Basic Journal Entries Question

by SURINDER
(Jammu)

Surinder Thakyal

Surinder Thakyal

Before you begin: It's important for testing and exams to make sure you not only answer questions correctly but also complete them at the right speed. So make sure you time yourself while attempting this question.



Difficulty Rating:
Intermediate --> Advanced

Time limit:
25 minutes




Question:

Create journal entries for the following transactions (Rs. = Rupees = Indian currency):

1. Harish started business with cash Rs. 10000
2. Bought goods from Manohar Rs. 5000
3. Purchase fittings for cash Rs. 800
4. Sold goods to Charanjeet Rs. 1600
5. Paid Manohar Rs. 3000
6. Sold goods Vadva Ram Rs. 2000
7. Received from Charanjeet Rs. 1540 and allowed him discount Rs. 60
8. Paid wages Rs. 80
9. Bought goods for cash Rs. 600
10. Sold goods to Ramesh Rs. 3400
11. Purchase goods from Purchotam Ra. 2600
12. Paid Manohar in settlement Rs. 1900 and discount allowed by him Rs. 100
13. Paid carriage from goods and sold Rs. 40
14. Paid wages Rs. 80
15. Bought goods Manohar Rs. 3000
16. Bought goods for cash Rs. 800
17. Sold goods Vadva Ram Rs. 3600
18. Vadva Ram paid on account Rs. 4000
19. Purchase goods from Harbans Rs. 1500
20. Sold goods for cash Rs. 1600
21. Paid wages Rs. 80
22. Paid to Harbans Rs. 1440 and discount allowed by him Rs. 60
23. Sold goods to Charanjeet Rs. 2600
24. Bought goods for Manohar Rs. 1400
25. Bought goods for cash Rs. 1460
26. Paid on account to Manohar Rs. 1460
27. Received from Charanjeet Rs. 4000
28. Paid wages Rs. 80
29. Paid for electric lighting Rs. 100
30. Paid rent Rs. 160
31. Harish drew for personal use Rs. 300
32. Purchases Rs. 80
33. General expense Rs. 190
34. Carriage outwards Rs. 60




Solution:

Here are the journal entries for the above:

1. Dr Bank 10,000
Cr Capital 10,000


Bank is an
asset , which increases on the left side of the accounting equation (debit). This investment by the owner in the business is known as capital, which is a form of owner's equity . Owner's equity increases on the right side of the accounting equation (credit). See our tutorial on the journal entry for an equity investment by the owner for a full example and explanation of this type of transaction.

2. Dr Purchases 5,000
Cr Creditors 5,000


In this example I am assuming the business is using the
periodic inventory system , so we debit the purchases account (not the inventory account). Since the purchases are on credit, we have liabilities . Since liabilities increase on the right side, we credit the creditors.

3. Dr Fittings 800
Cr Bank 800


Fittings are fixed pieces of equipment inside a business or house which can be removed if needed. Examples include a ceiling lamp or a tap/faucet. Fittings are assets for the business. Since these assets are increasing, we do an entry on the left side of the accounting equation (debit). Bank is decreasing since it is a payment and so is credited. See the tutorial on the
journal entry for purchasing an asset for a full example of this kind of transaction.

4. Dr Debtors 1,600
Cr Sales 1,600


A credit sale means that there will be income, which is credited. The debit goes to debtors (or "accounts receivable," an asset), which means that debtors is increasing. See the tutorial on the
journal entry for income on credit for a full example.

5. Dr Creditors 3,000
Cr Bank 3,000


In this case we are paying the debt to our supplier. A payment means our bank is decreasing, which occurs on the right side (credit). Creditors (a liability) decreases too, which means this is debited. See our tutorial on the
journal entry for paying a debt for a full example.

6. Dr Debtors 2,000
Cr Sales 2,000


Same as 4 above - credit sale.

7. Dr Bank 1,540
Dr Discount allowed (expense) 60
Cr Debtors 1,600


Since we're receiving money, our bank increases, which means we debit it. Debtors (accounts receivable) also decreases, since this debt to our business is being paid. The discount our business is giving is an expense and so is debited.

8. Dr Wages 80
Cr Bank 80


Wages are an expense and so are debited. Bank is decreasing and so gets a credit. See our tutorial on the
journal entry for expenses paid by cash for a full example.

9. Dr Purchases 600
Cr Bank 600


Same as 2 above except that this is a cash purchase, so our bank is decreasing (credit).

10. Dr Debtors 3,400
Cr Sales 3,400


Same as 4 and 6 above.

11. Dr Purchases 2,600
Cr Creditors 2,600


Same as 2 above.

12. Dr Creditors 2,000
Cr Bank 1,900
Cr Discount received (income) 100


In this case we are receiving a discount. This is counted as income, meaning we credit it. Our liability (debt) to our supplier is decreasing. Since liabilities increase on the right side, they decrease on the left, so are debited. The payment means bank is decreasing, so it gets a credit.

13. Dr Carriage on goods 40
Cr Bank 40


"Carriage" means "transport costs." It is an expense.

14. Dr Wages 80
Cr Bank 80


Same as 8 above.

15. Dr Purchases 3,000
Cr Creditors 3,000


Same as 2 and 11 above.

16. Dr Purchases 800
Cr Bank 800


Same as 9 above.

17. Dr Debtors 3,600
Cr Sales 3,600


Same as 4, 6 and 10 above.

18. Dr Bank 4,000
Cr Debtors 4,000


We are receiving money, so our bank increasing means we debit it. The credit is to the debtors (accounts receivable), which means we are recording this asset decreasing. See the tutorial on the
journal entry for when a debtor pays for a full example and explanation.

19. Dr Purchases 1,500
Cr Creditors 1,500


Same as 1, 11, 15 above.

20. Dr Bank 1,600
Cr Sales 1,600


A cash sale means we record income on the right side of our accounting equation (credit) and our bank increasing means we make an entry on the left side to this account (debit). See the tutorial on the
cash income journal entry for a full example.

21. Dr Wages 80
Cr Bank 80

22. Dr Creditors 1,500
Cr Bank 1,440
Cr Discount received (income) 60


Same as 12 above.

23. Dr Debtors 2,600
Cr Sales 2,600

24. Dr Purchases 1,400
Cr Creditors 1,400

25. Dr Purchases 1,460
Cr Bank 1,460

26. Dr Creditors 1,460
Cr Bank 1,460

27. Dr Bank 4,000
Cr Debtors 4,000


Same as 18 above.

28. Dr Wages 80
Cr Bank 80

29. Dr Electric lighting 100
Cr Bank 100


Electric lighting is an expense and so is debited.

30. Dr Rent 160
Cr Bank 160


Rent is also an expense.

31. Dr Drawings 300
Cr Bank 300


Drawings is the opposite of capital (owner's equity investment in a business). It means owner's equity, which is on the right side of our accounting equation, is now decreasing. So drawings occurs on the left side (debit). The credit is to bank, which means it is decreasing (a payment).

32. Dr Purchases 80
Cr Bank 80


There was no mention for this transaction if the purchases were made with cash or on credit. I assumed it was a cash purchase.

33. Dr General expense 190
Cr Bank 190

34. Dr Carriage outwards 60
Cr Bank 60


Carriage outwards is a transport expense of goods going out from the business.


That's it! Hope you enjoyed our Journal Entries Question!

All the best with your studies!

- Michael Celender
Founder of Accounting Basics for Students


Related Questions and Exercises:
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Comments for Basic Journal Entries Question

Click here to add your own comments

Minority Interest Charge to Income Statement
by: Val Trudeau

What is a ''Minority Interest'' charge to an income statement? What does it mean or represent?

The minority interest is the portion of ownership (equity) of a subsidiary company that does not belong to the parent company.

For example, parent company BIG Ltd. owns 60% of its subsidiary Little Ltd. Various other companies own 40% - that's the minority interest.

The "charge" on the income statement is probably not an expense but rather just the share of the profit belonging to the minority interest (the other companies).

Parent companies, subsidiaries and the minority interest are dealt with in the advanced accounting field of consolidated financial statements.

Hope that helps!

Ask more questions like this in our FB group!

Best,
Michael C.
Founder of Accounting-Basics-for-Students.com

Journal Entries - Buying and Selling Goods
by: Anonymous

What is the journal entry of

1) sold goods to Krishna
Bought goods from Rajesh ?

A: For the journal entry for buying goods you will be able to work out the answer if you go through this tutorial on the journal entry for buying an asset.

For the journal entry for selling goods, go through the chapter on Inventory.

Good luck!

Michael C.
Founder of Accounting Basics for Students


Correct Your Entries
by: Anonymous

Please check your all entries. You are everywhere used bank account but they are all have changed cash account.

You are correct. It is not really a big deal for examiners usually - they don't mind if you use "bank" or "cash" for transactions like these. But technically it would probably be more accurate to call the account "cash."

Best,
Michael
Editor

Accountancy
by: Yash raj

Paid interest to Ramesh 2000

Dr Interest Paid (expense) 2,000
Cr Bank 2,000

- Michael (editor)

Accountancy
by: Ganga

What is meant by "Manohar remitted Rs 1000 on account?"

"Remitted" means sent or transferred or paid money. "On account" means on credit.

Ganga, when you don't understand something in accounting you need to look to see if there are words you don't understand. Then look them up in a dictionary. This is a vital part of studying anything - the individual words.

- Michael Celender
Founder of Accounting Basics for Students

12th Journal Entry Above
by: Anvesha

Explain the 12th entry plz...

Manohar is a creditor from transaction #2 - we bought the goods on credit for 5,000. In transaction #5 we paid him 3,000 of the 5,000 so he had a balance of 2,000 that we owed him (credit balance).

In #12 he is giving us a discount of 100 off the 2,000 and we pay him the rest (1,900). So our bank decreases by 1,900, we also record 100 discount received, which is income (credit) and against these 2 entries we record the entire 2,000 of the creditors decreasing by debiting creditors.

- Michael Celender
Founder of Accounting Basic for Students

Clarification
by: Manas

The answer for question 1) should be:
Cash A/c Dr.
To Capital A/c

Yes this is also correct - "cash" or "bank" can be used as the debit entry - same thing.

- Michael Celender
Founder of Accounting Basics for Students

I have a question
by: Komal

What is the journal entry of sold 4000 of goods to mohan at a profit of 30% on cost?

Doubt
by: Anonymous

In question number 7, can we write

Cash account a/c debit
Discount allowed a/c debit
Creditor a/c credit

Yes for the first 2 lines you wrote. But the 3rd line is Debtors not Creditors.

- Michael Celender
Founder of Accounting Basics for Students

Please give me ans
by: Anonymous

Sold good to Sohan RS 20000 and received cheque 5000 and cash of 3000.

Sasi
by: Anonymous

What is the journal entry for received a cheque for 100 rupees to open the book?

Journal entry
by: Anonymous

Bought goods from Kiran at 10% trade discount $2000. Please give the journal entry for this transaction.

Have a doubt
by: Anonymous

What is the journal entry
Paid to ram 18,000 half cash and half cheque please type the answer. Thanks.

Same as normal entry:

Dr Creditors 18,000
Cr Cash/Bank 18,000

You can separate cash and bank into different accounts if you want too.



Doubt
by: Man

What should be the journal entry for the following transaction?
Good sold to Ram (costing Rs 10000) for Rs 12000

A:

Cash 12,000
Goods 10,000
Profit/Income 2,000

Journal entry
by: Shailesh

What is the journal entry of purchase goods for ₹ 100000 on credit from Raghunath brothers, paid ₹ 1200 for carriage on these goods?

Journal entry
by: Anonymous

Bought goods from Ramesh for Rs 2100 and sold to Suresh for Rs 3000. What is the journal entry?

Doubt
by: harsh

What is the accounting equation for started business with cash rs 20000, furniture rs. 4000 and a bank loan of rs. 20000?

What will be the accounting entry
by: Anonymous

I purchase a book in 50 rs and sold it in 40 rs

A: Dr Purchases 50
Cr Cash 50

Dr Cash 40
Cr Sales 40

Solve this
by: Anonymous

Sold goods for cash, costing Rs. 2,200 at Rs. 2000.

Journal entry help
by: Aman

What is the entry for ram purchases goods from shyam of 10,000 @ 18 % per annum?

wrong journal
by: neelu

u not use cash a/c and creditors and debtors name

Bank Account, Cash Account
by: Michael Celender

Bang Bang, you can have a bank account and also a separate cash account in the accounting system for the business. In many accounting questions and exercises they just show "bank account" which represents both the cash account and bank account in one.

DOUBT
by: Bang Bang

Why only Bank account is Dr./Cr. and not Cash account while selling or purchasing goods?


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