Journal Entries and Ledger
Question and Answer
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Q: Mr Robert commenced business on 1st January, 2011 with a capital of $100,000 in cash. On the same date he opened the bank account in ADCB and deposited $20,000. During the month of January 2011 the following transactions took place:
Jan 1 Bought goods for cash 70,000
2 Sold goods to Steve Co. (Credit) 38,000
15 Sold goods for cash 9,000
21 Steve Co. paid by cheque 35,000
22 Stationery bill paid by cheque 2,000
22 Telephone bill by cash 500
31 Paid rent by cash 2,000
Paid salaries by cash 3,000
Withdrew cash personal use 5,000
Record journal entries for the transactions and post them to ledgers.
Jan 1 Dr Cash on hand 80,000
Dr Bank 20,000
Cr Capital 100,000Note that in most accounting questions you won't have to account for "Cash on hand" and "Bank" in separate accounts. In most questions I just combine these into "Bank." But in this question they specifically talk about opening the bank account with $20,000 of the $100,000, which indicates they kept cash on hand in addition to the bank account, which needs to be accounted for.1 Dr Purchases/Inventory 70,000
Cr Cash on hand 70,000Note that it's "Purchases" for a periodic system of inventory and "Inventory" if it's the perpetual system. See the tutorial on perpetual and periodic inventory for more information.2. Dr Debtors 38,000
Cr Sales 38,000
15. Dr Cash on hand 9,000
Cr Sales 9,000
21. Dr Bank 35,000
Cr Debtors 35,000
22. Dr Stationery expense 2,000
Cr Bank 2,000
22. Dr Telephone expense 500
Cr Cash on hand 500
31. Dr Rent expense 2,000
Cr Cash on hand 2,000
31. Dr Salaries 3,000
Cr Cash on hand 3,000
31. Dr Drawings 5,000
Cr Cash on hand 5,000
There you go. Hope you enjoyed this detailed journal entries and ledger question and answer.
Thanks to Kay Khine, Kong Chenda and others for contributions in the Comments section below that helped solve this question!
Good luck with your studies!
- Michael Celender
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