Journal Entry Examples

Example # 1:  

Following transactions are related to Saifullah Naseem business. You are required to pass Journal Entries.

 

June 1, 2016. Mr. Saifullah started business with Cash Rs. 10,000 and Furniture Rs. 2,000.

Date Account Title and Explanations Ref Amount (Rs)
Debit Credit
2016
 June 1 Cash 10,000
Furniture 2,000
           Owner’s Equity 12,000
(Started business with cash and furniture)

 

June 5.   Purchased merchandise/goods on credit Rs. 5,000 from Ali Store.

Date Account Title and Explanations Ref Amount (Rs)
Debit Credit
 2016
 June  5 Purchases 5,000
          Account Payable _ Ali Store 5,000
(Purchases goods on credit)

 

June 7.   Sold goods/ merchandise on credit Rs. 6,000 to Ahmed Brothers.

Date Account Title and Explanations Ref Amount (Rs)
Debit Credit
2016
 June  7 Account Receivable _ Ahmed Brothers 6,000
          Sales 6,000
(Sales on account)

 

June 15. Payment of creditors in full settlement of account Rs. 4,900 of June 5th transaction.

Date Account Title and Explanations Ref Amount (Rs)
Debit Credit
2016
 June 15 Account Payable_ Ali Store 5,000
          Cash 4,900
          Discount 100
(Reduced liability of Ali Store and received discount)

 

June 20. Received from debtors in full settlement of account Rs. 5,800 of June 7th transaction.

Date Account Title and Explanations Ref Amount (Rs)
Debit Credit
2016
 June 20 Cash 5,800
Discount 200
          Account Receivable _ Ahmed Brothers 6,000
(Account receivable realized and discount allowed recorded)

 

June 25. Rs. 500 was privately used by Saifullah.

Date Account Title and Explanations Ref Amount (Rs)
Debit Credit
2016
June  25 Drawing 500
          Cash 500
(Cash withdrawal by owner)

 

June 27. Purchase furniture of worth Rs. 60,000, having 10% trade discount.

Date Account Title and Explanations Ref Amount (Rs)
Debit Credit
2016
June  27 Purchase 54,000
          Cash 54,000
(Cash purchases and trade discount )

 

June 28. Paid Salaries Rs. 1,500.

Date Account Title and Explanations Ref Amount (Rs)
Debit Credit
2016
 June 28 Salaries 1,500
           Cash 1,500
(Expense paid)

 

 

Cases When Purchases are Credit?

Example # 2:  

There are five cases when purchases are recorded as credited

Case # 1 Goods Lost by Fire of Rs. 400.

Date Account Title and Explanations Ref Amount (Rs)
Debit Credit
Lost by Fire 400
          Purchases 400

 

Case # 2 Goods Lost by Theft of Rs. 500.

Date Account Title and Explanations Ref Amount (Rs)
Debit Credit
Lost by Theft 500
          Purchases 500

 

Case # 3 Goods distributed as Charity of Rs. 600.

Date Account Title and Explanations Ref Amount (Rs)
Debit Credit
Charity 600
          Purchases 600

 

 Case # 4 Goods distributed as Free Sample of Rs. 700.

Date Account Title and Explanations Ref Amount (Rs)
Debit Credit
Free Sample 700
          Purchases 700

 

Case # 5 Goods withdrawal by Owner of Rs. 800.

Date Account Title and Explanations Ref Amount (Rs)
Debit Credit
Drawing 800
         Purchases 800

 

Example # 3:  

In the table below, indicate the accounts that would be debited and credited for each of the transactions?

  1. Provide services to customers on account.
  2. Purchase land by paying cash.
  3. Purchase an insurance policy that will provide coverage for a two-year period.
  4. Acquire cash by issuing common stock.
  5. Receive payment from a customer for services that will be provided over the next six months.
  6. Cash deposited into bank.
  7. Purchased goods by cheque.
  8. Drew cash from bank for office use.
  9. Purchased goods from Miss Noreen.
  10. Cash sales made.
  11. Paid cash to Miss Noreen.
  12. Recognize expense for amount of office supplies already in stock, that had been used during the period.
  13. Discount Received by cash.
  14. Drew cash from bank for personal use of proprietor.
  15. Received cash from credit customer.
  16. Paid rent by cash.
  17. Furniture lost by fire.

 

Solution:

S.no Account Debited Account Credited
1 Account Receivable Service Revenue
2 Land Cash
3 Prepaid Insurance Cash
4 Cash Common stock
5 Cash Unearned Services
6 Bank Cash
7 Purchases Bank
8 Cash Bank
9 Purchases Account Payable_ Miss Noreen
10 Cash Sales
11 Account Payable_ Miss Noreen Cash
12 Supplies Expense Supplies
13 Cash Discount
14 Drawing Bank
15 Cash Account Receivable
16 Rent Cash
17 Lost by Fire Furniture

 

 

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