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SUMMARISED PRESENTATION OF JOURNAL ENTRIES
Transactions Journal Entry Rule Applicable
1. Commenced business Cash A/c Dr. Increase in assets is debited.
To Capital A/c Increase in capital is credited.
2. Cash purchases or Purchases A/c Dr. Increase in expense or assets is debited.
Goods purchased for cash To Cash A/c Decrease in assets is credited.
3. Purchased goods on credit or Purchases Ale Dr. Increase in expenses o·r assets is debited.
Credit purchases To Supplier's A/c Increase in liability is credited.
4. Cash sales Cash A/c Dr. Increase in assets is debited.
To Sales A/c Decrease in revenue or assets is credited.
5. Credit sales Debtors A/c Dr. Increase in assets is debited.
To Sales A/c Decrease in or assets is credited.
6. Purchases return Supplier's A/c Dr. Decrease in liability is debited.
To Purchases return A/c Decrease in assets is credited.
or_ Returns outward A/c
7. Sales return Sales return A/c Dr. Decrease in revenue is debited.
or Returns inward A/c Dr. Decrease in assets is credited.
To Debtors Nc
8. Purchase of assets Assets A/c Dr. Increase in assets is debited.
To Cash A/c Decrease in assets is credited.
9. Sale of assets Cash A/c Dr. Increase in assets is debited.
To Assets A/c Decrease in assets is credited.
10. Payment of expenses Expenses A/c Dr. Increase in expenses is debited.
To Cash A/c Decrease in assets is credited.
11. Receipt of income Cash A/c Dr. Increase in assets is debited.
To Income A/c Increase in revenue is credited.
12. Collection from debtors Cash A/c Dr. Increase in assets is debited.
(Discount allowed) Discount A/c Dr. Increase in expense is debited
To Debtors A/c Decrease in assets is credited.
13. Paymentro creditors Suppliers A/c Dr. Decrease in liability is debited.
(Discount Received) To Cash A/c Decrease in assets is credited.
To Discount A/c Increase in revenue is credited.
14. Depreciation on assets Depreciation A/c Dr. Increase in expenses is debited.
To Assets A/c Decrease in assets is credited.
15. Interest on capital Interest on capital A/c Dr. Increase in expenses is debited.
To Capital A/c Increase in capital is credited.
16. Outstanding expenses Expenses A/c Dr. Increase in expenses is debited.
To Outstanding
expenses A/c Increase in liability is credited.
17. Prepaid expenses Prepaid expenses A/c Dr. Increase in assets is debited.
To Expenses A/c Decrease in expenses is credited.
18. Withdrawal of cash Drawings A/c Dr. Decrease in capital is debited.
for personal use To Cash A/c Decrease in assets is credited.
19. Withdrawal of goods Drawings A/c Dr. Decrease in capital is debited.
for personal use To Purchases A/c Decrease in expense or assets is credited.
20. Goods given as charity Charity A/c Dr. Increase in expenses is debited.
To Purchases A/c Decrease in expenses or assets is credited.
21. Insolvency of debtors Cash A/c Dr. Increase in assets is debited.
Bad Debts A/c Dr. Increase in expenses is debited.
To Debtors A/c Decrease in assets is credited.
22. Bad Debts recovered Cash A/c Dr. Increase in assets is debited.
To Bad Debts
recovered A/c Increase in revenue is credited.
23. Distribution of goods Free Samples or Increase in expense is debited.
as free samples Advertising A/c Dr.
To Purchases A/c Decrease in expense or assets is credited.
24. Loss of goods by Loss by theft A/c Dr. Increase in expenses is debited.
theft/fire or
Loss by fire A/c Dr. Increase in expense is debited.
To Purchases A/c Decrease in expense or assets is credited.
25. Loss of cash by Loss by theft A/c Dr. Increase in expense is debited.
theft/fire or
Loss by fire A/c Dr. Increase in expense is debited.
To Cash A/c Decrease in assets is credited.
26. Income Tax paid Capital A/c Dr. Decrease in capital is debited.
To Bank/Cash A/c Decrease in assets is credited.
27. Refund of Income Tax Cash A/c Dr. Increase in assets is debited.
To Capital A/c Increase in capital is credited.
28. Interest received on Cash A/c Dr. Increase in assets is debited.
(Income Tax surplus) To Capital A/c Increase in capital is credited.
29. Bills drawn Bills Receivable A/c Dr. Increase in assets is debited.
To Drawee's A/c Decrease in assets (Debtors) is credited.
30. Bills accepted Drawer's A/c Dr. Decrease in liability is debited.
To Bills Payable A/c Increase in liability is credited.
31. Payment of the bill Cash A/c Dr. Increase in assets (cash) is debited.
received To Bills receivable A/c Decrease in assets (B/R) is credited.
32. Payment of the bill Bills Payable A/c Dr. Decrease in liability (B/P) is debited.
made To Cash A/c Decrease in assets (cash) is credited.
33. Bills Receivable Drawee's A/c Dr. Increase in assets is debited.
dishonored To Bills receivable A/c Decrease in assets is credited.
or Bank A/c Decrease in assets is credited
or Endorsee's A/c Increase in liability is credited.
34. Bills Payable dishonoured Bills payable A/c Dr. Decrease in liability is debited.
To Drawer's A/c Increase in liabi lity is credited.
35. Sale of Assets for more Cash A/c Dr. Increase in assets (cash) is debited.
than the book value To Assets A/c Decrease in assets is credited.
To Profit on Sale of
Assets A/c Increase in revenue is credited.
36. Sale of Assets for lesser Cash A/c Dr. Increase in assets is debited.
than the book value Profit & Loss A/c Dr. Increase in expenses is debited.
To Assets A/c Decrease in assets is credited.
37.Amount deposited into Bank A/c Dr. Increase in assets is debited.
Bank/opened a Bank Account To Cash A/c Decrease in assets is credited.
38.Amount withdrawn from Cash A/c Dr. Increase in assets is debited.
Bank To Bank A/c Decrease in assets is credited.
39.Cheque received and Cash A/c Dr. Increase in assets is debited.
retained To Debtors A/c Decrease in assets is credited.
40.Cheque received previously Bank A/c Dr. Increase in assets is debited.
deposited into Bank To Cash A/c Decrease in assets is credited.
41.Cheque received previously Endorsee's A/c Dr. Decrease in liabiitiy is debited.
and endorsed To Cash A/c Decrease in assets is credited.
42.Cheque received and Bank A/c Dr. Increase in assets is debited.
deposited into Bank To Debtors A/c Decrease in assets is credited.
43.Cheque issued Creditors A/c Dr. Decrease in liability is debited.
To Bank A/c Decrease in assets is credited.
44.Interest allowed or Bank A/c Dr. Increase in assets is debited.
Credited by bank To Interest A/c Increase in revenue is credited.
45.Interest charged or Interest A/c Dr. Increase in expenses is debited.
Debited by bank To Bank A/c Decrease in assets is credited.
46.Bank charges or Bank Charges A/c Dr. Increase in expenses is debited.
collection charges To Bank A/c Decrease in assets is credited.
47.Dishonour of cheques, Drawee's A/c Dr. Increase in assets is debited.
Discounted earlier To Bank A/c Decrease in assets is credited.
48.Sale of wastes or scrap Cash A/c Dr. Increase in assets is debited.
To Miscellaneous
Receipts A/c Increase in revenue is credited.
49.Subscribing newspaper Miscellaneous Expenses
A/c Dr. Increase in expenses is debited.
To Cash A/c Decrease in assets is credited.
50.Treatment of Sales Tax (a) Cash A/c Dr. Increase in assets is debited.
To Sales A/c Decrease in assets, revenue is credited.
To Sales Tax A/c Increase in liability is credited.
(b) Sales Tax A/c Dr. Decrease in liability is debited.
To Cash A/c Decrease in cash as assets is credited.
51.Receipt of VPP (value Purchases A/c Dr. Increase in assets or expenses is debited.
payable post) To Cash A/c Decrease in assets is credited.
Illustration 7. Classify the following under three different types of accounts :
(i) Stock (ii) Loan (iii) Fixture
(iv) Cash (v) Drawings (vi) Salaries
(vii) Current Accounts of a partner (viii) Insurance (ix) Banks.
Solution.
Personal Account : Real Account Nominal Account :
(i) Loan (i) Stock A/c (i) Salaries A/c
(ii) Drawings (ii) Fixture A/c (ii) Insurance A/c.
(iii) Bank A/c (iii) Cash A/c
(iv) Current A/c of a Partner.
Illustration 8. On 1st January, 2006 the following were the balcmces ofGarg & Co. :
Cash in hand Rs. 900; Cash at bank Rs. 21,000 ; Gopi (Cr. ) Rs. 3,000Anu (Dr.) Rs. 2,400; Stock Rs.
12,000; Dharmendra.(Cr.) Rs. 6,000; Keshav (Dr.) Rs. 4,500; Kunal (Cr.) Rs. 2,700.
Transactions during the month were-
2001
Jan. 2 Bought goods from Dharmendra ................................ $2,700
Jan. 3 Sold to Keshav ... ......................................... $3,000
Jan. 5 Sold to Kunal goods for cash ........................ $3,600
Jan. 7 Took goods for personal use .... ....... ...... ..............$200
Jan. 13 ReceivedfromAnu in full settlement .................... . $2,350
Jan. 17 Paid to Gopi in full settlement .... .............. $2,920
Jan. 22 Paid cashfor stationery ....................... ..... $50
Jan. 29 Paid to Dharmendra by cheque .......................... $2,650
Discount allowed ......................................... $50
Jan. 30 Provide interest on capital .............................. $100
Rent due to landlord ....................................... $200
Journalise the above transactions.
Solution.
Jounial Entries
*Excess of debit opening balances over credit opening balances will be assumed to be capital.
Alternate of Illustration No. 8
Analysis of Transactions
Note. Analysis of transactions and their Accounting treatment to the modem American approach and Traditional English approach as per above statement shows the same Accounting treatment. Learners of the subject should base their understanding on Accounting Equation Approach in order to develop scientific outlook towards Accounting. It may also be noted that purchases A/c can also be treated as an expense and sales A/c can be treated as revenue. According to this approach, rule of deb if and credit regarding expense and revenue will apply in case of purchases and sales but lead to the same entry as discussed above.
Illustration 9. Record the following transactions in the Journal of NOIDA Furniture Mart :
2006
Jan. 1 Started business with cash $. 10,000.
Jan. 2 Deposited into bank $ 9,000.
Jan. 3 Purchased machinery for $ 5,000 from Miss Jolly arid gave her a cheque for the amount.
Jan. 15 Paid installation charges of machinery $ 1 00.
Jan. 20 Purchased timber from Rami of the list price of $ 2,000. He allowed 10% Trade Discount.
Jan. 23 Furniture costing $ 500 was used in furnishing the office.
Jan. 25 Sold furniture to Ramesh of the list price of $ 1,000 and allowed ‘him 5% Trade Discount.
Jan. 31 Paid wages $ 350 and rent $ 200.
Solution.
Journal Entries
Notes: (i) Installation charges on machinery are capital expenditure. It will increase· the value of machinery, so it will be debited to machinery account not charges account.
(ii) Timber will be treated as goods, because West Point Furniture Mart, the firm concerned has been dealing in furniture.
(iii) No entry regarding Trade Discount is passed.
