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Journal Entry

Illustration 1. Journalize the following transactions with narration:

Date Particulars Amount


1 May,2019 Receive cash from Ramu 2,500
4 May,2019 Purchase goods for cash 1,000
5 May, 2019 Sold goods to Hari 4,000
8 May, 2019 Bought furniture from Raju 500
10 May, 2019 Paid for office stationery 150

Solution 1:

Journal Entries

Date Particulars L.F. Dr. Cr.


1 Cash a/c 2,500
To Ramu 2,500
(Cash received from Ramu)
4 Purchase a/c 1,000
To Cash a/c 1,000
(Goods purchased for Cash)
5 Hari a/c 4,000
To Goods a/c 4,000
(Goods sold to Hari)
8 Furniture a/c 500
To Raju 500
(Furniture bought from Raju)
10 May Office Stationery a/c 150
To Cash a/c 150
(Paid for office stationery)

Illustration 2. Journalise the following transactions.

Following figures are given in (’00)

1. December 1, 2018, Ajit started business with capital Rs.4,00,000.


2. December 3, He withdrew cash for business from the Bank Rs. 2,000.
3. December 5, He purchased goods making payment through bank Rs. 15,000.
4. December 8, He sold goods Rs. 16,000 and received payment through bank.
5. December 10, He purchased furniture and paid by cheque Rs.2, 500.
6. December 12, He sold goods to Arvind Rs. 2, 400.
7. December 14, He purchased goods from Amrit Rs. 10,000.
8. December 15, He returned goods to Amrit Rs. 500.
9. December 16, He received from Arvind Rs.2, 300 in full settlement.
10. December 18, He withdrew goods for personal use Rs. 1,000.
11. December 20, He withdrew cash from business for personal use Rs. 2,000.
12. December 24, He paid telephone charges Rs.110.
13. December 26, Amount paid to Amrit in full settlement Rs. 9,450.
14. December 31, Paid for stationery Rs.200, Rent Rs. 5,000 and salaries to staff Rs. 2,000.
15. December 31, Goods distributed by way of free samples Rs. 2,000.

Solution 2:
Journal Entries
(Rs. in ’00)
S.No. Date Particulars L.F. Dr. Cr.
1. December 1 Bank a/c 4,00,000
To Capital a/c 4,00,000
(Being commencement of
Business)
2. December 3 Cash a/c 2,000
To Bank a/c 2,000
(Being cash withdrawn from
bank)
3. December 5 Purchase a/c 15,000
To Bank a/c 15,000
(Being purchase of goods for
cash)
4. December 8 Bank a/c 16,000
To Sales a/c 16,000
(Being goods sold for cash)
5. December 10 Furniture a/c 2,500
To Bank a/c 2,500
(Being purchase of furniture,
paid by cheque)
6. December 12 Arvind a/c 2,400
To Sales a/c 2,400
(Being sale of goods)
7. December 14 Purchase a/c 10,000
To Amrit 10,000
(Being purchase of goods from
Amrit)
8. December 15 Amrit a/c 500
To Purchases Return a/c 500
(Being goods returned to
Amrit)
9. December 16 Bank a/c 2,300
Discount a/c 100
To Arvind 2,400
(Being cash received from
Arvind in full settlement and
allowed him Rs.100 as
discount)
10. December 18 Drawings a/c 1,000
To Purchases a/c 1,000
(Being withdrawal of goods for
personal use)
11. December 20 Drawings a/c 2,000
To Cash a/c 2,000
(Being cash withdrawal from
the business for personal use)
12. December 24 Telephone expenses a/c 110
To Bank a/c 110
(Being telephone expenses
paid)
13. December 26 Amrit a/c 9,500
To Bank a/c 9,450
To Discount a/c 50
(Being cash paid to Amrit and
he allowed Rs.50 as discount)
14. December 31 Stationery a/c 200
Rent a/c 5,000
Salaries a/c 2,000
To Bank a/c 7,200
(Being expenses paid)
15. December 31 Advertisement Expenses a/c 2,000
To Purchases a/c 2,000
(Being distribution of goods by
way of free samples)

Illustration 3. Shown the classification of the following accounts under traditional and
accounting equation approach:

(a)Building (b) Purchases (c) Sales (d) Bank Fixed Deposit (e) Rent (f) Rent Outstanding (g) Cash
(h) Trade Payable (i) Closing Inventory (j) Investments (k) Trade receivables (l) Sales Tax
Payable (m) Discount Allowed (n) Bad debts (o) Capital (p)Drawings (q) Interest Receivable
Account (r) Rent received in advance (s) Prepaid salary (t) Bad debts recovered (u)
Depreciation (v) Personal income tax

Solution 3:

Nature of Account
S.No Title of Account Traditional Approach Accounting Equation
Approach
(a) Building Real Asset
(b) Purchases Real Asset
(c) Sales Real Revenue
(d) Bank Fixed Deposit Personal Asset
(e) Rent Nominal (Expense) Expense
(f) Rent Outstanding Personal Liability
(g) Cash Real Asset
(h) Trade Payable Personal Liability
(i) Closing Inventory Real Asset
(j) Investments Real Asset
(k) Trade receivables Personal Asset
(l) Sales Tax Payable Personal Liability
(m) Discount Allowed Nominal (Expense) Temporary Capital
(Expense)
(n) Bad debts Nominal (Expense) Temporary Capital
(Expense)
(o) Capital Personal Capital
(p) Drawings Personal Temporary Capital
(Drawings)
(q) Interest Receivable Account Personal Asset
(r) Rent received in advance Personal Liability
(s) Prepaid salary Personal Asset
(t) Bad debts recovered Nominal (Gain) Temporary Capital
(Gain)
(u) Depreciation Nominal (Expense) Temporary Capital
(Expense)
(v) Personal Income Tax Personal (Drawing) Temporary Capital
(Drawings)

Illustration 4: Transactions of Ramesh for April are given below. Journalise them.
April 2019 Amount in Rs.
1 Ramesh started business with 10,00,000
3 Bought goods for cash 50,000
5 Drew cash from bank 10,000
13 Sold to Krishna- goods on credit 1,50,000
20 Bought from Shyam goods on credit 2,25,000
24 Received from Krishna 1,45,000
Allowed him discount 5,000
28 Paid Shyam Cash 2,15,000
Discount allowed 10,000
30 Cash Sales for the month 8,00,000
Paid Rent 50,000
Paid Salary 1,00,000

Solution 4:
Date Particulars L.F. Dr Cr
April 2019
1 Bank a/c 10,00,000
To Capital a/c 10,00,000
(Being the amount invested by
Ramesh in the business as capital)
3 Purchase a/c 50,000
To Bank a/c 50,000
(Being goods purchased for cash)
5 Cash a/c 10,000
To Bank a/c 10,000
(Being cash withdrawn from bank)
13 Krishna a/c 1,50,000
To Sales a/c 1,50,000
(Being goods sold to Krishna on
credit)
20 Purchase a/c 2,25,000
To Shyam 2,25,000
(Being goods bought from Shyam
on credit)
24 Bank a/c 1,45,000
Discount a/c 5,000
To Krishna 1,50,000
(Being cash received from Krishna
and discount allowed to him)
28 Shyam 2,25,000
To Bank a/c 2,15,000
To Discount a/c 10,000

(Being cash paid to Shyam and


discount allowed by him)
30 Bank a/c 8,00,000
To Sales a/c 8,00,000
(Being goods sold for cash)
30 Rent a/c 50,000
Salaries a/c 1,00,000
To Bank a/c 1,50,000
(Being the amount paid for rent
and salary)

Illustration 5:
Pass Journal Entries for the following transactions in the books of Gamma Bros.
(i) Employees had taken inventory worth Rs.1,00,000 (Cost price Rs. 75,000) on the eve of
Deepawali and the same was deducted from their salaries in the subsequent month.
(ii) Wages paid for erection of Machinery Rs. 18,000.
(iii) Income tax liability of proprietor Rs.1,17,000 was paid out of petty cash.
(iv) Purchase of goods from Naveen of the list price of Rs.2,00,000. He allowed 10% trade
discount, Rs. 5,000 cash discount was also allowed for quick payment.
Solution 5:

Journal Entries in the books of Gamma Bros.


S.No. Particulars L.F. Dr. Cr.
(i) Salaries 75,000
To Purchases 75,000
(Being entry made for inventory
taken by employee)
(ii) Machinery a/c 18,000
To Cash a/c 18,000
(Being wages paid for erection of
machinery)
(iii) Drawings 1,17,000
To Petty Cash a/c 1,17.000
(Being the income tax of proprietor
paid out of business money)

(iv) Purchase a/c 1,80,000


To Cash a/c 1,75,000
To Discount Received a/c 5,000
(Being the goods purchased from
Naveen for Rs.2,00,000@10% trade
discount and cash discount of Rs.
5,000)

Trial Balance

Illustration 6:

Mr. Ashish furnishes the following balances as on 31st March, 2019. You have to prepare a Trial Balance
with the following information:

Particulars Amount (Rs.) Particulars Amount (Rs.)


Interest on Capital 24,000 Salaries 1,28,000
Creditors 6,00,000 Capital 8,00,000
Discount Received 23,000 Drawings 2,46,000
Loan 1,74,000 Machinery 3,00,000
Purchase Returns 40,000 Bills Payable 20,000
Sales Return 6,000 Furniture 6,00,000
Advertisement 1,63,000 Debtors 5,00,000
Commission Received 20,000 Bank Loan 2,00,000
Rent 10,000 Patents 60,000
Purchases 19,00,000
Sales 32,60,000
Opening Stock 12,00,000
Solution 6:

Trial Balance

(as on 31st March 2019)

Particulars Dr. (Amount) Cr. (Amount)


Interest on Capital 24,000
Creditors 6,00,000
Discount Received 23,000
Loan 1,74,000
Purchase Returns 40,000
Sale Returns 6,000
Advertisement 1,63,000
Commission Received 20,000
Rent 10,000
Purchases 19,00,000
Sales 32,60,000
Opening Stock 12,00,000
Salaries 1,28,000
Capital 8,00,000
Drawings 2,46,000
Machinery 3,00,000
Bills Payable 20,000
Furniture 6,00,000
Debtors 5,00,000
Bank Loan 2,00,000
Patents 60,000
Total 51,37,000 51,37,000

Illustration 7: From the following Ledger balances, prepare a trial balance of Anuradha Traders as on 31st
March 2019.

Account Head Amount (Rs.)


Capital 1,00,000
Sales 1,66,000
Purchases 1,50,000
Sales Return 1,000
Discount Allowed 2,000
Expenses 10,000
Trade Receivables 75,000
Trade Payables 25,000
Investments 15,000
Cash at Bank and in Hand 37,000
Interest received on investments 1,500
Insurance paid 2,500
Solution 7:

Trial Balance of Anuradha Traders as on 31st March 2019

Dr. Balance Amount Cr. Balance Amount


Purchases 1,50,000 Capital 1,00,000
Sales Return 1,000 Sales 1,66,000
Discount Allowed 2,000 Trade Payables 25,000
Expenses 10,000 Interest received on 1,500
Investments
Trade Receivables 75,000
Investments 15,000
Cash at bank and in 37,000
hand
Insurance paid 2,500
Total 2,92,500 Total 2,92,500

Illustration 8: One of your clients, Mr. Singhania has asked you to finalise his account for the year ended
31st March,2019. Till date, he himself has recorded the transactions in books of accounts. As a basis for
audit, Mr. Singhania furnished you with the following statement.

Dr. Balance Cr. Balance


Singhania’s Capital 1,556
Singhania’s Drawings 564
Leasehold premises 750
Sales 2750
Due from customers 530
Purchases 1259
Purchase Return 264
Loan from Bank 256
Trade Payables 528
Trade expenses 700
Cash at bank 226
Bills Payable 100
Salaries and Wages 600
Inventories (1.4.2018) 264
Rent and rates 463
Sales Return 98
Total 5454 5454

The closing inventory on 31st March, 2019 was valued at Rs.574. Mr. Singhania claims that he has
recorded every transaction correctly as the Trial Balance is tallied. Check the accuracy of the above trial
balance.

Solution 8:

Corrected Trial Balance of Mr. Singhania as on 31st March, 2019


Particulars Dr. Cr.
Amount Amount
` `
Singhania’s Capital 1,556
Singhania’s Drawings 564
Leasehold premises 750
Sales 2,750
Due from customers 530
Purchases 1,259
Purchases returns 264
Loan from Bank 256
Creditor/Suppliers 528
Trade expenses 700
Cash at Bank 226
Bills payable 100
Salaries and Wages 600
Inventory (1.4.2015) 264
Rent and rates 463
Sales return 98
5,454 5,454
Reasons:
1. Due from customers is an asset, so its balance will be a debit balance.
2. Purchases return account always shows a credit balance because assets go out.
3. Balance in Creditors Account is a liability, so its balance will be a credit balance.
4. Bills payable is a liability, so its balance will be a credit balance.
5. Inventory (opening) represents assets, so it will have a debit balance.
6. Sales return account always shows a debit balance because assets come.

Triple Column Cash Book


Illustration 9: Enter the following transactions in Cash Book with Discount and Bank Columns. Cheques
are first treated as cash receipt.

2019 Amount (Rs.)


Jan.1 Chandrika commences business with Cash 20,000
“3 He paid into Current A/c 19,000
“4 He received cheque from Kirti & Co. on account 600
“7 He pays in bank Kirty & Co.’s cheque 600
“10 He pays Rattan & Co. by cheque and is allowed discount ` 20 330
“12 Tripathi & Co. pays into his Bank A/c 475
“15 He receives cheque from Warshi and allows him discount ` 35 450
“20 He receives cash ` 75 and cheque ` 100 for cash sale
“25 He pays into Bank, including cheques received on 15th and 20th 1,000
“27 He pays by cheque for cash purchase 275
“30 He pays sundry expenses in cash 50

Solution 9:

Date Receipts L.F. Discount Cash Bank Date Payments L.F. Discount Cash Bank
` ` ` ` ` `
2016 2016
Jan. 1 To Capital A/c 20,000 Jan. 3 By Bank A/c C 19,000
3 To Cash C 19,000 7 By Bank A/c C 600
4 To Kirti & Co. 600 10 By Ratan & Co. 20 330
7 To Cash C 600 25 By Bank A/c C 1,000
12 To Tripathi & 475 27 By Purchases 275
Co. A/c
15 To Warshi 35 450 30 By S. Exp. A/c 50
20 To Sales A/c 175
25 To Cash C 1,000
31 By Balance c/d 300 20,745
35 21,225 21,075 20 21,225 21,075
Feb. 1 To Balance b/d 300 20,745
Illustration 10: From the following particulars, write up the Cash Book of M/s R.R with cash and Bank
columns and bring down the final balance.

2019 Particulars Amount


1 April Cash in hand 100
1 Cash at Bank 3,500
5 Paid salary by cheque 250
7 Paid to K.K & Co. by Cheque 260
9 Received a cheque from B & Co. 2,500
12 Bought goods for cash paid by cheque 750
15 Received cash from M/s. S Chand 1,500
17 Deposited cash into bank 1,450
18 Sundry creditors were paid by cheque 1,250
19 Received from debtors by cheque which could 1,780
not be sent to bank
20 B & Co. cheque dishonored 2,500
22 B & Co. paid Cash 2,500
24 R & Co. issued a cheque for Rs.470 in full 500
satisfaction of his account for
27 Shyam Lal was paid Rs. 395 in full settlement 400
of his A/c amounting to
30 Deposited into the bank 2,200

Solution 10: Three Column Cash Book

Date Particulars L.F. Discount Cash Bank Date Particulars L.F. Discount Cash Bank
2019 2019
1 To Balance 100 3500 5 By Salaries 250
b/d
9 To B & Co. 2500 7 By K & Co. 260
15 To S Chand 1500 12 By 750
Purchase
17 To Cash 1450 17 By Bank (c ) 1450

(c )
19 To Debtors 1780 18 By S. 1250
Creditors
22 To B&Co. 30 2500 20 By B & Co. 2502
0
24 To R & Co. 470 27 By Shyam 5 395
Lal
30 To Cash (c ) 2200 30 By Bank a/c (c ) 2200
By Balance 4885 5110
c/d
Total 30 5880 10,1 Total 5 5880 10,1
20 20
Illustration 11. From the following particulars make cash book of Ghulam Fatima Trading Co. for
the month of November, 2016:
1 Cash balance (Cr) Rs. 2,000; Bank balance Rs. 40,000.
4 Cash sales Rs. 3,700; Credit sales Rs. 1,800 would be received at near future.
6 Paid Ahmed & Bros. by cash Rs. 500; Received cash by debtors Rs. 1,800.
12 Paid to vendor by means of check worth Rs. 2,700.
13 Paid Utility bills in cash Rs. 250; Bought goods by check Rs. 750.
19 Drew from Bank for office use Rs. 160; Personal withdrawal of cash Rs. 1,000.
20 Received a check from Hamid Rs. 2,700 and deposited into the bank.
21 Received by check from Munir Rs. 1,360; Discount Rs. 140 (not deposited).
25 Cash sales Rs. 2,100; Paid wages by bank Rs. 1,500.
28 Deposited Munir’s check into bank.
29 Payment by check to Anees for Rs. 175; Discount received Rs. 25.
30 Munir’s check has been dishonored and return by bank.

Solution 11:
Bank Reconciliation Statement

Illustration 12: From the following particulars, prepare a Bank Reconciliation Statement for Jindal Offset
Ltd.

(1) Balance as per Cash Book is Rs. 2,40,000.


(2) Cheques issued but not presented in the bank amounts to Rs. 1,36,000.
(3) Cheques deposited in bank but not yet cleared amounts to Rs. 90,000.
(4) Bank charges amount to Rs.300.
(5) Interest credited by bank amounts to Rs. 1,250.
(6) The balance as per Pass Book if Rs.2,86,950.

Solution 12:

Bank Reconciliation Statement

Particulars Amount (Rs.)


Balance as per cash book 2,40,000
Add: Cheque issued but not presented 1,36,000
Interest credited 1,250
3,77,250
Less: Cheque deposited but not yet cleared (90,000)
Bank Charges (300)
Balance as per pass book 2,86,950

Illustration 13: On 31st March 2017, the Bank Pass Book of Namrata showed a balance of Rs.1,50,000 to
her credit while balance as per cash book was Rs. 1,12,050. On scrutiny of the two books, she
ascertained the following causes of difference:

1. She has issued cheques amounting to Rs. 80,000 out of which only Rs. 32,000 were presented
for payment.
2. She received a cheque of Rs. 5,000 which she recorded in her cash book but forgot to deposit in
the bank.
3. A cheque of Rs. 22,000 deposited by her has not been cleared yet.
4. Mr. Gupta deposited an amount of Rs. 15,700 in her bank which has not been recorded by her in
Cash Book yet.
5. Bank has credit an interest of Rs. 1,500 while charging Rs.250 as bank charges.

Prepare Bank Reconciliation Statement.


Solution 13:

Bank Reconciliation Statement as on 31st March 2017

Particulars Amount (Rs.)


Balance as per Pass Book (Cr.) 1,50,000
Add: Cheque deposited but not yet cleared 22,000
Add: Cheque recorded in Cash Book but not yet deposited 5,000
Add: Bank Charges debited by Bank 250
Less: Cheque issued but not yet presented (48,000)
Less: Amount deposited but not recorded in Cash Book (15,700)
Less: Interest allowed by Bank (1,500)
Balance as per Cash Book 1,12,050

Illustration 14: From the following information, prepare a Bank Reconciliation Statement as at 31st
December, 2017 for Messers New Steel Limited:

1. Bank overdraft as per Cash Book on 31st December, 2017 Rs. 22,45,900.
2. Interest debited by bank on 26th December, 2017 but no advice received Rs.2,78,700.
3. Cheque issued before 31st December, 2017 but not yet presented to Bank Rs. 6,60,000.
4. Transport subsidy received from the State Government directly by the Bank but not advised to
the company Rs. 14,25,000.
5. Draft deposited in the Bank, but not credited till 31st December, 2017 Rs. 13,50,000.
6. Bills for collection credited by the Bank till 31st December, 2017 but no advice received by the
company Rs.8,36,000.
7. Amount wrongly debited to company account by the Bank, for which no details are available
Rs. 7,40,000.

Solution 14:

M/s. New Steel Ltd.

Bank Reconciliation Statement as on 31st Dec 2017.

Particulars Amount (Rs.)


Overdraft as per Cash Book 22,45,900
Add: Interest charged by the bank 2,78,700
Add: Draft deposited in bank but not yet credited 13,50,000
Add: Wrong debit by the bank, under verification 7,40,000
Less: Cheque issued but not yet presented (6,60,000)
Less: Transport subsidy not yet recorded in the cash book (14,25,000)
Less: Bills for collection credited in the bank not yet entered in the cash book (8,36,000)
Overdraft as par bank statement 16,93,600
Illustration 15: When Nikki & Co. received a Bank Statement showing a favourable balance of
Rs.10,39,200 for the period ended on 30th June, 2017, this did not agree with the balance in the cash
book.

An examination of the cash book and bank statement disclosed the following:

1. A deposit of Rs. 3,09,200 paid on 29th June, 2017 had not been credited by the Bank until 1st July,
2017.
2. On 30th March, 2017 the company had entered into hire purchase agreement to pay by bank
order a sum of Rs. 3,00,000 on the 10th of each month, commencing from April, 2017. No entries
had been made in Cash book.
3. A customer of the firm, who received a cash discount of 4% on his account of Rs. 4,00,000 paid
the firm a cheque on 12th June. The cashier erroneously entered the gross amount in the bank
column of the Cash Book.
4. Bank charges amounting to Rs. 3,000 had not been entered in Cash Book.
5. On 28th June, a customer of the company directly deposited the amount in the bank Rs. 4,00,000
but no entry has been made in the cash book.
6. Rs. 11,200 paid into the bank had been entered twice in the Cash Book.
7. A debit of Rs.11,00,000 appeared in the Bank Statement for an unpaid cheque, which had been
returned marked ‘out of date’. The cheque had been re- dated by the customer and paid into
Bank again on 5th July, 2017.

Prepare Bank Reconciliation Statement on 30th June, 2017.

Solution 15:

Bank Reconciliation Statement on 30 June, 2017

Particulars Amount (Rs.)


Balance as per Pass Book 10,39,200
Add: Deposited with Bank but not credited 3,09,200
Add: Payment of Hire Purchase installments not entered in the Cash Book 9,00,000
(Rs. 3,00,000 X 3)
Add: Discount allowed wrongly entered in bank column 16,000
Add: Bank charges not entered in the Cash Book 3,000
Add: Deposit entered in the Cash Book twice 11,200
Add: Cheque returned ‘out of date’ entered in the Cash Book 11,00,000
Less: Direct deposit by customer not entered in the Cash Book (4,00,000)
Balance as per the Cash Book 29,78,600

Illustration 16: The bank account of Mukesh was balanced on 31st March, 2017. It showed an overdraft
of Rs. 5,000. This did not agree with the balance shown by bank statement of Mukesh. You are required
to prepare a bank reconciliation statement taking into account:

1. Cheques issued but not presented for payment till 31.3.2017 Rs. 12,00,000.
2. Cheques deposited but not collected by bank till 31.3.2017 Rs. 20,00,000.
3. Interest on term loan Rs. 10,00,000 debited by bank on 31.3.2017 but not accounted in
Mukesh’s Book.
4. Bank Charges Rs.2,500 was debited by bank during March, 2017 but accounted in the books of
Mukesh on 4.4.2017.
5. An amount of Rs.30,68,000 representing collection of Mukesh’s cheque was wrongly credited to
the account of Mukesh by the bank in their bank statement.

Solution 16:

In the Books of Mukesh

Bank Reconciliation Statement as on 31.3.2017

Particulars Amount
Overdraft as per the Cash Book 5,000
Add: Cheques deposited in bank but not collected and credited by bank till 31.3.2017 20,00,000
Add: Interest on term loan not accounted in books 10,00,000
Add: Bank charges not accounted in books 2,500
Less: Cheques issued but not presented for payment till 31.3.2017 (12,00,000)
Less: Erroneous credit by bank to Mukesh’s a/c (30,68,000)
Balance as per the bank statement (12,60,500)