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In accounting, only business transactions are recorded. A transaction is an event which can be expressed in terms of money and which brings change in the financial position of a business enterprise. An event is an incident or a happening which may or may not being any change in the financial position of a business enterprise. Therefore, all transactions are events but all events are not transactions. A transaction is a complete action, to an expected or possible future action. In every transaction, there is movement of value from one source to another. For example, when goods are purchased for cash, there is a movement of goods from the seller to the buyer and a movement of cash from buyer to the seller. Transactions may be external (between a business entity and a second party, e.g., goods sold on credit to Hari or internal (do not involve second party, e.g., depreciation charged on the machinery).
1. Mr. Mondal started business with capital (brought in cash) Rs. 40,000.
2. Paid salaries to staff Rs. 5,000.
3. Purchased machinery for Rs. 20,000 in cash.
4. Placed an order with Sen & Co. for goods for Rs. 5,000.
5. Opened a Bank account by depositing Rs. 4,000.
6. Received pass book from bank.
7. Appointed Sohan as Manager on a salary of Rs. 4,000 per month.
8. Received interest from bank Rs. 500.
9. Received a price list from Lalit.
(i) It is a transaction, because it changes the financial position of Mr. Mondal’s business. Cash will increase by Rs. 40,000 and Capital will increase by Rs. 40,000.
(ii) It is a transaction, because it changes the financial position of Mr. Mondal’s business. Cash will decrease by Rs. 5,000 and Salaries (expenses) will increase by Rs. 5,000
(iii) It is a transaction, because it changes the financial position of Mr. Mondal’s business. Machinery comes in and cash goes out.
(iv) It is not a transaction, because it does not change the financial position of the business.
(v) It is a transaction, because it changes the financial position of the business. Bank balance will increase by Rs. 4,000 and cash will decrease by Rs. 4,000.
(vi) It is not a transaction, because it does not change the financial position of Mr. Mondal.
(vii) It is not a transaction, because it does not change the financial position of Mr. Mondal.
(viii) It is a transaction, because it changes the financial position of Mr. Mondal’s business. Bank interest will increase by Rs. 500 and cash will increase by the same amount.
(ix) It is not a transaction, because it does not change the financial position of the business of Mr. Mondal.
Journal is the first book of original entry in which all transactions are recorded event wise and date-wise and presents a historical record of all monetary transactions. It may further be divided into sub-journals as well which are also known subsidiary books.
Accounting is the art of classifying business transactions. Classification means statement setting out for a period where all the similar transactions relating to a person, a thing, expense, or any other subject are grouped together under appropriate heads of accounts.
Summarising is the art of making the activities of the business enterprise as classified in the ledger for the use of management or other user groups i.e. Sundry debtors, Sundry creditors etc. Summarisation helps in the preparation of Profit and Loss Account and Balance sheet for a particular fiscal year.
The financial information or data as recorded in the books of a account must further be analysed and interpreted so to draw useful conclusions. Thus, analysis of accounting information will help the management to assess in the performance of business operation and forming future plans also.
The end users of accounting statements must be benefited from analysis and interpretation of data as some of them are the ‘stock holders’ and other one the ‘stake holders’. Comparison of past and present statement and reports, use of ratio and trend analysis are the different tools of analysis and interpretation. From the above discussion one can conclude that accounting is a art which starts and includes steps right from recording of business transactions of monetary character to the communicating or reporting the results thereof to the various interested parties.
Journal is a historical record of business transaction or events. The word journal comes from the French word “Jour” meaning “day”. It is a book of original or prime entry. Journal is a primary book for recording the day to day transactions in a chronological order i.e. the order in which they occur. The journal is a form of diary for business transactions. This is called the book of first entry since every transaction is recorded firstly in the journal.
Journal entry means recording the business transactions in the journal. For each transaction, a separate entry is recorded. Before recording, the transaction is analysed to determine which account is to be debited and which account is to be credited. The Performa of journal is shown as follows:
Column 1 (Date): The date of the transaction on which it takes pale is written in this column.
Column 2 (Particulars): In this column, the name of the accounts to be debited is written first, then the names of the accounts to be credited and lastly, the narration (i.e. a brief explanation of transaction) are entered.
Column 3 (L.F.): L.F. stands for ledger folio which means page of the ledger. In this column the page numbers are entered on which the various accounts appear in the ledger.
Column 4 (Dr. Amount): In this column, the amount to be debited against the ‘Dr.’ Account is written along with the nature of currency.
Column 5 (Cr. Amount): In this column the amount to be credited against the ‘Cr.’ Account is written along with the nature of currency.
Journal is used because of the following advantages:
1. A journal contains a permanent record of all the business transactions.
2. The journal provides a complete chronological (in order of the time of occurrence) history of all business transactions and the task of later tracing of some transactions is facilitated.
3. A complete information relating to one single business transaction is available in one place with all its aspects.
4. The transaction is provided with an explanation technically called a narration.
5. Use of the journal reduces the possibility of an error when transactions are first recorded in this book.
6. The journal establishes the quality of debits and credits for a transaction and reconciles any problems. If a business purchases a bicycle, it is necessary to decide whether the bicycle represents ordinary goods or machinery. Further any amount paid is debited to bicycle account and credited to cash account.
7. The use of journals avoids omission or duplication of transactions or parts of transaction. Without the journal the accountant would be forced to go to the individual account to enter debits and credits. Therefore it is possible for an accountant to miss part of a transaction, duplicate all or part of a transaction or incorrectly record debits and credits. Even with the Journal, it is still possible to omit transactions and make other errors. However, the Journal reduces these problems.
8. Once a transaction is recorded in the journal, it is not necessary to post it immediately in the ledger accounts. In this, way, the journal allows the delayed posting.
9. In connection with the journal, the following points are to be remembered:
a. For each transaction, the exact accounts should be debited and credited. For that, the two accounts involved must be identified to pass a proper journal entry.
b. Sometimes, a journal entry may have more than one debit or more than one credit. This type of journal entry is called compound journal entry. Regardless of how many debits or credits are contained in a compound journal entry, all the debits are entered before any credits are entered. The aggregate amount of debits should be equal to the aggregate amount of credits.
c. For a business, journal entries generally extend to several pages. Therefore, the total are cast at the end of each page, against the debit and credit columns, the following words and written in the particular column, which indicates, carried forward (of the amount on the next page) “Total c/f”. The debits and credits totals of the page are then written on the next page in the amount columns; and opposite to that on the left, the following words are written in the particulars column to indicate brought forward (of the amount of the previous page) “Total b/f”. This process is repeated on every page and on the last page, “Grand Total” is cast.
Accounts which are related with accounts of individuals, firms, companies are known as personal accounts. The personal accounts may further be classified into three categories:
1. Natural Personal Accounts: Accounts of individuals relating to natural persons such as Akhil’s A/c, Rajesh’s A/c, Sohan’s A/c are natural personal accounts.
2. Artificial Personal Accounts: Accounts of companies, institutions such as Reliance Industries Ltd; Lions Club, M/s Sham & Sons, National College account are artificial personal accounts. These exist only in the eyes of law.
3. Representative Personal Accounts: The accounts which represent some person such as wage outstanding account, prepaid insurance account, accrued interest account are considered as representative personal accounts.
Real accounts are the accounts related to assets/properties. These may be classified into tangible real account and intangible real account. The accounts relating to tangible assets such as building, plant, machinery, cash, furniture etc. are classified as tangible real accounts.
Intangible real accounts are the accounts related to intangible assets such as goodwill, trademarks, copyrights, franchisees, Patents etc.
The accounts relating to income, expenses, losses and gains are classified as nominal accounts. For example Wages Account, Rent Account, Interest Account, Salary Account, Bad Debts Accounts.
Type of Accounts Rules for Debit Rules for Credit
1. Personal Account- Debit the receiver Credit the giver.
2. Real Account- Debit what comes in Credit what goes out.
3. Nominal Account- Debit all expenses and Losses, Credit all incomes and gains
1. Investments
2. Freehold Premises
3. Accrued Interest
4. Punjab Agro Industries Corporation
5. Janata Allied Mechanical Works
6. Salary Accounts
7. Loose Tools Accounts
8. Purchases Account
9. Indian Bank Ltd.
10. Capital Account
11. Brokerage Account
12. Toll Tax Account
13. Dividend Received Account
14. Royalty Account
15. Sales Account
Real Account: (i), (ii), (vii), (viii), (xv).
Nominal Account: (vi), (ix), (xi), (xii), (xiii), (xiv)
Personal Account: (iii), (iv), (v), (x)
Journalizing is the process of recording journal entries in the Journal. It is a systematic act of entering the transaction in a day book in order of their occurrence i.e., date-wise or event-wise. After analysing the business transactions, the following steps in journalising are followed:
1. Find out what accounts are involved in business transaction.
2. Ascertain what is the nature of accounts involved?
3. Ascertain the golden rule of debit and credit is applicable for each of the accounts involved.
4. Find out what account is to be debited and what is to be credited.
5. Record the date of transaction in the “Date Column”.
6. Write the name of the account to be debited very near to the left hand side in the ‘Particulars Column’ along with the word ‘Dr’ on the same line against the name of the account in the ‘Particulars Column’ and the amount to be debited in the ‘Debit Amount column’ against the name of the account.
7. Record the name of the account to be credited in the next line preceded by the word ‘To’ at a few space towards right in the ‘Particulars Column’ and the amount to be credited in the ‘Credit Amount Column’ in front of the name of the account.
8. Record narration (i.e. a brief explanation of the transaction) within brackets in the following line in ‘Particulars Column’.
9. A thin line is drawn all through the particulars column to separate one Journal entry from the other.
In case of going concern at the beginning of the new year, new books of accounts are opened and the balances relating to personal and real Accounts appearing in the books at the close of the previous year are brought forward in new books. The entry for this purpose in the books is called opening entry.
The opening entry is passed by debiting all assets and crediting all liabilities including capital. If the amount of capital is not given then this can be found out with the help of the accounting equation:
Assets = Liabilities + capital
Capital = Assets- Liabilities .
1. Jan Raman started business with cash Rs.50,000.
2. Jan Cash deposited into bank Rs. 25,000.
3. Jan Goods are purchased for cash from Naresh Rs. 25,000.
4. Jan Goods are sold to Rakesh for cash Rs. 34,000.
5. Jan Paid salary to Madan Rs. 42,000.
6. Jan For the purpose of personal use cash is withdrawn Rs. 25,000.
7. Jan Brought furniture from Sumit on credit Rs. 40,000.
8. Jan Paid interest on loan Rs. 5000.
9. Jan Paid rent Rs. 6000.
10. Jan Borrowed from Shina Rs. 10,000.
11. Jan Withdrew from bank for office Rs. 15,000.
12.Jan Bought furniture Rs.30, 000.
Journals Entries in the Books of Raman
| Date | Particulars | L.F | Dr. | Cr. |
| Jan 1st | Cash a/c Dr.
To capital a/c (being commencement of business) |
50,000 | 50,000 | |
| Jan 3rd | Bank a/c Dr.
To cash a/c (being cash deposited into bank) |
25,000 | 25,000 | |
| Jan 5th | Purchase a/c Dr.
To Cash a/c (being goods purchased) |
25,000 | 25,000 | |
| Jan 8th | Cash a/c Dr.
To sales a/c (being goods sold for cash) |
34,000 | 34,000 | |
| Jan 10th | Salary a/c Dr.
To cash a/c (being salary paid to Madan) |
42,000 | 42,000 | |
| Jan 14th | Drawings a/c Dr.
To cash a/c (being cash withdrawn for personal use) |
25,000 | 25,000 | |
| Jan 16th | Furniture a/c Dr.
To Sumit a/c (being furniture purchased on credit) |
40,000 | 40,000 | |
| Jan 18th | Interest on loan a/c Dr.
To bank a/c (being interest paid) |
5,000 | 5,000 | |
| Jan 22nd | Rent a/c Dr.
To cash a/c (being rent paid) |
6,000 | 6,000 | |
| Jan 24th | Cash a/c Dr.
To Shina a/c (being cash borrowed) |
10,000 | 10,000 | |
| Jan 26th | Cash a/c Dr.
To bank a/c (being cash withdrawn from bank for office use) |
15,000 | 15,000 | |
| Jan 30th | Furniture a/c Dr.
To cash a/c (being furniture purchased) |
30,000 | 30,000 |
2005
June 1. Paid cash to Mahesh Rs. 9,600
And discount received from him. Rs. 400
June 4. Received cash from Arun Rs. 4,900
And discount allowed to him. Rs. 100
June 10. Goods sold to Harish Rs. 30,000
June 12. Harish returned goods. Rs. 2,000
June 14. Received cash from Harish Rs. 27,500 in full settlement of his account.
June 20. Sold goods to Gopal of the list price of Rs. 60,000 at 10% trade discount.
June 23. Purchased goods from Ravi of the list price of Rs. 20,000 at 15% trade discount.
Journal entries in the Book of
Naresh for the year 2005
| Date | Particulars | L.F | Dr. | Cr. |
| June 1st | Mahesh a/c Dr.
To cash a/c To discount received (being cash paid to Mahesh and discount received) |
10,000 | 9,600400 | |
| June 4th | Cash a/c Dr.
Discount Allowed Dr. To Arun’s a/c (being cash received from Arun and allowed him discount) |
49,000
1,000 |
50,000 | |
| June 10th | Harish a/c Dr.
To sales a/c (being goods sold to Harish) |
30,000 | 30,000 | |
| June 12th | Sales Return a/c Dr.
To Harish a/c (being sales return) |
2,000 | 2,000 | |
| June 14th | Cash a/c Dr.
Discount Allowed a/c Dr. To Harish a/c (being cash received in full settlement) |
27,500
500 |
28000 | |
| June 20th | Gopal a/c Dr.
To sales a/c (being goods sold at trade discount) |
54,000 | 54,000 | |
| June 23rd | Purchase a/c Dr.
To Ravi a/c (being goods purchased at trade discount) |
17,000 | 17,000 |
April 1. Sita Ram started business with cash Rs. 70,000
April 2. Purchased furniture for cash. Rs. 9,000
April 3. Purchased goods for cash. Rs. 30,000
April 4. Bought goods from Naresh. Rs. 25,000
April 6. Sold goods for cash. Rs. 22,000
April 8. Sold goods to Ram Lal. Rs. 15,000
April 11. Paid cash to Naresh Rs. 17,500
April 14. Received cash from Ram Lal. Rs. 10,000
April 15. Bought computer in cash. Rs. 20,000
April 19. Paid wages in cash. Rs. 300
April 21. Purchased goods in cash from Krishna. Rs. 8,000
April 25. Received commission. Rs. 250
April 27. Paid salary to Madan. Rs. 1,000
April 28. Received cash from Ram Lal Rs. 3,500
April 29. Withdraw cash from office for Rs. 2,000
personal use
April 30. Bought typewriter in cash. Rs. 6,000
April 30. Paid shop rent Rs. 800
| Date | Particular | LF | Debit | Credit |
| 2005 | Rs | Rs | ||
| April 1st | Cash A/c. Dr To capital A/c (being business started with cash) |
70,000 | 70,000 | |
| April 2nd | Furniture A/c Dr
To cash A/c (being furniture purchased in cash) |
9,000 | 9,000 | |
| April 3rd | Purchases A/c Dr To cash A/c (being goods purchased in cash) |
30,000 | 30,000 | |
| April 4th | Purchases A/c Dr To Naresh A/c (being goods purchased from Naresh) |
25,000 | 25,000 | |
| April 6th | Cash A/c Dr To sales A/c (being goods sold in cash) |
22,000 | 22,000 | |
| April 8th | Ram Lal A/c Dr To sales A/c (being goods sold to Ram Lal) |
15,000 | 15,000 | |
| April 11th | Naresh A/c Dr To cash A/c (being cash paid to Naresh) |
17,500 | 17,500 | |
| April 14th | Cash a/c Dr
To Ram Lal (being cash received and allowed discount) |
10,000 | 10,000 | |
| April 15th | Computer a/c Dr
To cash a/c (being computer purchased) |
20,000 | 20,000 | |
| April 19th | Wages a/c Dr
To cash a/c (being cash paid for wages) |
300 | 300 | |
| April 21st | Purchase a/c Dr
To cash a/c (being goods purchased) |
8,000 | 8,000 | |
| April 25th | Cash a/c Dr
To commission received a/c (being commission received) |
250 | 250 | |
| April 27th | Salary a/c Dr
To cash a/c (being salary paid) |
1,000 | 1,000 | |
| April 28th | Cash a/c Dr
To Ram Lal a/c (being cash received from Ramlal) |
3,500 | 3,500 | |
| April 29th | Drawings a/c Dr
To cash a/c (being withdraw cash for personal use) |
2,000 | 2,000 | |
| April 30th | Typewriter a/c Dr
To cash a/c (being typewriter bought) |
6,000 | 6,000 | |
| April 30th | Rent a/c Dr
To cash a/c (being rent paid) |
800 | 800 |
Assets:- Cash ₹15,000; Bank balance ₹5,000: Stock ₹40,000; Furniture ₹3,600; Debtors ₹24,000 (X ₹6,000; Y ₹8,000 and Z ₹10,000).
Liabilities:- Bank Loan ₹10,000; Creditors ₹12,500 (Ajay ₹5,000; Vijay ₹7,500).
Following Transactions took place during April 2011:
April 2. Bought goods from Kailash for ₹20,000 at a trade of 10% and each cash discount of 2%. Paid 60% amount immediately.
April 4. Sold goods to X for ₹10,000.
April 5. Received ₹15,000 from X in full settlement of his account.
April 6. Cash deposited into bank ₹15,000.
April 8. Cheque received from Y for ₹7,850 in full settlement of his account. This cheque was immediately deposited into bank.
April 10. Received a cheque from Z ₹5,000.
April 12. Cheque received from Z deposited into bank.
April 15. Cheque received from Y dishonored.
April 16. Cash sales ₹15,000; Out of this amount ₹12,000 deposited into bank.
April 16. Amount due to Ajay paid by Cheque.
April 18. Old newspapers sold ₹100.
Old furniture sold ₹900.
April 20. Z became insolvent and 50 paisa in rupee could be received from his estate.
April 22. Purchase goods from Gopal and paid by Cheque ₹10,000.
April 24. Sold half of the above goods to Chanderkant at a profit of 30% on cost.
April 25. Proprietor withdrew for private use ₹2,000 from office and ₹3,000 from bank.
April 31. Paid Salary to Ram by Cheque ₹5,000.
April 31. Paid Rent by Cheque ₹3,000.
April 31. Paid trade expenses ₹1,000.
Journal of Vishal Stores
On April 1st ,2011
| Date | Particulars | L.F | Dr. | Cr. |
| April 1st | Cash a/c Dr.
Bank a/c Dr. Stock a/c Dr. Furniture a/c Dr. X Dr. Y Dr. Z Dr. To loan from bank To Ajay To Vijay To Capital (bal. fig.) (being assets and liabilities brought figure) |
15,000
5,000 40,000 3,600 6,000 8,000 10,000 |
10,000
5,000 7,500 65,100 |
|
| April 2nd | Purchase a/c Dr.
To cash a/c To discount received a/c To Kailash (being goods purchased and discount received) |
18,000 | 10,584360
7,056 |
|
| April 4th | X Dr.
To sales a/c (being goods sold on credit) |
10,000 | 10,000 | |
| April 5th | Cash a/c Dr.
Discount Allowed a/c Dr. To X (being cash received and discount allowed) |
14,000
1,000 |
15,000 | |
| April 6th | Bank a/c Dr.
To cash a/c (being cash deposited into bank) |
10,000 | 10,000 | |
| April 8th | Bank a/c Dr.
Discount Allowed a/c Dr. To Y (being cheque received and deposited into bank) |
7,850
150 |
8,000 | |
| April 10th | Cash a/c Dr.
To Z (being Cheque received) |
5,000 | 5,000 | |
| April 12th | Bank a/c Dr.
To cash a/c (cheque received from Z now deposited into bank) |
5,000 | 5,000 | |
| April 15th | Y Dr.
To Bank a/c To Discount Allowed a/c (being cheque dishonoured and discount withdrawn) |
8,000 | 7,850150 | |
| April 16th | Cash a/c Dr.
Bank a/c Dr. To sales a/c (being cash sales) |
3,000
12,000 |
15,000 | |
| April 16th | Ajay Dr.
To bank a/c (being cheque given to Ajay) |
5,000 | 5,000 | |
| April 18th | Cash a/c Dr.
To miscellaneous income a/c To furniture a/c (being old newspapers and old furniture sold) |
800 | 50750 | |
| April 20th | Bank a/c Dr.
Bad debts a/c Dr. To Z (being Amount received and bad debts written off) |
2,500
2,500 |
5,000 | |
| April 22nd | Purchase a/c Dr.
To bank a/c (being goods purchased by cheque) |
8,000 | 8,000 | |
| April 24th | Chanderkant a/c Dr.
To sales a/c (being goods sold on credit) |
6,500 | 6,500 | |
| April 25th | Drawings a/c Dr.
To cash a/c To bank a/c (being amount withdrawn for personal use) |
5,000 | 2,0003,000 | |
| April 30th | Sala/c Dr.
Rent a/c Dr. To bank a/c (being expenses paid by cheque) |
2,000
1,500 |
3,500 | |
| April 30th | Trade Expenses a/c Dr.
To cash a/c (being expenses paid in cash) |
500 | 500 |
2001
April 1. Started business with ₹ 5,00,000; paid into bank ₹4,00,00.
April 4. Purchased goods for ₹ 1,40,000 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. Also incurred ₹24,000 on its registration. Payment for building was made by cheque and brokerage and registration charges were paid in cash.
April 12. Sold goods to Arun for ₹2,00,000. Arun pays one-fourth amount in cash.
April 14. A cheque of ₹1,48,000 is received from Arun in full settlement and the cheque is immediately deposited into bank.
April 16. Paid stationery expenses ₹180.
April 17. Paid fire insurance premium on building by Cheque ₹1,000 and Gauri Shankar’s life insurance premium by cheque ₹4,000.
April 20. Paid for office cleaning ₹200.
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’ ₹2000.
Journals of Mr. Gauri Shankar (2001)
| Date | Particulars | L.F | Dr. | Cr. |
| April 1st | Cash a/c dr.
To capital a/c To bank a/c (being business started with cash and paid to bank) |
5,00,000 | 1,00,0004,00,000 | |
| April 4th | Purchase a/c dr.
To cash a/c To bank a/c (being goods purchased and took credit from Mr. Sudhir) |
1,40,000 | 70,00070,000 | |
| April 7th | Building a/c dr.
Brokerage a/c dr. To bank a/c To cash a/c (bring building purchased and brokerage paid) |
2,00,000
4,000 |
2,00,000
4,000 |
|
| April 12th | Cash a/c dr.
Bank a/c dr. To sales a/c (being goods sold to them with ¼ amount in cash) |
50,000
1,50,000 |
2,00,000 | |
| April 14th | Bank a/c dr.
Discount Allowed a/c To Arun a/c (being cheque received in full settlement) |
1,48,000
2,000 |
2,00,000 | |
| April 16th | Stationary a/c dr.
To cash a/c (being stationary purchased) |
180 | 180 | |
| April 17th | Fire insurance a/c dr.
Life insurance a/c dr. To bank a/c (being paid fire insurance and life insurance by cheque) |
1,000
4,000 |
5,000 | |
| April 20th | Office cleaning a/c dr.
To cash a/c (being paid for office cleaning) |
200 | 200 | |
| April 28th | Cash a/c dr.
To rent a/c (being rent received) |
2,500 | 2,500 | |
| April 28th | Advertisement a/c dr.
To cash a/c (being paid for advertisement) |
2,000 | 2,000 |
2008
May 1. Started business with cash ₹1,00,000.
May 2. Purchased Box for business for ₹10,000.
May 3. Purchased filing cabinet for office use ₹4,000 and paid ₹20 as cartage on it.
May 4. Purchased a portable furniture from Krishna & Co. for ₹10,000.
May 5. Purchased an electric fan for ₹8,000.
May 6. Purchased a livestock for business for ₹20,000.
May 7. Purchased Post Cards for ₹25; Envelopes for ₹50 and Stamps for ₹100.
May 8. Purchased stationery for ₹500.
May 15. Gave as charity – Cash ₹200 and Goods ₹800, Furniture ₹1,000.
May 20. The livestock bought on May 6 died, its carcass was sold for ₹3,000.
May 25. Sold household furniture for ₹8,000 and paid the money into business.
May 31. Paid Landlord ₹15,000 for rent. One fifth of the building is occupied by the proprietor for residential use.
Journal Entries
| Date | Particulars | L.F | Dr. | Cr. |
| May 1st | Cash a/c dr.
To capital a/c (being started business with cash) |
1,00,000 | 1,00,000 | |
| May 2nd | Box a/c dr.
To cash a/c (being box purchased for business) |
10,000 | 10,000 | |
| May 3rd | Cabinet a/c dr.
Cartage a/c dr. To cash a/c (being filling cabinet purchased and paid for cartage) |
4,000
20 |
4,020 | |
| May 4th | Furniture a/c dr.
To Krishna & Co. a/c (being furniture purchased) |
10,000 | 10,000 | |
| May 5th | Electric fan a/c dr.
To cash a/c (being electric fan purchased) |
8,000 | 8,000 | |
| May 6th | Livestock a/c dr.
To cash a/c (being livestock purchased) |
20,000 | 20,000 | |
| May 7th | Post card a/c dr.
Envelopes a/c dr. Stamp a/c dr. To cash a/c (being postcard, envelopes, stamps purchased) |
25
50 100 |
175 | |
| May 8th | Stationary a/c dr.
To cash a/c (bring stationary purchased) |
500 | 500 | |
| May 15th | Cash a/c
Goods a/c Furniture a/c To charity a/c (being charity paid) |
200
800 1,000 |
2,000 | |
| May 20th | Cash a/c dr.
To Livestock a/c (being livestock sold) |
3,000 | 3,000 | |
| May 25th | Cash a/c dr.
To capital a/c (being furniture sold) |
8,000 | 8,000 | |
| May 31st | Rent a/c dr.
Drawings a/c dr. To cash a/c (being rent paid) |
12,000
3,000 |
15,000 |
2012
May 1. Commenced business with cash ₹1,00,000.
May 2. Purchased goods from Gopal ₹30,000.
May 4. Sold goods to Ramnath ₹20,000.
May 6. Ramnath returned defective goods 20% of Total.
May 10. Received cash from Ramnath ₹14,000 and Discount allowed on rest.
May 12. Vimal sold goods to us ₹20,000.
May 14. Paid to Vimal in full settlement of his account after deducting 5% discount.
May 15. Paid rent to Madan ₹3,000.
May 16. Paid Rent of Hari residence ₹1,000.
May 18. Purchased goods from cash from Vimal for ₹6,000 at 20% trade discount.
May 20. Purchased goods from Rama for ₹10,000 at 20% trade discount.
May 25. Paid to Gopal ₹4,750; discount received ₹250.
May 31. Paid Wages ₹400; Salaries ₹4,000; Advertisement expenses ₹800 and Trade expenses ₹1,000.
Journal Entries in the books of Hari
| Date | Particulars | L.F | Dr. | Cr. |
| May 1st | Cash a/c Dr.
To Capital a/c (being started business with cash) |
1,00,000 | 1,00,000 | |
| May 2nd | Purchases a/c Dr.
To Gopal a/c (being goods purchased from Gopal) |
30,000 | 30,000 | |
| May 4th | Ramnath a/c Dr.
To sales a/c (being goods sold) |
20,000 | 20,000 | |
| May 6th | Sales Return a/c Dr.
To Ramnath a/c (being defective goods returned) |
4,000 | 4,000 | |
| May 10th | Cash a/c Dr.
Discount Allowed a/c Dr. To Ramnath a/c (being cash received and allowed discount) |
14,000
2,000 |
16,000 | |
| May 12th | Vimal a/c Dr.
To sales a/c (being goods sold to Vimal) |
20,000 | 20,000 | |
| May 14th | Cash a/c Dr.
Discount Allowed Dr. To Ramnath a/c (being paid to Vimal in full settlement and allowed discount of 5%) |
19,000
1,000 |
20,000 | |
| May 15th | Rent a/c Dr.
To cash a/c (being rent paid to Madan) |
3,000 | 3,000 | |
| May 16th | Drawings a/c Dr.
To cash a/c (being rent paid) |
1,000 | 1,000 | |
| May 18th | Purchase a/c Dr.
To cash a/c (being goods purchased and allowed trade discount of 20%) |
4,800 | 4,800 | |
| May 20th | Purchase a/c Dr.
To cash a/c (being goods purchased and allowed 20% trade discount) |
8,000 | 8,000 | |
| May 25th | Gopal a/c Dr.
To cash a/c To Discount Received a/c (being paid to Gopal and received discount of Rs.250) |
5,000 | 4,750250 | |
| May 31st | Wages a/c Dr.
Salaries a/c Dr. Advertisement Expenses a/c Dr. Trade Expenses a/c Dr. To cash a/c (being paid wages, salaries, advertisement expenses and trade expenses) |
400
4,000 800 1,000 |
6,200 | |
2009
Jan 02: Bought goods of the list price 30,000 from Ram at 10% Trade Discount.
Jan 05: Returned goods to Ram of the list price Rs.5,000
Jan 08: Settled the account of Ram by paying Rs.4,000 in Cash.
| Date | Particulars | L.F | Dr. | Cr. |
| Jan 02 | Purchase a/c Dr.
To Ram a/c (for goods bought of list price and less 10% trade discount) |
27,000 | 27,000 | |
| Jan 05 | Ram a/c Dr.
To Purchase Return a/c (for goods returned of the list price 5,000 and less 10% trade discount) |
44,500 | 44,500 | |
| Jan 08 | Ram a/c Dr.
To Discount a/c To Cash a/c (for cash paid to Ram and received discount) |
22,000 | 1,50021,500 | |
| TOTAL | 54,000 | 54,000 |
Working Note:
Jan 02: purchase 30,000
Less: Trade discount 3,000
Total = 27,000
Jan 05: purchase Return 5,000
Less: 10% Trade discount 500
Total = 4,500
Jan 08: Net payable: 27,000-4,500= 22,500
Settlement: 21,000
Cash Discount Received: 22,500-21,000= 1,500
2008
July 05: Sold goods to Jai of the list price of Rs.60,000 at a Trade Discount of
20%
July 11: Jai returned goods of the list price Rs.8,000
July 12: Cash Received from Jai under cash discount of 5%
| Date | Particulars | L.F | Dr. | Cr. |
| July 05 | Jai a/c Dr.
To Sales a/c (for goods sold of the list price 60,000 less 20% trade discount) |
48,000 | 48,000 | |
| July 11 | Sales Return a/c Dr.
To Jai a/c (for goods returned of the list price 8,000 less 20% trade discount) |
6,400 | 6,400 | |
| July 12 | Cash a/c Dr.
Discount a/c Dr. To Jai a/c (for cash received from Jai and discount allowed) |
39,520
2,080 |
41,600 | |
| TOTAL | 96,000 | 96,000 |
Working Note:
Jan 05: Sales 60,000
20% Trade Discount 1,2000
Total = 48,000
Jan 11: Sales Return 8,000
20% Trade Discount 1,600
Total = 6,400
Jan 12: Net amount due: 48,000- 6,400= 41,600
5% Trade Discount: 2,080
Net amount cash received: 41,600- 2,080= 39,520
2009
March 09: Sold goods for cash of list price Rs.15,000 @10% Trade Discount and
2% Cash Discount.
March 29: Purchased goods from Sohan for cash of list price Rs.10,000 @20%
Trade Discount and 2% Cash Discount.
March 31: Purchased goods from Mukesh of list price Rs.6,00,000 @20% Trade
Discount and 5% Cash Discount but only 60% goods purchased for
Cash.
Working Note:
March 09: Sales 15,000
10% Trade Discount 1,500
2% Cash Discount 270
Total = 13,230
March 29: Purchase 10,000
10% Trade Discount 1,000
9,000
2% Cash Discount of 9,000 180
Total = 8,820
March 31: Purchase 1,00,000
20% Trade Discount 20,000
80,000
40% Credit of 80,000 i.e. 32,000
60% Cash Discount 80,000- 32,000= 48,000
5% of Cash Discount of 48,000 i.e. 2,400
Cash Amount: 48,000- 2,400= 45,600
| Date | Particulars | L.F | Dr. | Cr. |
| March 09 | Cash a/c Dr.
Discount a/c Dr. To sales a/c (for goods sold of the list price 15,000 less 10% trade discount and 2% cash discount) |
13,230
270 |
13,500 | |
| March 29 | Purchase a/c Dr.
To Cash a/c To Discount a/c (for goods purchased of the list price 10,000 less 10% trade discount and 2% cash discount) |
9,000 | 8,820180 | |
| March 31 | Purchase a/c Dr.
To Mukesh a/c To Cash a/c To Discount a/c (for goods purchased of list price 10,000 less trade discount and 5% cash discount of which 60% was paid in cash and 40% on credit) |
80,000 | 32,00045,600
2,400 |
|
| Total | 1,02,000 | 1,02,000 |
Of Pratap Singh.
2005
May 01 Started business with Cash 1,00,000
Goods 25,000
May 02 Purchased Furniture in cash 75,000
May 03 Bought goods from Sohan for cash 20,000
May 04 Sold goods to Lal Chand 31,800
May 05 Returned defective goods by Lal Chand 1800
May 09 Received cash from Lal Chand 29,000
and discount allowed 1,000
May 11 Roshan Lal purchased goods from us 9,000
May 12 Jai stores sold goods to us 10,000
May 14 paid cash to Jai stores on account 6890
And Discount Allowed by them 110
May 16 Lent to Pawan 2000
May 17 Bought goods from Raj at list price Rs.2,000 less 20% Trade Discount
May 20 Paid to Raj 12,000
May 22 Cash Sales 7,500
May 24 Bought ‘table lamp’ for cosmetic use 1,250
May 25 Received cash from Roshan Lal 5,000
May 30 Paid Salary 2,000
And Trade Expenses 300
May 31 Paid remuneration to the workers 500
May 31 Received Rent 400 May 31 Received Interest 250
| Date | Particulars | L.F | Dr. | Cr. |
| May 1st | Cash a/c Dr.
Purchases a/c Dr. To Capital a/c (being business started with cash and goods) |
1,00,000
25,000 |
1,25,000 | |
| May 2nd | Furniture a/c Dr.
To cash a/c (being furniture purchased) |
75,000 | 75,000 | |
| May 3rd | Purchases a/c Dr.
To cash a/c (being goods bought in cash) |
20,000 | 20,000 | |
| May 4th | Lal Chand a/c Dr.
To sales a/c (being goods sold) |
81,800 | 81,800 | |
| May 5th | Sales Return a/c Dr.
To Lal Chand (being defective goods returned) |
1,800 | 1,800 | |
| May 9th | Cash a/c Dr.
Discount a/c Dr. To Lal Chand (being goods received from Lal Chand and allowed discount) |
29,000
1,000 |
30,000 | |
| May 11th | Roshan Lal a/c Dr.
To sales a/c (being goods purchased from us) |
9,000 | 9,000 | |
| May 12th | Purchases a/c Dr.
To Jai stores (being goods sold to us by Jai stores) |
10,000 | 10,000 | |
| May 14th | Jai stores a/c Dr.
To cash a/c To Discount received a/c (being cash paid and received discount) |
7,000 | 6,890110 | |
| May 16th | Pawan’s loan a/c Dr.
To cash a/c (being lent to Pawan) |
2,000 | 2,000 | |
| May 17th | Purchases a/c Dr.
To Raj a/c (being goods bought of the list price and less 20% trade discount) |
16,000 | 16,000 | |
| May 20th | Raj a/c Dr.
To cash a/c (being cash paid) |
12,000 | 12,000 | |
| May 22nd | Cash a/c Dr.
To sales a/c (being cash sales) |
7,500 | 7,500 | |
| May 24th | Drawings a/c Dr.
To cash a/c (being table lamp is bought for cosmetic use) |
1,250 | 1,250 | |
| May 25th | Cash a/c Dr.
To Roshan Lal a/c (being cash received) |
5,000 | 5,000 | |
| May 30th | Salary a/c Dr.
Trade Expenses a/c Dr. To Cash a/c (being salary and trade expenses paid) |
2,000
300 |
2,300 | |
| May 31st | Wages a/c Dr.
To cash a/c (being remuneration paid to workers) |
500 | 500 | |
| May 31st | Cash a/c Dr.
To Rent a/c To Interest a/c (being rent and interest received) |
650 | 400250 | |
| TOTAL | 3,56,800 | 3,56,800 |
May 17: Purchases 20,000
Less: 20% Trade Discount 4,000
Net Amount = 16,000
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