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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.