1. Significance of Debit and Credit
Q1: What are the two primary aspects of every transaction in the double entry system?
A: The two primary aspects of every transaction in the double entry system are debit and credit. Every transaction affects at least two accounts, with one account being debited and the other credited.
Q2: How do debit and credit entries help in maintaining accounting accuracy?
A: Debit and credit entries ensure that the total amount debited always equals the total amount credited, thereby maintaining arithmetical accuracy through the preparation of a Trial Balance.
Q3: Explain the role of debit and credit in the Double Entry System.
A: In the Double Entry System, debit and credit are used to record both aspects of a transaction, ensuring that every entry has an equal and opposite effect on two or more accounts.
2. Meaning of Journal
Q4: Define a Journal in accounting.
A: A Journal is the first book of accounts where transactions are originally recorded in chronological order, and each entry made in the Journal is known as a Journal Entry.
Q5: What is the significance of a Journal Entry?
A: A Journal Entry serves as the initial record of a transaction, capturing the debit and credit aspects along with a brief description, ensuring systematic recording in the books of accounts.
3. Process or Rule of Journalising
Q6: List the steps involved in journalizing a transaction.
A: The steps involved in journalizing a transaction are:
- Ascertain the accounts affected.
- Determine the nature of the accounts.
- Apply the rules of debit and credit to decide which account is debited and which is credited.
Q7: What is the purpose of the Ledger Folio column in a Journal?
A: The Ledger Folio column is used to record the page number of the Ledger where the account is posted, aiding in cross-referencing between the Journal and Ledger.
4. Simple and Compound Journal Entries
Q8: Differentiate between simple and compound journal entries.
A: A simple entry affects only two accounts (one debit and one credit), whereas a compound entry affects multiple accounts, with either two or more accounts debited and/or credited.
Q9: Provide an example of a compound journal entry.
A: Example of a compound journal entry:
Cash A/c Dr. 4,850
Discount Allowed A/c Dr. 150
To Satish A/c 5,000
(Being the amount due from Satish settled by receiving cash and allowing a discount)
5. Double Entry System of Accounting
Q10: What is the Double Entry System of Accounting?
A: The Double Entry System of Accounting recognizes and records both aspects of a transaction (debit and credit), ensuring that every debit entry has a corresponding credit entry.
Q11: Describe one advantage of the Double Entry System.
A: One advantage of the Double Entry System is that it provides a complete and accurate record of each transaction, facilitating the preparation of financial statements and detecting errors.
6. Stages of Double Entry System
Q12: What are the three stages of a complete double entry bookkeeping system?
A: The three stages are:
- Recording transactions in the Journal.
- Posting transactions to Ledger accounts and preparing a Trial Balance.
- Closing books and preparing final accounts.
Q13: Why is a Trial Balance important in the Double Entry System?
A: A Trial Balance ensures that total debits equal total credits, providing a check for arithmetic accuracy and forming the basis for preparing financial statements.
7. Types of Accounts and Rules of Debit and Credit
Q14: List the rules for debiting and crediting Assets and Liabilities accounts.
A:
- Assets Account: Debit when increased, Credit when decreased.
- Liabilities Account: Credit when increased, Debit when decreased.
Q15: How do you apply the rules of debit and credit to a Revenue account?
A: For a Revenue account:
- Debit when decreased.
- Credit when increased.
8. Illustration of Journal Entries
Q16: Prepare a journal entry for Dinesh starting a business with cash Rs. 5,00,000.
A:
Date: [Current Date]
Particulars Dr. (Rs.) Cr. (Rs.)
Cash A/c 5,00,000
To Capital A/c 5,00,000
(Being capital introduced by Dinesh to start the business)
Q17: Record a journal entry for purchasing furniture for Rs. 20,000 in cash from Raj Furniture House.
A:
Date: [Current Date]
Particulars Dr. (Rs.) Cr. (Rs.)
Furniture A/c 20,000
To Cash A/c 20,000
(Being furniture purchased in cash from Raj Furniture House)
9. Special Transactions: Bad Debts
Q18: What journal entry is passed when a debt is written off as irrecoverable?
A:
Bad Debts A/c Dr.
To Debtor's Personal A/c
(Being the amount written off as irrecoverable)
Q19: How do you account for the recovery of previously written-off bad debts?
A:
Cash/Bank A/c Dr.
To Bad Debts Recovered A/c
(Being the amount recovered from previously written-off bad debts)
10. Drawings and Banking Transactions
Q20: What is the journal entry for cash withdrawn by the proprietor for personal use?
A:
Drawings A/c Dr.
To Cash A/c
(Being cash withdrawn by the proprietor for personal use)
Q21: Describe the accounting treatment for cash deposited into a bank account.
A:
Bank A/c Dr.
To Cash A/c
(Being cash deposited into the bank account)
11. Discounts: Trade vs. Cash
Q22: Explain the difference between trade discount and cash discount.
A:
- Trade Discount: Allowed on bulk purchases and not recorded in accounts.
- Cash Discount: Allowed for early payment and recorded in accounts.
Q23: Record the journal entry for cash discount allowed to a debtor.
A:
Cash/Bank A/c Dr.
Discount Allowed A/c Dr.
To Debtor's A/c
(Being cash received and discount allowed to a debtor)
12. Losses and Expenses
Q24: How is a loss by theft accounted for in the books?
A:
Loss by Theft A/c Dr.
To Purchases A/c
(Being the loss incurred due to theft)
Q25: What is the treatment for insurance claims not fully accepted by the insurer?
A:
Bank A/c Dr. [Amount received]
Profit and Loss A/c Dr. [Loss – claim not admitted]
To Insurance Co. [Total claim]
(Being partial claim settlement for insurance)
13. Capital Expenditure on Assets
Q26: How are installation costs of machinery recorded?
A:
Machinery A/c Dr.
To Cash/Bank A/c
(Being installation costs capitalized with machinery purchase)
Q27: What is the journal entry for building construction expenses?
A:
Building A/c Dr.
To Cash/Bank A/c
(Being expenses for building construction capitalized)
14. Illustrative Transactions
Q28: Record a compound entry for goods purchased partially on credit from Shyam Lal.
A:
Purchases A/c Dr. 20,000
To Cash A/c 8,000
To Shyam Lal A/c 12,000
(Being goods purchased partially on credit)
Q29: Prepare a journal entry for interest charged by the bank.
A:
Interest A/c Dr.
To Bank A/c
(Being interest charged by the bank)
15. Banking and Financial Entries
Q30: What entry is made for bank collection of dividends on behalf of a firm?
A:
Bank A/c Dr.
To Dividend A/c
(Being collection of dividend by the bank on behalf of the firm)
Question 1:
XYZ Traders began its operations on August 1, 2024. The following transactions occurred during the first week of business. Prepare the Journal entries for each transaction and provide a narration for each entry.
- August 1, 2024: Rahul invested Rs. 800,000 in cash to start XYZ Traders.
- August 2, 2024: Purchased furniture worth Rs. 50,000 from M/s Furniture Mart on credit.
- August 3, 2024: Bought goods for cash Rs. 100,000.
- August 4, 2024: Sold goods on credit to Sunil Enterprises for Rs. 60,000.
- August 5, 2024: Paid Rs. 30,000 cash to M/s Furniture Mart as partial payment.
- August 6, 2024: Received Rs. 40,000 in cash from Sunil Enterprises.
- August 7, 2024: Rahul withdrew Rs. 5,000 for personal use.
- August 7, 2024: Paid office rent Rs. 10,000 in cash.
- August 7, 2024: Purchased a computer for office use for Rs. 40,000, paying Rs. 20,000 in cash and the rest on credit.
- August 7, 2024: Deposited Rs. 50,000 into the bank account for business purposes.
Instructions:
- Use the appropriate format for journal entries, including the date, particulars, ledger folio (L.F.), debit amount (Dr.), and credit amount (Cr.).
- Ensure each entry has a proper narration explaining the transaction.
- Apply the rules of debit and credit for each transaction.
- Include compound entries where applicable.
Solution 1:
Here is how each transaction would be recorded in the journal:
Journal Entries for XYZ Traders
| Date | Particulars | L.F. | Dr. (Rs.) | Cr. (Rs.) |
|---|---|---|---|---|
| 2024-08-01 | Cash A/c | 800,000 | ||
| To Capital A/c (Rahul) | 800,000 | |||
| (Being capital introduced by Rahul to start the business) | ||||
| 2024-08-02 | Furniture A/c | 50,000 | ||
| To M/s Furniture Mart A/c | 50,000 | |||
| (Being furniture purchased on credit from M/s Furniture Mart) | ||||
| 2024-08-03 | Purchases A/c | 100,000 | ||
| To Cash A/c | 100,000 | |||
| (Being goods purchased for cash) | ||||
| 2024-08-04 | Sunil Enterprises A/c | 60,000 | ||
| To Sales A/c | 60,000 | |||
| (Being goods sold on credit to Sunil Enterprises) | ||||
| 2024-08-05 | M/s Furniture Mart A/c | 30,000 | ||
| To Cash A/c | 30,000 | |||
| (Being partial payment made to M/s Furniture Mart) | ||||
| 2024-08-06 | Cash A/c | 40,000 | ||
| To Sunil Enterprises A/c | 40,000 | |||
| (Being cash received from Sunil Enterprises) | ||||
| 2024-08-07 | Drawings A/c | 5,000 | ||
| To Cash A/c | 5,000 | |||
| (Being cash withdrawn by Rahul for personal use) | ||||
| 2024-08-07 | Rent A/c | 10,000 | ||
| To Cash A/c | 10,000 | |||
| (Being office rent paid in cash) | ||||
| 2024-08-07 | Computer A/c | 40,000 | ||
| To Cash A/c | 20,000 | |||
| To Creditor (Computer Supplier) | 20,000 | |||
| (Being computer purchased for office use, paid partly in cash and partly on credit) | ||||
| 2024-08-07 | Bank A/c | 50,000 | ||
| To Cash A/c | 50,000 | |||
| (Being cash deposited into the bank for business purposes) |
Explanation:
- August 1, 2024: Rahul’s investment is treated as capital introduced, increasing both cash and capital accounts.
- August 2, 2024: The purchase of furniture on credit affects the Furniture account (asset increase) and the supplier’s account (liability increase).
- August 3, 2024: Cash purchases increase the Purchases account and decrease the Cash account.
- August 4, 2024: Credit sales affect the Sales account (revenue increase) and Sunil Enterprises’ account (asset increase).
- August 5, 2024: Partial payment to the supplier reduces both cash and liability.
- August 6, 2024: Receipt of cash from a debtor decreases the debtor’s account and increases cash.
- August 7, 2024: Withdrawal for personal use decreases both cash and owner’s equity (drawings).
- August 7, 2024: Rent payment reduces cash and increases expenses.
- August 7, 2024: The purchase of a computer includes both cash and credit components, reflecting a compound entry.
- August 7, 2024: Bank deposit increases the Bank account and decreases Cash.
Grading Rubric:
- Correctness of Entries (6 Marks):
- Each transaction should have the correct accounts debited and credited according to the rules of debit and credit.
- Narration (2 Marks):
- Each entry must include a clear and concise narration explaining the transaction.
- Format (2 Marks):
- Proper format for journal entries, including correct columns, alignment, and use of the ledger folio column if necessary.
Additional Instructions for Students:
- Ensure clarity and neatness in your presentation of journal entries.
- Provide proper explanations for compound entries, highlighting the multiple accounts affected.
- Double-check the arithmetic accuracy of debits and credits, ensuring they balance for each entry.
Question 2: Comprehensive Transaction Recording
XYZ Limited conducted the following transactions during the month of July 2024. Prepare the necessary journal entries and provide narrations for each entry:
- July 1, 2024: The business owner, Mr. Sharma, invested Rs. 1,200,000 in cash.
- July 3, 2024: Purchased inventory worth Rs. 300,000 on credit from ABC Suppliers.
- July 5, 2024: Sold goods costing Rs. 50,000 to DEF Traders for Rs. 75,000 on credit.
- July 7, 2024: Paid salaries to employees amounting to Rs. 20,000 in cash.
- July 10, 2024: Received a bank loan of Rs. 500,000.
- July 12, 2024: Purchased office equipment for Rs. 150,000, paying Rs. 100,000 in cash and the balance on credit.
- July 15, 2024: Returned defective inventory worth Rs. 20,000 to ABC Suppliers.
- July 18, 2024: Received Rs. 40,000 from DEF Traders in partial settlement of their account.
- July 20, 2024: Paid Rs. 100,000 to ABC Suppliers, settling the remaining balance.
- July 25, 2024: Paid electricity bill of Rs. 5,000 and water bill of Rs. 2,000 in cash.
Instructions:
- Record each transaction using appropriate debit and credit rules.
- Include narrations that explain the nature of each transaction.
- Provide compound entries where multiple accounts are affected.
Solution 2
Journal Entries for XYZ Limited
| Date | Particulars | L.F. | Dr. (Rs.) | Cr. (Rs.) |
|---|---|---|---|---|
| 2024-07-01 | Cash A/c | 1,200,000 | ||
| To Capital A/c (Mr. Sharma) | 1,200,000 | |||
| (Being capital introduced by Mr. Sharma) | ||||
| 2024-07-03 | Purchases A/c | 300,000 | ||
| To ABC Suppliers A/c | 300,000 | |||
| (Being inventory purchased on credit) | ||||
| 2024-07-05 | Accounts Receivable (DEF Traders) A/c | 75,000 | ||
| To Sales A/c | 75,000 | |||
| (Being goods sold on credit to DEF Traders) | ||||
| Cost of Goods Sold A/c | 50,000 | |||
| To Inventory A/c | 50,000 | |||
| (Being cost of goods sold to DEF Traders) | ||||
| 2024-07-07 | Salaries A/c | 20,000 | ||
| To Cash A/c | 20,000 | |||
| (Being salaries paid in cash) | ||||
| 2024-07-10 | Bank A/c | 500,000 | ||
| To Loan A/c (Bank Loan) | 500,000 | |||
| (Being bank loan received) | ||||
| 2024-07-12 | Office Equipment A/c | 150,000 | ||
| To Cash A/c | 100,000 | |||
| To Creditors (Office Equipment Supplier) A/c | 50,000 | |||
| (Being office equipment purchased, partly paid in cash) | ||||
| 2024-07-15 | ABC Suppliers A/c | 20,000 | ||
| To Purchases Returns A/c | 20,000 | |||
| (Being defective inventory returned to ABC Suppliers) | ||||
| 2024-07-18 | Cash A/c | 40,000 | ||
| To Accounts Receivable (DEF Traders) A/c | 40,000 | |||
| (Being cash received from DEF Traders) | ||||
| 2024-07-20 | ABC Suppliers A/c | 100,000 | ||
| To Cash A/c | 100,000 | |||
| (Being balance payment made to ABC Suppliers) | ||||
| 2024-07-25 | Electricity Expense A/c | 5,000 | ||
| Water Expense A/c | 2,000 | |||
| To Cash A/c | 7,000 | |||
| (Being payment of electricity and water bills in cash) |
Explanation for Question 2:
- The journal entries reflect various aspects of business transactions, including capital investment, credit purchases and sales, payment of expenses, and settlement of accounts.
- Narrations provide clarity and context for each transaction, supporting the understanding of financial implications.
Question 3: Complex Transactions with Discounts
ABC Industries conducted the following transactions in August 2024. Prepare journal entries for each transaction, including compound entries where applicable:
- August 1, 2024: The owner, Ms. Verma, invested Rs. 500,000 in cash and Rs. 200,000 in machinery into the business.
- August 2, 2024: Purchased raw materials for Rs. 150,000 from XYZ Suppliers, availing a trade discount of 10%.
- August 3, 2024: Sold products worth Rs. 100,000 to PQR Ltd., offering a cash discount of 5% for payment within 10 days. PQR Ltd. paid on August 10.
- August 5, 2024: Received a cheque for Rs. 80,000 from RST Co. for an outstanding invoice, deposited on August 6.
- August 8, 2024: Paid rent of Rs. 15,000 and utilities of Rs. 5,000 via bank transfer.
- August 12, 2024: Returned defective raw materials worth Rs. 10,000 to XYZ Suppliers.
- August 15, 2024: Purchased office supplies for Rs. 10,000 in cash.
- August 18, 2024: Paid salaries of Rs. 30,000 and bonuses of Rs. 5,000 in cash.
- August 20, 2024: Ms. Verma withdrew Rs. 20,000 in cash for personal use.
- August 25, 2024: Received Rs. 5,000 as commission income credited directly to the bank account.
Instructions:
- Record journal entries for each transaction, using the correct rules for debit and credit.
- Explain the rationale behind each entry with detailed narrations.
- Handle trade and cash discounts appropriately, ensuring accuracy in calculations.
Solution 3
Journal Entries for ABC Industries
| Date | Particulars | L.F. | Dr. (Rs.) | Cr. (Rs.) |
|---|---|---|---|---|
| 2024-08-01 | Cash A/c | 500,000 | ||
| Machinery A/c | 200,000 | |||
| To Capital A/c (Ms. Verma) | 700,000 | |||
| (Being capital introduced by Ms. Verma in cash and machinery) | ||||
| 2024-08-02 | Purchases A/c | 135,000 | ||
| To XYZ Suppliers A/c | 135,000 | |||
| (Being raw materials purchased with a trade discount of 10%) | ||||
| 2024-08-03 | Accounts Receivable (PQR Ltd.) A/c | 95,000 | ||
| To Sales A/c | 100,000 | |||
| To Cash Discount A/c | 5,000 | |||
| (Being products sold with a 5% cash discount to PQR Ltd.) | ||||
| 2024-08-05 | Cheque in Hand A/c | 80,000 | ||
| To Accounts Receivable (RST Co.) A/c | 80,000 | |||
| (Being cheque received from RST Co.) | ||||
| 2024-08-06 | Bank A/c | 80,000 | ||
| To Cheque in Hand A/c | 80,000 | |||
| (Being cheque deposited into the bank) | ||||
| 2024-08-08 | Rent Expense A/c | 15,000 | ||
| Utilities Expense A/c | 5,000 | |||
| To Bank A/c | 20,000 | |||
| (Being rent and utilities paid via bank transfer) | ||||
| 2024-08-12 | XYZ Suppliers A/c | 10,000 | ||
| To Purchases Returns A/c | 10,000 | |||
| (Being defective raw materials returned to XYZ Suppliers) | ||||
| 2024-08-15 | Office Supplies A/c | 10,000 | ||
| To Cash A/c | 10,000 | |||
| (Being office supplies purchased in cash) | ||||
| 2024-08-18 | Salaries A/c | 30,000 | ||
| Bonuses A/c | 5,000 | |||
| To Cash A/c | 35,000 | |||
| (Being salaries and bonuses paid in cash) | ||||
| 2024-08-20 | Drawings A/c | 20,000 | ||
| To Cash A/c | 20,000 | |||
| (Being cash withdrawn by Ms. Verma for personal use) | ||||
| 2024-08-25 | Bank A/c | 5,000 | ||
| To Commission Income A/c | 5,000 | |||
| (Being commission income received directly into bank) |
Explanation for Question 3:
- Each entry reflects the transaction’s impact on the accounts, considering discounts and other details.
- The solution includes compound entries where multiple accounts are involved.
- Proper narrations are provided to explain the context of each transaction.
Question 4: Complex Business Transactions
MegaCorp Pvt. Ltd. executed the following transactions in September 2024. Prepare the journal entries, ensuring correct application of accounting principles:
- September 1, 2024: Issued equity shares worth Rs. 2,000,000, receiving cash.
- September 3, 2024: Purchased machinery for Rs. 500,000; paid Rs. 300,000 in cash and the balance on credit.
- September 5, 2024: Sold goods costing Rs. 150,000 to Alpha Co. for Rs. 220,000 on credit.
- September 8, 2024: Paid advertising expenses of Rs. 20,000 in cash.
- September 10, 2024: Received Rs. 100,000 from Alpha Co. as part payment.
- September 12, 2024: Paid Rs. 50,000 in cash for insurance premium covering the next 12 months.
- September 15, 2024: Returned damaged goods worth Rs. 10,000 to a supplier, receiving a credit note.
- September 18, 2024: Paid Rs. 5,000 as bank charges for processing fees related to the equity shares issuance.
- September 20, 2024: Paid Rs. 40,000 in cash for repairing office equipment.
- September 25, 2024: Received interest income of Rs. 7,500 credited directly to the bank account.
Instructions:
- Prepare the journal entries, ensuring correct debit and credit allocation.
- Include explanations for each entry, focusing on the rationale behind the accounting treatment.
- Handle multi-step transactions with precision.
Solution 4
Journal Entries for MegaCorp Pvt. Ltd.
| Date | Particulars | L.F. | Dr. (Rs.) | Cr. (Rs.) |
|---|---|---|---|---|
| 2024-09-01 | Cash A/c | 2,000,000 | ||
| To Equity Share Capital A/c | 2,000,000 | |||
| (Being equity shares issued for cash) | ||||
| 2024-09-03 | Machinery A/c | 500,000 | ||
| To Cash A/c | 300,000 | |||
| To Creditors (Machinery Supplier) A/c | 200,000 | |||
| (Being machinery purchased partly in cash and credit) | ||||
| 2024-09-05 | Accounts Receivable (Alpha Co.) A/c | 220,000 | ||
| To Sales A/c | 220,000 | |||
| (Being goods sold on credit to Alpha Co.) | ||||
| Cost of Goods Sold A/c | 150,000 | |||
| To Inventory A/c | 150,000 | |||
| (Being cost of goods sold to Alpha Co.) | ||||
| 2024-09-08 | Advertising Expense A/c | 20,000 | ||
| To Cash A/c | 20,000 | |||
| (Being advertising expenses paid in cash) | ||||
| 2024-09-10 | Cash A/c | 100,000 | ||
| To Accounts Receivable (Alpha Co.) A/c | 100,000 | |||
| (Being part payment received from Alpha Co.) | ||||
| 2024-09-12 | Insurance Premium A/c | 50,000 | ||
| To Cash A/c | 50,000 | |||
| (Being insurance premium paid for the next 12 months) | ||||
| 2024-09-15 | Creditors A/c | 10,000 | ||
| To Purchase Returns A/c | 10,000 | |||
| (Being damaged goods returned and credit note received) | ||||
| 2024-09-18 | Bank Charges A/c | 5,000 | ||
| To Cash A/c | 5,000 | |||
| (Being bank charges paid for equity shares processing) | ||||
| 2024-09-20 | Repairs Expense A/c | 40,000 | ||
| To Cash A/c | 40,000 | |||
| (Being payment for repairing office equipment) | ||||
| 2024-09-25 | Bank A/c | 7,500 | ||
| To Interest Income A/c | 7,500 | |||
| (Being interest income received directly into bank) |
Explanation for Question 4:
- The journal entries demonstrate a mix of straightforward and complex transactions, requiring accurate application of accounting rules.
- Each entry is supported by a clear narration to explain the context of the transaction.
Question 5: Real-World Business Scenarios
TechGuru Enterprises recorded the following transactions in October 2024. Prepare journal entries for each transaction, reflecting your understanding of accounting principles:
- October 1, 2024: The owner, Mr. Kumar, contributed Rs. 1,500,000 in cash and Rs. 300,000 in computer equipment.
- October 2, 2024: Purchased office furniture worth Rs. 100,000 on credit from M/s Furniture House.
- October 3, 2024: Paid Rs. 25,000 in cash for utility bills.
- October 4, 2024: Received Rs. 80,000 from clients for services rendered.
- October 5, 2024: Sold computer equipment costing Rs. 150,000 for Rs. 200,000, receiving Rs. 50,000 in cash and the rest on credit.
- October 7, 2024: Purchased office supplies worth Rs. 10,000 in cash and Rs. 15,000 on credit.
- October 8, 2024: Paid Rs. 20,000 as maintenance expenses for office computers via bank transfer.
- October 10, 2024: Issued a cheque of Rs. 60,000 to M/s Furniture House for partial payment.
- October 12, 2024: Received Rs. 100,000 from credit clients for previously rendered services.
- October 15, 2024: Paid Rs. 8,000 as interest on a bank loan.
Instructions:
- Prepare the journal entries, ensuring correct debit and credit application.
- Provide detailed explanations for each entry, highlighting the reasoning behind each transaction’s treatment.
- Include compound entries for multi-step transactions.
Solution for Question 5
Journal Entries for TechGuru Enterprises
| Date | Particulars | L.F. | Dr. (Rs.) | Cr. (Rs.) |
|---|---|---|---|---|
| 2024-10-01 | Cash A/c | 1,500,000 | ||
| Computer Equipment A/c | 300,000 | |||
| To Capital A/c (Mr. Kumar) | 1,800,000 | |||
| (Being capital contributed by Mr. Kumar in cash and equipment) | ||||
| 2024-10-02 | Office Furniture A/c | 100,000 | ||
| To M/s Furniture House A/c | 100,000 | |||
| (Being office furniture purchased on credit) | ||||
| 2024-10-03 | Utility Expenses A/c | 25,000 | ||
| To Cash A/c | 25,000 | |||
| (Being utility bills paid in cash) | ||||
| 2024-10-04 | Cash A/c | 80,000 | ||
| To Service Revenue A/c | 80,000 | |||
| (Being cash received for services rendered) | ||||
| 2024-10-05 | Cash A/c | 50,000 | ||
| Accounts Receivable A/c | 150,000 | |||
| To Sales A/c | 200,000 | |||
| (Being computer equipment sold for cash and credit) | ||||
| Cost of Goods Sold A/c | 150,000 | |||
| To Computer Equipment A/c | 150,000 | |||
| (Being cost of equipment sold) | ||||
| 2024-10-07 | Office Supplies A/c | 25,000 | ||
| To Cash A/c | 10,000 | |||
| To Creditors (Supplies Supplier) A/c | 15,000 | |||
| (Being office supplies purchased partly in cash and credit) | ||||
| 2024-10-08 | Maintenance Expenses A/c | 20,000 | ||
| To Bank A/c | 20,000 | |||
| (Being maintenance expenses paid via bank transfer) | ||||
| 2024-10-10 | M/s Furniture House A/c | 60,000 | ||
| To Bank A/c | 60,000 | |||
| (Being partial payment made to M/s Furniture House) | ||||
| 2024-10-12 | Cash A/c | 100,000 | ||
| To Accounts Receivable A/c | 100,000 | |||
| (Being payment received from credit clients) | ||||
| 2024-10-15 | Interest Expense A/c | 8,000 | ||
| To Bank A/c | 8,000 | |||
| (Being interest paid on bank loan) |
Explanation for Question 5:
- The entries reflect real-world scenarios involving capital contributions, sales, credit purchases, and expense payments.
- Detailed narrations clarify the nature of each transaction and the accounts involved.
- Compound entries are used to handle transactions affecting multiple accounts.