Bookkeeping - Journal Entries - Examples

 Bookkeeping - Journal Entries - Examples  

Nageswara Rao 9492432160

1. If the Proprietor has withdrawn cash from the Business for Personal use, the journal entry is _________________

1. Drawings Account is Debited and Capital Account is Credited 

2. Cash Account is Debited and Drawings Account is Credited

3. Capital Account is Debited and Cash Account is Credited 

4. None of these  

Answer: D. None of these.  The correct answer is Drawings Account is Debited and Cash Account is Credited. 

Explanation: 

Drawings mean the amount withdrawn by the Proprietor from the Business. Hence Proprietor’s account is a personal account.  However, we operate Drawings Account in case of withdrawal of money and operate Capital Account in case of inducting the money into the Business.  

The drawing account comes under Personal Account.  The Rule of the Personal Account is Debit the Receiver and Credit the Giver.   

Hence Drawings Account is Debited. 

Cash is a Real Account.  The Rule of a Real Account is Debit what comes in and Credit what goes out. 

Hence the Cash Account is credited. 

	First Account	Second Account
The Accounts Involved in the Transaction	Drawings	Cash
Type of Account	Personal Account	Real Account
Rule of Account	Debit the Receiver and Credit the Giver	Debit is What comes in and Credit is What goes out
Debit or Credit	Debited. Because the Proprietor is a receiver	Credited. Because Cash is going out from the Business

2. Cash Sales to Mr. Mohan.  The Journal Entry is ___________ 

1. The Cash Account is Debited and the Sales Account is Credited

2. Cash Account is Debited and Mohan Account is Credited

3. Mohan's Account is Debited and the Sales Account is Credited 

4. None of these  

The correct answer is A. Cash Account is Debited and the Sales Account is Credited

	First Account	Second Account
The Accounts Involved in the Transaction	Cash	Sales
Type of Account	Real Account	Nominal Account
Rule of Account	Debit is What comes in and Credit is What goes out	Debit all Expenses & losses and Credit all Incomes and Gains
Debit or Credit	Debited (Because cash is received)	Credited (because Sales is income)

Note: Both Purchases and Sales are Nominal Accounts.  Purchases imply expenses, whereas Sales imply generating Revenue (i.e., Incomes and Gains).  Thus as per the Golden Rule of Nominal Accounts, Debit all expenses & losses and Credit all incomes & gains. 

3. Credit purchases from Mr Krishna.  The Journal entry is _________

1. Purchase Account is Debited and Cash Account is Credited 

2. Goods Account is Debited and Krishna Account is Credited

3. Purchases Account is Debited and Krishna Account is Credited 

4. Krishna Account is Debited and Purchases Account is Credited 

The Correct Answer is C.  

	First Account	Second Account
The Accounts involved in the Transaction	Krishna	Purchases
Type of Account	Personal Account	Nominal Account
Rule of Account	Debit the Receiver and Credit the Giver	Debit all Expenses & losses and Credit all Incomes and Gains
Debit or Credit	Credited. Because Krishna is Giver.	Debited (Because Purchases is an expenses)

Note: Both Purchases and Sales are Nominal Accounts.  Purchases imply expenses, whereas Sales imply generating Revenue (i.e., Incomes and Gains).  Thus as per the Golden rule of Nominal Accounts, Debit all expenses & losses and Credit all incomes & gains.  

4. Salary paid to Ms Sunitha through Cheque.  The Journal entry is _________ 

1. Sunitha Account is Debited and Bank Account is Credited

2. Salaries Account is Debited and Bank Account is Credited

3. Bank Account is Debited and Sunitha Account is Credited

4. Bank Account is Debited and Salaries Account is Credited 

The correct Answer is B. 

 

	First Account	Second Account
The Accounts involved in the Transaction	Bank	Salaries
Type of Account	Real Account	Nominal Account
Rule of Account	Debit What comes in and Credit What goes out	Debit all Expenses & losses and Credit all Incomes and Gains
Debit or Credit	Credited (Because cash goes out from the Bank)	Debited (because Salaries is an expense.)

Notes: Sunitha Account is not comes in records. Because the Firm pays salary for services rendered by Sunitha.  Hence Salaries Account is recorded, not Sunitha Account.  

    

5. Goods returned to ABC limited.  Journal entry is _______________

1. Goods outward account is debited and ABC limited account is credited

2. Purchases Account is debited and ABC limited account is credited

3. ABC limited account is debited and Goods inward account is credited

4. None of these  

The Correct answer is ABC Limited Account is Debited and Goods Outward Account is Credited. 

Notes: Goods outward means Purchase Returns  and Goods inward means Sales Returns.  

	First Account	Second Account
The Accounts involved in the Transaction	ABC Limited	Goods outward
Type of Account	Personal Account	Nominal Account
Rule of Account	Debit the Receiver and Credit the Giver	Debit all Expenses & losses and Credit all Incomes and Gains
Debit or Credit	Debited.  Because ABC limited is receiver.	Credited.  Because Purchases is an expenses and Purchase Returns or Goods outward is an gain

Notes: Candidates are advised to do the above templates initially till become confident in journalising.the transactions. 

-- end–

Bookkeeping - Accounting Cycle (Miniature Model)

 Bookkeeping  - Accounting Cycle

 (Miniature Model) 

Five Stages

1.       Transactions

2.       Journal Entries

3.       Ledger

4.       Trial Balance

5.       Final Accounts

 

1.        Transactions in ABC Ltd.

 

·         Started Business with Rs. 100

·         Cash Purchases – Rs. 50 (50 units)

·         Cash Sales  -  Rs. 60  (40 units)

·         Wages – Rs. 5

·         Salaries – Rs. 5

·         Furniture purchased – Rs. 20

·         Depreciation on Furniture – Rs. 5

·         Loan from Krishna – Rs. 20

·         Interest on Loan – Rs. 2

             Adjustments: Closing Stock – Rs. 10

2.       Journal Entries

Date	Particulars	LF	Dr	Cr
	Cash A/c Dr   To Capital		100	100
	Purchases A/c Dr   To Cash		50	50
	Cash A/c Dr   To Sales		60	60
	Wages A/c Dr   To cash		5	5
	Salaries A/c Dr   To Cash		5	5
	Furniture A/c Dr   To cash		20	20
	Depreciation A/c Dr   To Furniture		5	5
	Cash A/c Dr   To Krishna		20	20
	Interest A/c  Dr   To Cash		2	2

 

3.       Ledger

 

Capital A/c

Dr					Cr
Date	Particulars	JF	Amount		Date	Particulars	JF	Amount
	To Balance c/d		100			By Cash		100
	Total		100			Total		100
						By Balance b/d		100

 

Cash A/c

Dr					Cr
Date	Particulars	JF	Amount		Date	Particulars	JF	Amount
	To Capital		100			By Purchases		50
	To Sales		60			By Wages		5
	To Krishna		20			By Salaries		5
						By Furniture		20
						By Interest		2
						By Balance c/d		98
	Total		180			Total		180
	To Balance b/d		98

 

Purchases A/c

Dr					Cr
Date	Particulars	JF	Amount		Date	Particulars	JF	Amount
	To Cash		50
	Total		50

 

Sales A/c

Dr					Cr
Date	Particulars	JF	Amount		Date	Particulars	JF	Amount
						By Cash		60
						Total		60

 

Wages A/c

Dr					Cr
Date	Particulars	JF	Amount		Date	Particulars	JF	Amount
	To cash		5
	Total		5

 

Salaries A/c

Dr					Cr
Date	Particulars	JF	Amount		Date	Particulars	JF	Amount
	To cash		5
	Total		5

 

Furniture A/c

Dr					Cr
Date	Particulars	JF	Amount		Date	Particulars	JF	Amount
	To Cash		20			By  Depreciation		5
						By Balance c/d		15
	Total		20			Total		20
	To Balance b/d		15

 

Depreciation A/c

Dr					Cr
Date	Particulars	JF	Amount		Date	Particulars	JF	Amount
	To Furniture		5
	Total		5

 

Krishna A/c

Dr					Cr
Date	Particulars	JF	Amount		Date	Particulars	JF	Amount
	To Balance c/d		20			By Cash		20
	Total		20			Total		20
						By Balance b/d		20

 

Interst A/c

Dr					Cr
Date	Particulars	JF	Amount		Date	Particulars	JF	Amount
	To Cash		2
	Total		2

 

 

4.       Trial Balance

                                                                                Trial Balance

SN	Particulars	LF	Dr	Cr
1	Capital			100
2	Cash		98
3	Purchases		50
4	Sales			60
5	Wages		5
6	Salaries		5
7	Furniture		15
8	Krishna			20
9	Depreciation		5
10	Interest		2
	Total		180	180

 

5.       Final Accounts

                                               Trading A/c of ABC ltd for the year ending______

Dr					Cr
SN	Particulars		Amount		SN	Particulars		Amount
	To Purchases		50			By Sales		60
	To Wages		5			By Closing Stock		10
	To Gross Profit (c/d to P & L A/c)		15
	Total		70			Total		70

 

                                                                  Profit & Loss A/c of ABC Ltd for the year ending____

Dr					Cr
SN	Particulars		Amount		SN	Particulars		Amount
	To Salaries		5			By Net Profit (b/d from Trading A/c)		15
	To Depreciation		5
	To Interest		2
	To Net Profit (C/d to Capital)		3
	Total		15			Total		15

 

 

 

 

 

                                                         Balance Sheet of ABC ltd as on 31^st March _____

Liabilities					Assets
SN	Particulars		Amount		SN	Particulars		Amount
	Capital	100				Furniture		15
	+ Net Profit	3	103			Cash		98
	Sundry Creditors		20			Closing Stock		10
	Total		123					123