Journal Entries

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

Received cash of Rs.950 from Nischal and allowed discount of Rs.50
Paid cash of Rs.750 to Reema and received discount of Rs.50
Received cash of Rs.950 from Tilak in full settlement of his account Rs. 1000
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)

Questions and Answers

Click on the questions below to reveal the answers

Journalize the following transactions:

Date

Transactions

1^st January 2016

Commenced business with cash of Rs. 1,00,000.

12^th January 2016

Deposited cash in the bank Rs.10,000.

21^st January 2016

Bought machinery worth Rs. 20,000 and paid by cheque.

25^th January 2016

Paid for installation charges Rs. 1,000.

Required: Journal Entries

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)

Following transactions were given to you:

Started business with Rs. 20,000.

Purchased goods for Rs. 12,000 from Upendra and made partial payment of Rs. 8,000.

Equipment costing Rs. 5,000 were sold for Rs. 5,200.

Paid Rs. 3,800 to Upendra in full settlement of his account.

Required: Journal Entries

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)

Journalize the following transactions of a business:

Date

Transactions

2012/01/01

Purchased goods for cash Rs.10,000

2012/01/10

Cash sales made for Rs.8,000

2012/01/22

Cash deposited into bank Rs.5,000

2012/01/29

Purchased furniture from Shyam Rs.10,000

Required: Journal Entries

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)

Journalize the following transactions of a business:

Unused furniture were disposed off for Rs.2,000.

Homeway Ltd., a debtor for Rs.5,000 settled its account receiving discount of Rs.500.

Krishna started his own business with Rs.40,000.

Amount due from Ashma Rs.1,000 has been written off as bad debts.

Required: Journal Entries

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)

Goods purchased for cash Rs. 2500

Cash sales made for Rs. 1500

Goods purchased from Sudip on credit for Rs. 6000

Purchased goods from MeenaCenter for Rs. 8000

Returned goods to Meena Center of Rs 500 being defective

Sold goods to Beena Centre for Rs 6000

Returned goods by Beena Center of Rs. 300 being damaged.
Required: Journal Entries

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.
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)

Pass journal entries of the following transaction:

Purchased furniture for cash Rs.10,000

Purchased a machine from Maheshwori Stationary Ltd. for Rs.75000

Sold an old computer for Rs.5000
Required: Journal Entries

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)

Forum	Time	Replies
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