JOURNAL

Meaning of Journal ( Books of original Entry)

Journal is the book of original entry in which transaction are recorded in chronological order according to
the principle of double entry system from sources document.

Journal provide date wise record of all transaction with details of the account debited and credited and
their amount.

Features or characteristics of Journal

1. Book of original entry( transaction are recorded first time when they take place)

2. Primary Book ( First time recorded in journal and then transferred to ledger)

3. Daily accounting record

4. Transaction are recorded in chronological order ( date wise and sequence wise)

5. Principles of double entry system

6. It provide complete picture of one transaction in one entry.

7. Transaction are recorded from source document.

Advantages of Journal

1. Less chance of omission on any transaction(Recorded when they take place)

2. Easy to locate the transaction ( chronological order)

3. Facilitates in ledger posting

4. Carry narration (with brief explanation of transaction)

5. identity of each transaction is maintained on permanent basis.

6. journal facilitates cross checking of ledger if trial balance does not agree.

Limitations of Journal

1. Journal does not provide information of prompt basis.

2. When number of transaction are large ( Not possible to record all transaction in
journal)

3. Many transaction are repetitive in nature but recorded again in again.

4. Cash balance of business cannot be ascertain with journal.

 Format of Journal

Journal of Ram

Date Particulars LF Dr (Rs.) Cr. (Rs,)

Name of Account to be debited Dr .
Year To Name of Account to be credited
Month
& (Being --------------------------------------------)
Date
-----------------------------------------------------------------------

Steps of Journalising:

1. Analysis the business transaction ( Find out atleast two affected accounts)

2. Classified into Personal, Real and Nominal A/c.

3. Apply the rules of concern account (related accounts)

4. One account will be debited and Other will be credited.

Rules of Journalising:

Dr. Cr.

1. Personal Accounts Receiver Giver

2. Real Accounts Comes in Goes Out

3. Nominal Accounts Expenses and Losses Revenue and Income & gains
TOPIC : SIMPLE JOURNAL ENTRIES

1. STARTED BUSINESS OR COMMENCED Journal

BUSINESS Date Particulars LF Dr. Cr.
(1) Ram’s started business with cash 60,000
Cash A/c—R—Comes in –Dr.
Ram’s Capital A/c—P – Giver – Cr. 1. Cash A/c Dr 60000
To Ram’s Cap. A/c 60000
(1A) Ram’s started business with cash (Being business started
50,000 with cash)
, furniture 20000 and building 80000
1(A) Cash A/c Dr 50000
Cash A/c—R—Comes in –Dr. 50000 Furniture A/c Dr. 20000
Furniture A/c—R—Comes in –Dr. 20000 Building A/c Dr. 80000
Building A/c—R—Comes in –Dr. 80000 To Ram’s Cap. A/c 150000
Ram’s Capital A/c—P – Giver – Cr. 150000 (Being business started
with cash)

2. GOODS PURCHASED 2(A) Purchases A/c Dr. 40000

To Cash A/c 40000
(2A) Goods purchased Rs. 40000 (Being goods purchased)
Purchases A/c—N—Expenses –Dr. ----------------------------------
Cash A/c – R - Goes out – Cr.
2(B) Purchases A/c Dr. 20000
(2B) Goods purchased Rs. 20000 from Amit To Amit’s A/c 20000
Purchases A/c—N—Expenses –Dr. (Being goods purchased
Amit’s A/c – P - Giver out – Cr. form Amit)
---------------------------------
(2C) Goods purchased Rs. 10000 from 2(C) Purchases A/c Dr. 10000
Raman for cash To Cash A/c 10000
Purchases A/c—N—Expenses –Dr. (Being goods purchased
Cash A/c – R - Goes out – Cr. From Raman for cash)
--------------------------------
3. EXPENSES PAID 3(A) Rent A/c Dr. 5000
(3A) Rent paid Rs. 5000 To Cash A/c 5000
Rent A/c —N—Expenses –Dr. (Being rent paid)
Cash A/c – R - Goes out – Cr. -----------------------------------
3(B) Salary A/c Dr. 8000
(3B) Salary paid Rs. 8000 To Cash A/c 8000
Salary A/c —N—Expenses –Dr. (Being salary paid)
Cash A/c – R - Goes out – Cr. ----------------------------------
4(A) Cash A/c Dr. 2000
[Link] RECEIVED To Comm. Received A/c 2000
(4A) Commission received Rs. 2000 (Being comm.. received)
Commission Received A/c —N—Income–Cr. ---------------------------------
Cash A/c – R - Comes in – Dr. 4(B) Cash A/c Dr. 1000
To Rent Received A/c 1000
(4B) Rent Received Rs. 1000 (Being rent received)
Rent Received A/c —N—Income–Cr.
Cash A/c – R - Comes in – Dr.
5. GOODS SOLD
5(A) Goods sold Rs. 50000 5(A) Cash A/c Dr. 50000
Cash A/c—R—Comes in—Dr. To Sales A/c 50000
Sales A/c- N-Revenue –Cr. (Being goods sold)
---------------------------------------
5(B) Goods sold Rs. 40000 to Sonu 5(B) Sonu’s A/c Dr. 40000
Sonu’s A/c—P—Receiver—Dr. To Sales A/c 40000
Sales A/c- N-Revenue –Cr. (Being goods sold to Sonu)
-----------------------------------------
5(C) Goods sold Rs. 10000 to Monu 5(C) Cash A/c Dr. 50000
For cash To Sales A/c 50000
Cash A/c—R—Comes in Dr. (Being goods sold to Monu for
Sales A/c- N-Revenue –Cr. cash)
-----------------------------------------

6. ASSETS PURCHASED AND

SOLD

6(A) Machinery purchased Rs. 20000 6(A) Machinery A/c Dr. 20000
Cash A/c—R—Goes out—Cr. To Cash A/c 20000
Machinery A/c- R-Comes in –Dr. (Being machinery purchased)
---------------------------------------
6(B) Furniture purchased Rs. 18000 6(B) Furniture A/c Dr. 18000
From Best Furniture House To Best Furniture House 18000
Best Furniture House—P—Giver-Cr. (Being furniture purchased from
Furniture A/c- R-Comes in –Dr. Best Furniture House)
---------------------------------------
6(C) Computer sold Rs. 12000 6(C) Cash A/c Dr. 12000
Cash A/c—R—Comes in—Dr. To Computer A/c 12000
Computer A/c- R-Goes Out –Cr. (Being computer sold)
---------------------------------------

[Link] PAID AND RECEIVED

7(A) Rs. 6000 paid to Amit
7(A) Amit A/c Dr. 6000
Cash A/c—R—Goes out—Cr. To Cash A/c 6000
Amit’s A/c- P-Receiver –Dr. (Being amount paid to Amit)
7(B) Rs. 5000 received from Sonu ------------------------------------------
7(B) Cash A/c Dr. 5000
Cash A/c—R—comes in —Dr. To Sonu”s A/c 5000
Sonu’s A/c- P-Giver –Cr. (Being amount received )
----------------------------------------
8. RETURN

8(A) Goods return to Amit Rs. 3000

8(A) Amit A/c Dr. 3000
Purchases ReturnA/c-N-Revenue -Cr. To Purchases Return A/c 3000
Amit’s A/c- P-Receiver –Dr. (Being goods return to Amit)
---------------------------------------

8(A) Goods return by Sonu Rs. 9000

8(A) Sales Returns A/c Dr. 9000
Sales Return A/c-N-Expenses -Dr. To Sonu’s A/c 9000
Sonu’s A/c- P-Giver –Cr. (Being goods return by Sonu)
----------------------------------------
9. DRAWINGS
9(A). 5000 withdrawn for personal use
Drawings A/c- P-Receiver- Dr 9(A) Drawings A/c Dr. 5000
Cash A/c – R – goes out- Cr. To Cash A/c 5000
(Being amount withdrawn for
personal use)
9(B).Motor cycle of Rs. 20000 ------------------------------------------
purchased for personal use
Drawings A/c- P-Receiver- Dr 9(B) Drawings A/c Dr. 5000
Cash A/c – R – goes out- Cr. To Cash A/c 5000
(Being motor cycle purchased for
personal use)

TOPIC ; Journal Entries related to discount

Discount: One kind of concession or rebate given by seller to Buyer.
(1) Trade discount
Fixed percentage on list price or MRP ( maximum retail price)
To increase sales
Given on cash as well as credit transaction
Accounting treatment : No separate entry passed in the books
Directly deducted from cash memo or invoice
At the time of return, trade discount is again deducted from list price of the returned goods.

Example
[Link] sold of list price Rs. 50000 at a trade discount of 20%
50000 – 20% of 50000= 40000 Cash A/c Dr. 40000
Cash A/c—R—Comes in—Dr. To Sales A/c 40000
Sales A/c- N-Revenue –Cr. (Being goods sold at trade disocunt)
---------------------------------------
[Link] purchased Rs. 40000 from Sumit at 25% Trade discount
40000 – 25% of 40000= 30000 Purchases A/c Dr. 30000
Sumit”s A/c—P—Giver -Cr. To Sumit’s A/c 30000
Purchases A/c- N-Expenses –Dr. (Being goods purchased from
Sumit at Trade discount)
-----------------------------------------

Q. NO. 7 page No. 9.61 (D. K Goel) / 2019-20

Journal
Date Particulars LF Dr. Cr.
2017
Jan. 6 Muskan’s A/c Dr. 1,60,000
To Sales A/c 1,60,000
(Being goods sold to Muskan at 20% trade discount)
200000-20% of 2,00,000= 1,60,000
Sales Return A/c Dr 4,000
Jan . 8 To Muskan’s A/c. 4,000
(Being goods returen by Muskan)
5000- 20% of 5000= 4000

Jan. 15 Cash A/c Dr. 1,49,760

Discount Allowed A/c (4% on 1,56,000) Dr. 6,240
. To Muskan’s A/c 1,56,000
(Being amount received from Muskan after deducting 4%
Discount)
TOTAL 3,20,000 3,20,000

2. Cash Discount
Discount given to customer for quick or prompt payment of cash.
If customer makes payment with in fixed period
Recorded in books separately.
If discount allowed to customer at the time of amount received--- discount allowed – Expenses- N –Dr.
If discount received at the time of payment to suppliers- discount received – Income – N –Cr.
Examples:
[Link]. 4,800 received from Sumit in full settlement of his account of Rs. 5000
Cash A/c (4800)- R- Comes in- Dr. Cash A/c Dr. 4,800
Discount Allowed A/c (200) – N – Expenses - Dr Discount Allowed A/c Dr. 200
Sumit’s A/c(5000) – P- Giver – Cr. To Sumit’s A/c 5,000
(Being amount received from
Sumit in full settlement)
2. .Rs. 9,700 paid to Ramit in full settlement of his account of Rs. 10,000
Cash A/c (9,700)- R- Goes out- Cr. Ramit’s A/c Dr. 10,000
Discount Received A/c (300) – N – Income - Cr To Cash A/c . 9,700
Ramit’s A/c(10000) – P- Receiver– Dr. To Discount Received A/c 300
(Being amount paid to
Ramit in full settlement)

[Link]. 4,000 received from Sanjay on account of Rs. 9000

Cash A/c (4000)- R- Comes in- Dr. Cash A/c Dr. 4,000
Sanjay’s A/c(4000) – P- Giver – Cr. To Sanjay’s A/c 4,000
(Being amount received from
Sanjay)

[Link]. 39,200 received from Raman after deducting 4% discount in full settlement of his account .
Let 100 4% DISOCUNT 39,200= 96% 39,200 x 100/96=40000

Cash A/c (39,200)- R- Comes in- Dr. Cash A/c Dr. 39,200
Discount Allowed A/c (800) – N – Expenses - Dr Discount Allowed A/c Dr. 800
Raman’s A/c(40000) – P- Giver – Cr. To Raman’s A/c 40,000
(Being amount received from
Raman in full settlement)
5. .Rs. 19,000 paid to Raj after deducting 5% discount in full settlement of his account.
Let 100 5% discount 19000= 95% 19000 x 100/95= 20000

Cash A/c (19000)- R- Goes out- Cr. Raj’s A/c Dr. 20,000
Discount Received A/c (1000) – N – Income - Cr To Cash A/c . 19,000
Raj’s A/c(20000) – P- Receiver– Dr. To Discount Received A/c 1,000
(Being amount paid to
Raj in full settlement)

Trade discount and cash discount both:

First trade discount is to be de deducted from list price and then, cash discount from balance amount.
1. Goods sold of list price 50,000 at 20% trade discount and 2% cash discount.
List price 50,000
Less: trade discount
20% of 50,000 10,000
Selling price 40,000 Cash discount allowed 2% on 40,000= 800
Cash Received= 40,000-800=39200

Cash A/c (39,200)- R- Comes in- Dr. Cash A/c Dr. 39,200
Discount Allowed A/c (800) – N – Expenses - Dr Discount Allowed A/c Dr. 800
Sales A/c(40000) – N- Revenue – Cr. To Sales A/c 40,000
(Being goods sold at trade discount and cash
discount)
2. Goods purchased from Sohan of list price 80,000 at 25% trade discount and 2% cash discount.
Only 75% amount paid in cash.
List price 80,000
Less: trade discount
25% of 80,000 20,000
Purchases price 60,000 Cash Purchases 75% of 60,000= 45000
Cash discount received 2% on 45,000= 900
Cash paid= 45,000-900=44,100
Credit Purchased from Sohan 25% of 60,000=15000

Cash A/c (44,100)- R- Goes out- Cr. Purchases A/c Dr. 60000
Discount Received A/c (900) – N – Income – Cr To Cash A/c 44100
Sohan’s A/c(15000) – P – Giver- Cr. To Discount Received A/c 900
Purchases A/c(60000) – N- Expenses – Dr. To Sohan’s A/c 15000
(Being goods purchased at trade discount
and cash discount)

3.
March 10 Goods sold of list price 100,000 to Mohan at 10% trade discount and 2% cash discount if
payment is received with in 15 days. 70% amount received by cheque on March 21.

March 10
List price 100000
Less: Trade discount
10% of 100,000 10,000
Selling price 90,000 ( On march 10 its credit sales)

Mohan’s A/c (90000)- P- Receiver- Dr. Mohan’s A/c Dr. 90000

Sales A/c(90000) – N- Revenue – Cr. To Sales A/c 90,000
(Being goods sold at trade discount to Mohan)

March 21
70% Amount received by cheque with in 15 daqys so cash discount will be allowed.
70% of 90,000=63000 Mohan’s A/c-P-Giver –Cr.
2% on 63,000= 1260 Discount Allowed A/c- N- Expenses –Dr.
63000-1260= 61740 Bank A/c – P Receiver – Dr.

Bank A/c Dr. 61740

Discount Allowed A/c Dr. 1260
To Mohan’s A/c 63,000
(Being cheque received from Mohan and cash
discount allowed)
TOPIC : BANKING TRASNACTION
Bank balance increased ----Dr.
Bank balance decreased ----Cr.
1. Amount deposited into bank
Or opened a current account in bank
Bank A/c- Increased- Dr. Bank A/c Dr.
Cash A/c – R – goes out – Cr. To Cash A/c
(Being Amount deposited into bank)
2. Amount withdrawn from bank
OR Amount withdrawn from bank for office use
OR Cashed a cheque from bank
Bank A/c- Decreased- Cr. Cash A/c Dr.
Cash A/c – R – Comes in – Dr. To Bank A/c
(Being Amount withdrawn from bank)
3.. Cheque , Draft received from customer and
directly deposited in to bank.
Bank A/c- Increased- Dr. Bank A/c Dr.
Customer’s A/c – P – Giver – Cr. To Customer’s A/c
(Being cheque received from customer
and deposited into bank)

4.. Cheque , Draft received from customer but

Not deposited in to bank same day
Cheque in hand A/c- R- comes in - Dr. Cheque in hand A/c Dr.
Customer’s A/c – P – Giver – Cr. To Customer’s A/c
(Being cheque received from customer
and not deposited into bank)
5. On the date when above Cheque , Draft
deposited in to bank.
Cheque in hand A/c- R- Goes Out - Cr. Bank A/c Dr.
Bank A/c – Increased – Dr. To Cheque in hand A/c
(Being above cheque deposited into bank)
6. When a cheque previously deposited into
Bank Is dishnoured.
Bank A/c- Decreased- Cr. Customer’s A/c Dr
Customer’s A/c- become debtors again – Dr. To Bank A/c
(Being cheque dishonoured)
Note: If any discount is allowed to customer at the time
of receiving cheque and cheque become dishnoured
discount allowed account will be reversed.
7.. When a customer has directly deposited in our
bank account.
Bank A/c- Increased- Dr. Bank A/c Dr.
Customer’s A/c – P – Giver – Cr. To Customer’s A/c
(Being amount deposited by customer
into bank)
8. When payment is made to some personal by issue of cheque
Personal A/c- P- Receiver – Dr Personal A/c Dr.
Bank A/c – Decreased – Cr. To Bank A/c
(Being cheque issued )
9. When Expenses paid by issue of cheque(Rent)
Rent A/c- N- Expenses – Dr Rent A/c Dr.
Bank A/c – Decreased – Cr. To Bank A/c
(Being rent paid by cheque)
10. When assets purchased and payment is made
by issue of cheque (furniture)
Furniture A/c- R- Comes in – Dr Furniture A/c Dr.
Bank A/c – Decreased – Cr. To Bank A/c
(Being furniture purchased and cheque issued)

11. When goods purchased and payment is made by issue of cheque

Purchases A/c- N- Expenses – Dr Purchases A/c Dr.
Bank A/c – Decreased – Cr. To Bank A/c
(Being goods purchased and cheque issued)

12. When cash is withdrawn from bank for personal use

Drawings A/c- P- Receiver – Dr Drawings A/c Dr.
Bank A/c – Decreased – Cr. To Bank A/c
(Being amount withdrawn from bank for personal use)

13. When interest is charged by bank on overdraft/ Interest debited by bank

Interest A/c- N- Expenses – Dr Interest A/c Dr.
Bank A/c – Decreased – Cr. To Bank A/c
(Being interest charged by bank)
14. When services charged/ incidental charges/ bank charges charged by bank .
Bank Charges A/c- N- Expenses – Dr Bank chargest A/c Dr.
Bank A/c – Decreased – Cr. To Bank A/c
(Being services charges charged by bank)
15. When interest is allowed by bank on overdraft/ Interest credited by bank
Interest A/c- N- Income – Cr Bankt A/c Dr.
Bank A/c – Increased – Dr. To Interest Earned A/c
(Being interest allowed by bank)
Some special Entries:

Modern Approach : C L E A R

INCREASE DECREASE

1. Capital/ Liabilities/ Revenue/ Income/ Profits/ Gains Cr. Dr.

2. Expenses and losses/ Assets Dr. Cr.

1. Bad Debts

Irrecoverable amount from debtors due to insolvency of debtors. It is loss for business.

Rajesh who owed to us Rs. 50,000 is declared insolvent and only 60 paise in a rupee received from his
estate. ( 60% amount received)

Cash A/c (30000)- R- Comes in- Dr. Cash A/c Dr. 30000
Bad Debts A/c (20000) – N – Expenses - Dr Bad Debts A/c Dr. 20000
Rajesh’s A/c(50000) – P- Giver – Cr. To Rajesh’s A/c 50,000
(Being 60% amount received from
Rajesh due to insolvency)

2. Bad Debts recovered

Bad debts previously written off are subsequently received. Now. It is income.
Bad debts recovered from Rajesh Rs. 12000
Cash A/c - R- Comes in- Dr. Cash A/c Dr. 12000
Bad Debts recovered A/c – N – Income - Cr To Bad Debts Recovered A/c 12000
(Being bad debts recovered)
Note: At the time of bad debts debtors account has been already credited.

3. Outstanding Expenses(Expenses due but not yet paid at the end of accounting year)
These are expenses which should have been paid during the current year but which have not been paid.
So, these expenses are related to current year but not yet paid.
Salary outstanding at the end of the year Rs. 20,000
Salary A/c- N- Expenses –Dr. Salary A/c Dr. 20000
Outstanding Salary A/c – Liability – Cr. To Outstanding Salary A/c 20000
( Being outstanding salary recorded)
Note: Outstanding salary is a representative personal account , representing those employee to whom
salary are to be paid.

4. Prepaid Expenses(Expenses related to next year but paid in advance during current year)
These are expenses which are related to next year but paid during the current year in advance.
So, the benefit of these expenses will be received during next accounting year..
Out of the insurance premium paid Rs. 12000 related to next year.
Insurance Premium A/c- N- Expenses decrease –Cr. Prepaid Insurance A/c Dr. 12000
Prepaid Insurance A/c – Assets – Dr. To Insurance Premium A/c 12000
( Being prepaid insuranc recorded)
Note: Prepaid Insurance is a representative personal account , representing those to whom payment has
made in advance.

5. Depreciation
Decrease in value of fixed tangible assets due to wear and tear and passage of time except land.
Deprecation charged @ 10% on building of Rs. 4,00,000
Depreciation A/c=10% on 4,00,000= 40000
Depreciation A/c – N – Expenses (non-cash) – Dr. Depreciation A/c Dr. 40000
Building A/c – Assets – decrease – Cr. To Building A/c 40000
(Being depreciation charged on building)

6. Interest on Capital
Interest is allowed to proprietor for using his capital in the business.
Allowed 10% p.a. interest on capital of Rs. 8,00,000 for 9 months.
Interest on capital = 800000 x 10/100 x 9/12= 60000
Interest on capital A/c – N – Expenses – Dr. Interest on Capital A/c Dr. 60000
Capital A /c – increases – Cr. To Capital A./c 60000
(Being interest allowed on capital)

7. Interest on Drawings
Interest is Charges on proprietor drawings.
Charged 10% p.a. interest on drawings Rs. 60,000 for 6 months.
Interest on drawings = 60000 x 10/100 x 6/12= 3000
Interest on Drawings A/c – N – Income – Cr. Drawings A/c Dr. 3000
Drawings A /c – increases – Dr. To Interest of Drawings A/c 3000
(Being interest charged on drawings)

8. Accrued Income ( Income earned during the current year but not received)
These are incomes related to current year but not yet received.
Accrued interest on investment Rs. 4000
Accrued Interest A/c – Assets – Dr. Accrued Interest A/c Dr. 4000
Interest Earned A/c – N-Income – Cr. To Interest Earned A/c 4000
(Being interest earned but not received ).
.
9. Income received in advance (Unearned Income )
These are incomes not related to current year but received. in advance in current year,
Out of the commission received Rs. 3000 related to next year.
Commission Received in Advance A/c – Liab. –Cr. Commission received A/c Dr. 4000
Commission received A/c – N-Income decrease –Dr. To Commission received in advance A/c 4000
(Being commission received in advance recorded)
Note :
1. Salary paid in advance Rs. 5000 ( It is clearly given advance)
Prepaid Salary A/c – Assets – Dr. Prepaid salary A/c Dr. 5000
Cash A/c – R- Goes out – Cr. To Cash A/c 5000
(Being advance salary paid)
2. Commission received in advance Rs. 2000
Commission Received in Advance A/c – Liability – Cr. Cash A/c Dr. 2000
Cash A/c – R- Comes in – Dr. To Comm. Received in Advance A/c 2000
(Being commission received in advance)
3. Outstanding Salary of last year paid in this year Rs. 4000
Outstanding Salary A/c – Liability decrease – Cr. Outstanding Salary A/c Dr.4000
Cash A/c – R- Goes out – Cr. To Cash A/c 5000
(Being outstanding salary of last year paid)

TOPIC : SPECIAL TRANSACTION RELATED TO GOODS IN WHICH PURCHASES ACCOUNT

WILL BE CREDITED
1. As a result of transaction the amount of purchases reduced.
2. At Cost price
3. Sales account should not be credited as sales has not been made.

1. Goods withdrawn by proprietor for personal use

Drawings A/c- P – Receiver –Dr Drawings A/c Dr
Purchases A/c – Reduced- Cr.. To Purchases A/c
(Being goods withdrawn by prop. for personal use)

2. Goods given away as charity

Charity A/c- N – Expenses –Dr Charity A/c Dr
Purchases A/c – Reduced- Cr.. To Purchases A/c
(Being goods given away as charity)
3. Goods distributed as free sample
Advertisement Expenses A/c- N – Expenses –Dr Advertisement Expenses A/c Dr
Purchases A/c – Reduced- Cr.. To Purchases A/c
(Being goods distributed as free sample)

4. Goods used as business assets

Assets A/c- R – Comes in –Dr Assets A/c Dr
Purchases A/c – Reduced- Cr.. To Purchases A/c
(Being goods used as business assets)
5. Goods destroyed by fire/ theft/loss by stolen
Case 1 Not insured
Goods destroyed by fire Rs. 8000 ( Selling price Rs. 9000), not insured
Loss by Fire A/c- N – loss –Dr. Loss by Fire A/c Dr. 8000
Purchases A/c – Reduced- Cr.. To Purchases A/c 8000
(Being goods destroyed by fire)
At the end of the year, total loss will be transfer to profit and loss Account
Profit and Loss A/c Dr. 8000
To Loss by Fire A/c 8000
(Being loss transferred to profit and loss account)

Case 2 Insured and Full claim accepted by Insurance company

Goods destroyed by fire Rs. 5000 ( Selling price Rs. 8000), insured and full claim accepted
Loss by Fire A/c- N – loss –Dr. Loss by Fire A/c Dr. 5000
Purchases A/c – Reduced- Cr.. To Purchases A/c 5000
(Being goods destroyed by fire)

When claim lodged to insurance company and full claim accepted

Insurance company A/c Dr. 5000 (assets)
To Loss by Fire A/c 5000 (Transfer)
(Being claim accepted by insurance company)

When claim received from Insurance company

Bank A/c/ Cash A/c Dr. 5000
To Insurance Company A/c 5000
(Being insurance claim received)

Case 3 Insured and only part of the claim accepted by Insurance company
Goods destroyed by fire Rs. 12000 ( Selling price Rs. 16000), insured and claim accepted Rs. 8000
Loss by Fire A/c- N – loss –Dr. Loss by Fire A/c Dr. 12000
Purchases A/c – Reduced- Cr.. To Purchases A/c 12000
(Being goods destroyed by fire)

When claim lodged to insurance company and part claim accepted

Insurance company A/c Dr. 8000 (assets)
Profit and Loss A/c Dr. 4000 (loss transfer)
To Loss by Fire A/c 12000
(Being claim accepted by insurance company & remaining transfer to profit and loss account )

When claim received from Insurance company

Bank A/c/ Cash A/c Dr. 8000
To Insurance Company A/c 8000
(Being insurance claim received)
TOPIC ; EXPENSES ON ASSETS PURCHASED AND GOODS PURCHASED
1. Expenditure on Assets
(1) Will not be separately shown, added in cost of assets.
(2) Machinery purchases ( carriage, freight, installation charges, erection charges, transit
expenses. loading and unloading charges) --- Capital expenditure
(3) Construction charges on building ( material purchased, wages paid , timer wood, sand, cement)
----- Capital expenditure
(4) Repair charges, renewal charges, improvement charges, addition made on recently purchased
assets ( either new or old)- Capital Expenditure
(5) Repairs charges on already appearing assets in books are debited to repairs account.
(6) Goods purchased and any expenses incurred ( carriage, freight, transit expenses. loading and
unloading charges will be recorded separately)

1. Machinery purchased Rs. 80,000, carriage paid 3000 and installation charges Rs, 4000.
Machinery A/c( 87000)- R – Comes in- Dr Machinery A/c Dr. 87000
Cash A/c( 87000)- R – Goes Out- Cr To Cash A/c . 87000
(Being machinery purchased and carriage and
Installation charges paid)
2. Bricks for 3,00,000, cement for 1,00,000 iron for 80,000 and wages to worker paid Rs, 60000 for
construction of building and all payment made by cheque.
Building A/c( 540000)- R – Comes in- Dr Building A/c Dr. 540000
Bank A/c(540000)- Decrease- Cr To Bank A/c . 540000
(Being expenses on construction of building)
3. Purchased an old car of Rs. 60,000,& repairs charges Rs, 4000.
Motor car A/c( 64000)- R – Comes in- Dr Motor Car A/c Dr. 64000
Cash A/c( 64000)- R – Goes Out- Cr To Cash A/c . 64000
(Being motor car purchased and repairs
charges paid)
4. Repair charges of Rs. 2000 paid on already existing machinery,
Repairs A/c- N – Expenses- Dr Repairs A/c Dr. 2000
Cash A/c- R – Goes Out- Cr To Cash A/c . 2000
(Being repair charges paid on machinery)

5. Goods Purchased form Namit Rs. 50,000,& carriage paid Rs, 4000.
Purchases A/c( 50000)- N – Expenses- Dr Purchases A/c Dr. 50000
Namit’s A/c( 50000)- P – Givert- Cr Carriage A/c Dr. 4000
Carriage A/c (4000)- N – Expenses – Dr. To Namit’s A/c 50000
Cash A/c(4000) – R- Goes out – Cr To Cash A/c 4000
(Being goods purchased from Namit and
Carriage paid in cash)
TOPIC ; Compound Entry

When two or more transaction related to one particular account take place on the same date, instead of
passing separate entry for all such transaction, only one entry is passed is known as compound entry.

Jan 18 Salary paid Rs. 12,000 , Rent paid 18,000 and electricity bill paid Rs. 4000.

Salary A/c Dr. 12000

Rent A/c Dr. 18000

Electricity Expenses A/c Dr. 4000

To Cash A/c 34000

(Being Expenses paid)

Q.1 Pass Journal entries in the books of Amit cloths.

2020
July (1) Started business with cash 1,00,000
(2) Goods Purchased 40,000
(3) Goods Purchased from Mohan 30,000
(4) Goods return to Mohan 2000
(4) Rent paid 10,000
(5) Received commission 12,000
(6) Furniture purchased from Best Furniture House 14,000
(7) Withdrew for personal use 10,000
(8) Amount paid to Mohan 13,000
(9) Goods Sold to Ramit for cash 9000
(10) Goods sold to Mahesh 25000
(11) Goods return by Mahesh 4000
(11) Received from Mahesh 7000
(12) Amount deposited in bank 12,000
(13) Computer purchased for personal use 18,000