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.

DateAccount Title and ExplanationsRefAmount (Rs)
DebitCredit
2016    
 June1Cash 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.

DateAccount Title and ExplanationsRefAmount (Rs)
DebitCredit
 2016    
 June 5Purchases 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.

DateAccount Title and ExplanationsRefAmount (Rs)
DebitCredit
2016    
 June 7Account 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.

DateAccount Title and ExplanationsRefAmount (Rs)
DebitCredit
2016    
 June15Account 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.

DateAccount Title and ExplanationsRefAmount (Rs)
DebitCredit
2016    
 June20Cash 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.

DateAccount Title and ExplanationsRefAmount (Rs)
DebitCredit
2016    
June 25Drawing 500 
            Cash  500
  (Cash withdrawal by owner)   

 

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

DateAccount Title and ExplanationsRefAmount (Rs)
DebitCredit
2016    
June 27Purchase 54,000 
            Cash  54,000
  (Cash purchases and trade discount )   

 

June 28. Paid Salaries Rs. 1,500.

DateAccount Title and ExplanationsRefAmount (Rs)
DebitCredit
2016    
 June28Salaries 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.

DateAccount Title and ExplanationsRefAmount (Rs)
DebitCredit
     
  Lost by Fire 400 
            Purchases  400

 

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

DateAccount Title and ExplanationsRefAmount (Rs)
DebitCredit
     
  Lost by Theft 500 
            Purchases  500

 

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

DateAccount Title and ExplanationsRefAmount (Rs)
DebitCredit
     
  Charity 600 
            Purchases  600

 

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

DateAccount Title and ExplanationsRefAmount (Rs)
DebitCredit
     
  Free Sample 700 
            Purchases  700

 

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

DateAccount Title and ExplanationsRefAmount (Rs)
DebitCredit
     
  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.noAccount DebitedAccount Credited
1Account ReceivableService Revenue
2LandCash
3Prepaid InsuranceCash
4CashCommon stock
5CashUnearned Services
6BankCash
7PurchasesBank
8CashBank
9PurchasesAccount Payable_ Miss Noreen
10CashSales
11Account Payable_ Miss NoreenCash
12Supplies ExpenseSupplies
13CashDiscount
14DrawingBank
15CashAccount Receivable
16RentCash
17Lost by FireFurniture

 

 

>>> Journal Entry Problems and Solutions

References

Mukharji, A., & Hanif, M. (2003). Financial Accounting (Vol. 1). New Delhi: Tata McGraw-Hill Publishing Co.

Narayanswami, R. (2008). Financial Accounting: A Managerial Perspective. (3rd, Ed.) New Delhi: Prentice Hall of India.

Ramchandran, N., & Kakani, R. K. (2007). Financial Accounting for Management. (2nd, Ed.) New Delhi: Tata McGraw Hill.

5 Comments

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  2. Alexander Sebastion

    It was helpful. Keep on posting!

    Reply
  3. frolep rotrem

    Keep working ,great job!

    Reply
  4. Million

    Comment
    here is my case
    1. discovered that the balance of the cash account and the accounts payable account as of April 1 were overstated by Ru. 200. A payment as of that amount to a creditor in March had not been recorded. Journalize the Ru. 200 payment as of April 20

    Reply
  5. Monika

    mohan and sons started a computer company by investing rs 100000 in cash and furniture worth rs 50000 ,machine rs 100000,stock rs 40000, goodwill rs 40000 and building 100000

    Reply

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