Sunday 1 April 2012

Examples of Journal entries in a simplified way - 3


16,Charged Manohar Rs. 50 commission for service rendered to him

Account to be debited            Manohar's A/c.(Personal A/c - Debit the receiver of benefit)
Account to be credited           Commission A/c(Nominal A/c-Credit Incomes and gains)

Reason - 
(a)Manohar is the receiver of benefit, i.e., service.
(b)Commission earned is an income.

17,Charlie agreed to pay interest of Rs.100 on the amount advanced to him

Account to be debited            Charlies Loan A/c.(Personal A/c - Debit the receiver of benefit)
Account to be credited           Interest on Loan A/c(Nominal A/c-Credit Incomes and gains)

Reason - 
(a)Charlie is the receiver of benefit, i.e., the period of credit.
(b)Interest on loan advanced is an income.

18. Received loan from Shankar Rs.1000.

Account to be debited            Cash A/c.(Real A/c - Debit what comes in)
Account to be credited           Shankar's Loan A/c(Personal A/c-Credit the giver of benefit)

Reason - 
(a)Cash comes in.
(b)Shankar is the giver of benefit i.e., loan.

19.Office furniture stolen Rs.50.

Account to be debited            Loss by theft A/c.(Nominal A/c - Debit losses and expenses)
Account to be credited           Furniture  A/c(Real A/c-Credit what goes out)

Reason - 
(a)Furniture stolen is a loss
(b)When furniture is stolen, furniture goes out.

20.Paid Income tax Rs.500

Account to be debited            Drawings A/c*.(Personal A/c - Debit the receiver of benefit)
Account to be credited           Cash A/c(Real A/c-Credit what goes out)

Reason - 
(a)When income-tax, i.e., the personal expense of the owner, is paid by the business, the owner is the receiver of benefit.
(b)Cash goes out.

***Income tax paid should be taken as the personal expense of the owner, i.e., as drawings.



21.Paid Life Insurance Premium Rs. 300

Account to be debited            Drawings A/c*.(Personal A/c - Debit the receiver of benefit)
Account to be credited           Cash A/c(Real A/c-Credit what goes out)

Reason - 
(a)When life insurance premium i.e., the personal expense of the owner, is paid by the business, the owner is the receiver of benefit. 
(b)Cash goes out.


***Life insurance pais should be taken as the personal expense of the owner, i.e., as drawings.


22.Allowed discount to Karunakar Rs. 20

Account to be debited            Discount Allowed A/c (Nominal A/c - Debit losses and expenses)
Account to be credited           Karunakar's A/c(Personal A/c-Credit the giver of benefit)

Reason - 
(a)Discount allowed is an expense.
(b)Discount is allowed to Karunakar for his prompt payment. So, Karunakar is the giver of benefit.


23. Discount Received from Gangadhar Rs.10.

Account to be debited            Gangadhar A/c (Personal A/c - Debit the receiver of benefit)
Account to be credited           Discount Received A/c(Nominal A/c-Credit Incomes and gains)

Reason - 
(a)Discount is given by Gangadhar for prompt payment made to him. So Gangadhar is the receiver of benefit.
(b)Discount received is an income.

24.Bank charges Rs. 30



Account to be debited            Bank charges A/c (Nominal A/c - Debit expenses and losses)
Account to be credited           Bank A/c(Personal A/c-Credit the giver of benefit)

Reason - 
(a)Bank charges are an expense.
(b)Bank charges are charged by the bank for the service rendered to the business. So, Bank is the giver of benefit i.e., banking service.

25.Railways freight paid on machinery purchased Rs. 100


Account to be debited           Machinery A/c*** (Real A/c - Debit what comes in)
Account to be credited          Cash A/c(Real A/c-Credit what goes out)

Reason - 
(a)Machinery comes in
(b)Cash goes out.

***Railway freight paid on machinery purchases should be tr eated as a part of cost of machinery purchased.


26.Till takings for the month Rs.1000


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-incomes and gains)
Reason - 
(a)Cash comes in.
(b)Goods go out on sale or goods sold are income for the business.




1 comment:

Contra entry example

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