700
3a05 NHLS
0ZY IOBH NOIE
AAN
dential
AL ENTRY-JOURNAL
OF ORIGINAL
ENT
March
iscellaneous Expenses
heo
to31
549
28Electicity Expenses
A/e
To
2.35,100 2.35,100
Ale
Cash le
(Payment made for
electricity
March
A0O
120
1,920
bill and miscellaneous
31Salaries Ae
To Outstanding
D
alaries A
(Salaries due)
March 31 Rent A/e
To Outstanding Rent
15,000
15,.000
Wc
(Rent due to landlord)
March 31 nterest on Capital
A/c
To Capital Alc
(Lnterest provided on capital)
3,000
Dr
16,000
16,000
5.000
Total
LLUSTRATION 25.
Journalise the following
5,000
D0,039
0,000
2,71.020 2.71.020
2018
March 1 Mukesh Bros. invested2,00,000
in business of general store
March 2 Paid into Current Account1,20,000.
March 4 Purchased goods for R60,000 and paid 2,000 for
carriage on these goods
March 6 Purchased goods for 1,00,000 on credit from Raghunath
Brothers, paid &1z00
for carriage on these goods.
March 10 Purchased machinery for 10,000 and spent100
for its camiage
March 12 Received an order of goods for 1,25,000 from Sunil.
March 13 Payment made to Raghunath Brothers by cheque after getting 107% discount
tor
prompt payment.
March 15 Sunil's order was executed and cartage R3,000 was paid in this connection.
March 16 Additional cash introduced by the proprietor50,000.
March 17 Spent 25,000 for showcase.
March 20 Purchased goods from Ravi for 12,000 and the payment was made by cheque
March 22 Sold
th of above goods at a profit of 33% on cost
March 28 Bank charges for its services R200
sOLUTIONV:
JOURNAL OF MUKESH BROS
Dr
2018
March
L.Amout
Particulars
Date
1
Cash A/c
To Capital A/c
by Mukesh Bros.)
(Amount of capital invested
Dr.
Anmount
Cr
2,00,000
2,00,000
CF
2,00,000 2,00,000
hOKSOF ORIGINALE
ETRY-oUR
March 2 Bank
A
2,00
Te Cash Ale
MMarch
20390
Hank)
4 Purhases Ae
Cariage Inwands
Ae
To
March
00
Amount deposited inte
6
(0
60,000
Ale
h
(Goods purchased
anddcarringe
Punchases A/e
Ta Raghunath
2,000
paid)
(Goods purchased Brother
on eredit)
i) Cariage
Inwards Ale
To Cash Ale
Camiage paid
March 10 Machinery for the purchase of above goods)
Ae
To Cash
Ae
(Machinery purchased
for R10,000 and
paid for the same
carriage
100)
March 12
No
March 13 Raghunath Brothers Entry
Dr.
To Bank A/c
To Discount Received A/c
(Settlement of his account of R1,00,000
under
10% discount)
March 15 Sunil
Dr.
To Sales Alc
To Cash A/c
(Goods sold
and carriage
100.000
1200
10,100
1.00,000
90.000
TOJ03
,28,000
1,25.000
3.000
paid)
March 16 Cash A/c
To Capital A/c
(Additional capital invested by
March 17| Furniture A/c
Dr.
50,000
50,000
the proprietor)
Dr.
1o Cash A/c
(Amount spent for show-case)
March 20 Purchases A/c
To Bank Alc
(Goods purchased from Ravi)
Dr.
March 22 Cash A/c
Dr.
25,000
25,000
12,000
12,000
3,200
3,200
To Sales A/c
Gth of the above goods sold at a profit of 33% on
cost)
March 28 Bank Charges A/c
To Bank Ac
(Recording of bank charges)
Dr.
Total
200
8,11,700 8,11,700
20,900
60,000U
BOOKS OF ORIGINAL
2,000
nUSTRATTON26
Journalisethe following:
O
.0
)
(i)
()
200
()
(vi)
(vii)
(vii)
(ix)
c)
10,10
(xi)
(xii)
ENTRY- JOURNAL
Received an order
for 50,000
R30,000 as an
advance togetherfrom Ghanshyam for supply of goods and rc ived
with the order.
Goods worth R50,000
supplied to Ghanshyam
Received a V,P.P. from
against the order.
Ram for 20,000.
as cartage.
Sent a peon to collect it who paid
Paid R3,000 for subscribing
for newspapers and
Received 500 from
magazines,
sale of old newspapers
Received F10,000
and magazines.
from sale of old chairs,
tables etc.
Paid interest on loan
R6,000.
Withdrawn goods for
personal use R8,000.
Goods stolen Cost Price
R48,000.
Goods destroyed by fire
Sold goods to X on credit-Cost Price 1,60,000.
R6,00,000.
D
Xreturnedth ofthe goods sold to him.
xii)X settles his account after deducting 10%
xiv) Salaries paid 780,000 and salaries owing discount for prompt payment
(due) R20,000.
(xv) Paid Income Tax
80,000 by cheque.
90,0
10,00
SOLUTION.
Date
25,000
S.No.
3,000
()
(i)
,000
$.51
JOURNAAL
Particulars
Amount
Dr.
Cash A/c
Dr.
To Advance from Ghanshyam
(Advance received from Ghanshyam against the order)
Ghanshyam
Advance from Ghanshyam
To Sales A/c
(Goods supplied to Ghanshyam against advance
previously received)
000
(il)
(iv)
O1
Dr.
Dr.
Amount
Cr.
30,000
30,000
20,000
30,000
50,000
Purchase A/c
Cartage A/c
To Cash A/c
(V.P.P. received and cartage paid)
Dr.
Dr.
Miscellaneous Expenditure A/c
Dr.
20,000
150
20,150
3,000
3,000
To Cash A/c
magazines)
(Amount paid for newspapers and
(v)
Dr
Cash A/c
To Miscellaneous Income Alc
newspapers and
(Amount received from sales of old
magazines)
C/F
500
500
1,03,650 1,03,650
RIGINAL
(vi)Cash A/c
B/
To Furniture A/c
(Amount received
Dr.
from sales of
old chairs, tablee ete
(vi) Interest on Loan
A/c
tc
To Cash A/c
Dr.
(Payment of interest
on loan)
(vii) Drawings A/c
To Purchases
Dr.
(Goods costing A/c
R8,000 taken
personal use)
(ix)
bytheproprietor
Loss by theft A/c
Dr.
To Purchases A/c
(Goods costing
Dr.
F1,60,000 destroyed
To Sales A/c
(Goods sold to X on
xii)
Apri
6,000
April
8,000
Aprt
48,000
1,60,000
1,60,000
by fire)
Dr.
6,00,000
6,00,000
credit)
Sales Return A/c
To X
(Goods returned by X)
Dr.
1,00,000
1,00,000
Dr.
Dr.
,50,000
50,000
5,00,000
(Amount received from X)
Salaries A/c
Dr.
To Cash A/c
ToSalaries Outstanding A/c
Recording of salaries paid and outstanding)
v)
April
April
April
April
48.006
(xiii) Cash A/c
Discount Allowed A/c
To X
(axiv)
BOOKS
Ap
To Purchases A/c
(Goods costing
X
- JOURN
03,650
10,000 103
for
48,000 stolen)
Loss by Fire A/c
(xi)
ENTRY
Drawings A/c
80,000
20,000
Dr.
To Bank A/c
(Payment of income tax)
1,00,000
80,000
80,000
Total
17,15,650 17,15,650
VP.P.
(Value Payable Post):Under
this system seller sends the goods through Post
pays
the
value
goods
to
the
of
Buyer
Post Office and gets the delivery of goods from
office.
Post Ofiice.
LLUSTRA TION 27,
Journalise the following transactions
2018
April Received an order for goods for 1,20,000 from M/s Gauri Shankar &Sons.
April 5 Received order for goods from M/s Ranbir & Co. of R5,00,000 alongwith a cheque
for 1,80,000 as advance.
,036
10,0
8,003
8,00T
BOOKS OF RIGINAL ENTRY
JOUR NAL
5.53
April 5 Placed order for goods
with
M/s
by cheque in advance.
Kohli & Sons
0,000; paid them 1,00,000
of 2,50,0
Aaril 7 Kohli & Sons. supplied
goods of 2,50,000.
Anril 10 Paid a cheque tor
60% of the balance
ril 15 Goods for R20,000 and furniture amount due to Kohli& Sons on accou
Anril 20 Goods cOsting
ofthe book value of 10,000 destroyea Dy
R50,000
authorities for the same. were damaged in transit; a claim was made on
ta
April 22Received irom
Salesman60,000
for goods sold by him after deducting
travelling expenses
4,000.
April 25 Sold goods to Vishesh
trade discount and paid costing 740,000 at a profit of 25%% and allowed him I00
for cartage 71,000 to charged
be
from him.
April 28 Received a cheque of F40,000
claim for damages in transit. from the railway authorities in full settlement o
S0LUTION
JOURNAL
,000
Date
Particulars
2018
April 1
,000
April
5
To Ranbir & Co. (Advance)
(Advance received against an order of 75,00,000)
Kohli & Sons (Advance)
To Bank Ale
(Paid advance against an order of F2,50,000)
April 7 Purchases A/c
To Kohli & Sons
00
(Goods purchased)
April 10 Kohli & Sons
To Bank Alc
account)
(60% of T1,50,000 paid on
00
00
April 15 Loss by fire A/c
00
O
ost
m
U1
O
O1
Amount
Dr.
Amount
Cr.
No Entry
April 3 Bank A/e
000
L
Dr.
1,80,000
1,80,000
Dr.
1,00,000
1,00,000
Dr.
2,50,000
2,50,000
Dr.
90,000
90,000
Dr.
20,000
10,000
To Purchases A/c
To Furniture A/c
destroyed by fire)
(Goods and furniture
April 20 Railway Claim A/c
To Purchases A/c
damaged in transit)
(Claim made for goods
Dr.
April 22 Cash A/c
Dr.
Travelling Expenses A/c
his
To Sales A/c
after deducting
salesman
(Cash received from
C/F
travelling expenses)
30,000
50,000
50,000
Dr.
60,000
4,000
64,000
7,64,000
7,64,000
5.54
BOOKS OF ORIG
ENTRY
-JOUR
B/F
April 25 Vishesh (Note
1)
7,64000
Dr.
To Sales A/c
To Cash A/c
46,000
154
45
(Goods sold on credit and paid for cartage 1,000
to
be charged from him)
April 28 Bank A/c
Profit & Loss A/c
To Railway Claim A/c
(Claim received from Railway)
Dr.
40,000
Dr.
10,000
Total
8,60,000
Working Notes
(1) Cost of Goods
Add: Profit 25% of R40,000
8,600
40,000
10,000
50,000
Less: Trade Discount: 10% of R50,000
45.00
Add: Cartage
46,000
(2) It is assumed that the cheques received are
deposited into the bank on the same day,
TLLUSTRATION28.
Give the journal entries corresponding to the narration given below :
Date
Particulars
Amount
F
D
Amount
Cr
2017
Dec. 5
(Furniture purchased for 20,000 and paid 7100 for
itscarriage)
Dec. 12
Dr.
Dr.
To
(Goods of the list price of R40,000 sold at 15% trade
discount and 3% cash discount)
Dr.
Dec. 20
Dr.
To Bank Alc
(Purchase of a computer for R30,000 and an electric
fan for T10,000)
O
Dr.
Dec. 24
To
(Goods costing 6,000 taken by
the proprietor
30,000
10,000
40,000
TT
2
CO
2021/5/14
08:35
Dec. 31 Rent
A/c
To Cash A/c
To Outstanding Rent
A/c
(Rent paid and
due)
O
BOOKS OF ORIGINAL ENTRYTO
1oURNA
B/F
1,28,600
286
Dr.
30,000
Date
sOLU
Date
S
1,58,600
Total
ILLUSTRATION
29.
Rectify the following
BOOKS
1,586
NO
entries assuming that the narration in each cas
ase is correct
Particulars
F
2017
Nov. 2 Machinery A/c
Dr.
Carriage A/c
Dr.
Installation Charges A/c
Dr.
To Cash A/c
(Machinery purchased and carriage and installation
charges paid for it)
Nov. 6 Miscellaneous Expenses A/c
Dr.
To Sales A/c
(Goods costing 75,000 stolen from the godown)
Nov. 12 Purchases A/c
Dr.
Amount Amount
Dr.
Cr
2,00,000
2,000
1,000
2,03,000
5,000
5,000
11,400
11,400
To Cash A/c
(Goods for R15,000 purchased at 20% trade discount
and 5% cash discount)
Nov. 20 Cash A/c
Dr.
5,150
5,000
To Sales A/c
To Newspapers A/c
(Sale of old machinery for 5,000 and old newspapers
for R150)
Nov. 24 Fire Insurance Premium A/c
Life Insurance Premium A/c
Dr.
Dr.
150
2,500
7,500
10,000
To Bank A/c
(Payment of fire insurance premium and life insurance
premiumn)
Nov.
30 Bank Charges A/c
To Cash Alc
(Charges made by bank for its services)
U1
Dr.
120
120
KNAL
D
5.57
sOLUTION:
Date
Un
corree
Am2
2,03,000
articulars
AmountAmount
2017
Nov. 2 Machinery A/c
Dr
To Cash A/c
(Machinery purchased for
R2,000 and installation R2,00,000 and carriage
charges 1,000 paid for
ity
Theft
by
A/c
Nov. 6Loss
Dr
To Purchase A/c
(Goods stolen from the godown)
Nov. 12 Purchases A/c
Dr
To Cash A/c
To Discount Received A/c
(Goods for 15,000 purchased at 20% trade discount
and 5% cash discount)
Nov. 20 Cash A/c
Dr.
To Machinery A/c
To Miscellaneous Income A/c
(Sale of old machinery and newspapers)
5,000
2,03,000
2,03,000
5,000
5,000
12,000
11,400
600
5,150
5,000
150
Nov. 24 Insurance Premium A/c
Dr.
Dr.
Drawings A/c
To Bank Alc
(Payment of fire insurance premium and life insurance
premium)
11,400
Cr.
Dr.
2,500
7,500
10,000
120
Dr.
Nov. 30 Bank Charges A/c
To Bank A/c
(Charges made by bank for its services)
120
Total
2,35,270
2,35,270
5,000
150
SHORT ANSWER QUESTIONS
What are books of original entry?
entries? Give an example.
What are compound journal
Give an example.
3. What is Trade Discount?
Discount.
Trade Discount and Cash
between
transactions?
Distinguish
4.
for two or more
entry
journal
a single
5. Is it possible to pass
1.
2
,000
N
QUESTIONS
OBJECTIVE TYPE
120
A)
0O
O1
Select the most suitable
1.
alternative
be Credited to:for Cash should
X
from
Purchase of goods
(b) Cash
(a) Purchase
(c) X