Journal entries explained in a simplified way.
1. X commenced business with cash. Rs. 5000.
2. Bought goods from Keshav for cash rs. 1,000.
3. Sold furniture to Raghav on credit Rs. 5,000.
4. Sold goods for cash Rs. 800.
5. Cash purchases Rs. 600.
1.X commenced business with cash. Rs. 5000.
Account to be debited Cash A/c.(Real A/c - Debit what comes in)
Account to be credited Capital A/c(Personal A/c-Credit the giver of benefit)
Reason -
(a)Cash comes in.
(b)Proprietor is the giver of benefit, when he gives cash to that business.
2. Bought goods from Keshav for cash rs. 1,000.
Account to be debited Purchases A/c(Real A.c- Debit what comes in or Nominal A/c -
Debit losses and expenses)
Account to be credited Cash A/c (Real A/c - Credit what goes out)
Reason -
(a)Goods come in on purchase or goods purchases are expenses for the business
(b)Cash goes out by.
3. Sold furniture to Raghav on credit Rs. 5,000.
Account to be debited Raghav's A/c(Personal A/c- Debit the receiver of benefit)
Account to be credited Furniture A/c(Real A/c- Credit what goes out)
Reason -
(a).Raghav is the receiver of benefit.
(b).Furniture goes out.
4. Sold goods for cash Rs. 800.
Account to be debited Cash A/c (Real A/c - Debit what comes in)
Account to be credited Sales A/c (Real A/c - Credit what goes out or Nominal A/c - Credit
incomes and gains)
Reason -
(a).Cash comes in.
(b).Goods go out on sale or goods sold are incomes for the business
5. Cash purchases Rs. 600.
Account to be debited Purchases A/c (Real A/c - Debit what comes in or Nominal A/c -
Debit losses and expenses)
Account to be credited Cash A/c (Real A/c - Credit what goes out)
Reason -
(a).Goods come in on purchase or goods purchases are expenses for the business.
| (b).Cash goes out. |
\Let us discuss on some more journal entries in the coming post :-)
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