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Journal Entries

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Every business transaction is recorded in the journal according to the rules of debit and credit. The recording of a financial transaction in the journal is called journal entries. Journal entries consist of the name of debit and credit involved in the financial transaction with a brief narration. It is the basis of making ledger.

Example:

Baisakh 10 Cash of Rs.10000 received from Sabin.

Baisakh 11 Paid for the salary of Rs.5000 and rent Rs.5000.

Journal Entries

Date

Particular

L.F

Debit Rs.

Credit Rs.

Baisakh 10

Cash a/c.............................Dr.

10,000

To Sabin's a/c

10,000

(Being cash received from Sabin)

Baisakh 11

Salary a/c....................................Dr.

5000

Rent a/c......................................Dr.

5000

To Cash a/c

10,000

(Being paid for salary and rent)

Simple and compound journal entry

Simple journal entry is composed of one debit and another credit account.

Compound journal entry is the combination of two or more than two simple journal entries. It contains two or more than two accounts either in debit or in credit. In fact, two or more simple entries can be combined and passed one compound entry if the data and an account of these entries are common. The journal entry of Baisakh 11shown above is the compound journal entry.

Journaling simple transactions

Example

Chaitra 1: Hari started a business with cash of Rs. 55,000.

Chaitra 5: Hari deposited cash of Rs. 45000 in the bank as his additional capital.

Chaitra 7: Hari withdrew cash of Rs. 2000 from the business as his additional capital.

Chaitra 8: Hari withdrew cash of Rs 3000 from the bank for his personal use

Chaitra 9: Hari Withdrew goods of Rs.4000 from the business for his personal use.

Required: Journal Entries

Journal Entries

Date

Particular

L.F

Debit Rs.

Credit Rs.

Chaitra1

Cash a/c.............................Dr.

55,000

To Capital a/c

55,000

(Being business started with cash)

Chaitra5

Bank a/c....................................Dr.

45000

To Capital a/c

45000

(Being the owner deposited cash in the bank as his additional capital)

Chaitra7

Drawing a/c................................Dr.

2000

To Cash a/c

2000

(Being cash withdrew from business for personal use)

Chaitra8

Drawing a/c...................................Dr.

3000

To Bank a/c

3000

(Being cash sales)

Chaitra9

Drawing a/c...................................Dr.

4000

To Purchase a/c

4000

(Being goods withdrew from the business for personal use)

Journaling compound transactions

Transaction of same data having a common account in one aspect are compound transactions. A single entry is passed for such compound transaction, which is known as compounded journal entry.

Example

  1. Received cash of Rs.950 from Nischal and allowed discount of Rs.50
  2. Paid cash of Rs.750 to Reema and received discount of Rs.50
  3. Received cash of Rs.950 from Tilak in full settlement of his account Rs. 1000
  4. Paid cash of Rs. 95 to Usha in full settlement of her account Rs.1000
    Required: Journal Entries

Journal Entries

Date

Particular

L.F

Debit Rs.

Credit Rs.

1

Cash a/c.......................................Dr.

950

Discount allowed a/c.......................Dr.

50

To Nischal's a/c

1000

(Being cash received from Nischal and allowed discount)

2

Reema's a/c....................................Dr.

800

To Discount received a/c

50

To Cash a/c

750

(Being cash paid to Reema and received discount)

3

Cash a/c........................................................Dr.

950

Discount allowed a/c........................................Dr

50

To Tilak's a/c

1000

(Being cash received from Tilak and allowed discount)

4

Uma's a/c...................................Dr.

1000

To Discount received a/c

50

To Cash a/c

950

(Being cash paid to Uma and received discount)



  • Journal entries are the systematic order record of the financial transaction in the journal.
  • Journal entries consist of the name of debit and credit involved in the financial transaction with a brief narration.
  • Journal is the basis of making ledger.
  • Simple journal entry is composed of one debit and another credit account.
  • Compound journal entry is the combination of two or more than two simple journal entries.
.

Very Short Questions

Solution:

Journal Entries

Date

Particulars

L.F.

Debit Rs.

Credit Rs.

2016-01-01

Cash a/c ……………………………Dr.

1,00,000

To capital a/c

1,00,000

(Being business commenced with cash)

2016-01-12

Bank a/c……………………………..Dr.

10,000

To cash a/c

10,000

(Being cash deposited in the bank)

2016-01-21

Machinery a/c…………………….Dr.

20,000

To bank a/c

20,000

(Being machinery purchased and paid through cheque)

2016-01-25

Machinery a/c…………………….Dr.

1,000

To cash a/c

1,000

(Being installation charge paid)

Solution:

Journal Entries

Date

Particulars

L.F.

Debit Rs.

Credit Rs.

a)

Cash a/c……………..Dr.

20,000

To capital a/c

20,000

(Being business started with cash)

b)

Purchase a/c…………………………Dr.

12,000

To cash a/c

8,000

To Upendra’s a/c

4,000

(Being goods purchased and partial payment made)

c)

Cash a/c……………………..Dr.

5,200

To equipment a/c

5,000

To profit on sales a/c

200

(Being equipment sold on profit)

d)

Upendra’s a/c………………………Dr.

4,000

To cash a/c

3,800

To discount received a/c 200

(Being payment made with discount)

Journal Entries

Date

Particulars

L.F.

Debit Rs.

Credit Rs.

2012/01/01

Purchase a/c…………………………Dr

10,000

To cash a/c

10,000

(Being goods purchased on cash

2012/01/10

Cash a/c………………………Dr.

8,000

To sales a/c

8,000

(Being goods sold on cash)

2012/01/22

Bank a/c………………………..Dr.

5,000

To cash a/c

5,000

(Being cash deposited in the bank)

2012/01/29

Furniture a/c……………………………Dr.

10,000

To Shyam’s a/c

10,000

(Being furniture purchased on cash)

Solution

Journal Entries

Date

Particulars

L.F.

Debit Rs.

Credit Rs.

a)

Cash a/c………………..dr.

2,000

To Furniture a/c

2,000

(Being unused furniture disposed off.)

b)

Cash a/c…………….Dr.

4,500

Discount allowed a/c……………….Dr.

500

To Homeway Ltd. a/c

5,000

(Being cash received with discount)

c)

Cash a/c……………………..Dr.

40,000

To capital a/c

40,000

(Being business started with cash)

d)

Bad debts a/c……………Dr.

1,000

To Ashma’s a/c

1,000

(Being amount due from Ashma written as bad debts)

Journal Entries

Date

Particular

L.F

Debit Rs.

Credit Rs.

a

Purchase a/c.............................Dr.

2500

To Cash a/c

2500

(Being goods purchase for cash)

b

Cash a/c....................................Dr.

15000

To Sales a/c

15000

(Being goods sold for cash)

c

Purchase a/c................................Dr.

6000

To Sudip a/c

6000

(Being goods purchased from Sudip on credit)

d

Purchase a/c...................................Dr.

8000

To Meena center a/c

8000

(Being good purchased from Meena center on credit)

e

Meena Center a/c...................................Dr.

500

To Purchase a/c

500

(Being goods returned to Meena Center)

f.

Beena Center a/c...................................Dr.

6000

To Sales a/c

6000

(Being goods sold Beena Center on Credit)

g

Sales return a/c............................Dr.

300

To Beena Center a/c

300

(Being goods return by Beena Center)

v

Journal Entries

Date

Particular

L.F

Debit Rs.

Credit Rs.

a

Purchase a/c.............................Dr.

2500

To Cash a/c

2500

(Being goods purchase for cash)

b

Cash a/c....................................Dr.

15000

To Sales a/c

15000

(Being goods sold for cash)

c

Purchase a/c................................Dr.

6000

To Sudip a/c

6000

(Being goods purchased from Sudip on credit)

d

Purchase a/c...................................Dr.

8000

To Meena center a/c

8000

(Being good purchased from Meena center on credit)

e

Meena Center a/c...................................Dr.

500

To Purchase a/c

500

(Being goods returned to Meena Center)

f.

Beena Center a/c...................................Dr.

6000

To Sales a/c

6000

(Being goods sold Beena Center on Credit)

g

Sales return a/c............................Dr.

300

To Beena Center a/c

300

(Being goods return by Beena Center)

Journal Entries

Date

Particular

L.F

Debit Rs.

Credit Rs.

1.

Furniture a/c.............................Dr.

10,000

To Cash a/c

10,000

(Being purchased furniture)

2.

Machinery a/c....................................Dr.

75000

To Maheshwori Stationary Ltd a/c

75000

(Being machine purchased from Maheshwori Stationary Ltd.)

3.

Cash a/c................................Dr.

5000

To office equipment a/c

5000

(Being old computer sold)

0%
  • When capital is invested to start a business, ______ the business.

    person comes in


    cash goes from


    cash comes in


    person goes out from


  • If the owner withdraws cash from the business for his personal use, he becomes ______.

    giver


    receiver


    none


    liable


  • When the goods are purchased on credit, purchase account is debited and the ______ account is credited.

    supplier’s


    consumer's


    sales


    drawing


  • The business returns goods to its supplier if the goods are ______.

    found damaged


    inferior in quality


    found defective


    all the options are correct


  • When the business sells goods on cash, ______

    cash comes in


    cash goes out


    goods comes in


    machinery comes in


  • Journal entries are the systematic order record of financial transaction in the ______.

    trial balance
    subsidiary books
    journal
    ledger
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