Chapter -3: Recording of Transactions-I

Questions for Practice

Short Answers

1. States the three fundamental steps in the accounting process.

Ans) The three fundamental steps in the accounting process are:
1. Identify the transaction from source documents, like purchase orders, loan agreements, invoices, etc.
2. Record the transaction as a journal entry.
3. Post the entry in the individual accounts in ledgers.
2. Why is the evidence provided by source documents important to accounting?
Ans) The evidence provided by the source document is important in the following manners:
1. It provides evidence that a transaction has actually occurred.
2. It provides important and relevant information about date, amount, parties involved and other details of a particular transaction.
3. It acts as a proof in the court of law.
4. It helps in verifying transactions during the auditing process.
3. Should a transaction be first recorded in a journal or ledger? Why?
Ans) A transaction will be first recorded in a journal. The word journal has been derived from the French word "Jour" Jour means day. So, journal means daily.
Transactions are recorded daily in journal and hence it has named so. As soon as a transaction takes place its debit and credit aspects are analyzed and first of all
recorded chronologically (in the order of their occurrence) in journal with its short description. Thus we see that the most important function of journal is to show the
relationship between the two accounts connected with a transaction. This facilitates writing of ledger. Since transactions are first of all recorded in journal, so it is
called book of original entry or prime entry or primary entry or preliminary entry, or first entry.
4. Are debits or credits listed first in journal entries? Are debits or credits indented?
Ans) As per the rule of double entry system, there are two columns of Amount in the journal format namely Debit Amount and Credit Amount. The way of
recording in a journal is quite different from normal recording. Journal entry is recorded in journal format in which the Debit Amount column is listed before the
Credit Amount column.
Credits are indented. Indentation is leaving a space before writing any word. Journal entry has its own jargon. While journalising, in the Particulars column of
journal format, debited account is written first and credited account is in the next line leaving some space, which is indentation.

5. Why are some accounting systems called double accounting systems?

Ans) Some accounting system records two effects of an accounting entry. The two effects of an accounting entry are known as Debit (Dr) and Credit (Cr). Debit is
the portion of transaction that accounts for the increase in assets and expenses, and the decrease in liabilities, equity and income. Credit is the portion of
transaction that accounts for the increase in income, liabilities and equity, and the decrease in assets and expenses. The classification of debit and credit effects is
structured in such a way that for each debit there is a corresponding credit and vice versa. Hence, every transaction will have 'dual' effects (i.e. debit effects and
credit effects). Thus, these accounting systems are known as double accounting systems.
6. Give a specimen of an account.
Dr.
Date
2006
April
30

Sam A/C
Particulars

J.F.

To Sales

Amount

6,000

Cr.
Date

Particulars

2006
April
30

By balance c/d

J.F.

Amount

6,000

7. Why are the rules of debit and credit same for both liability and capital?
Ans) Every business acquires funds from internal as well as from external sources. According to the business entity concept, the amount borrowed from the
external sources together with the internal sources like, capital invested by the proprietor, is termed as liability to the business. Business entity concept treats
business and business owner separately. Capital of the owner is treated as liability to the business because the business has to repay the amount of capital to the
owner, in case of closure of the business. As liability incurred is credited, in the same way, fresh capital introduced and net profit increases the owners capital, and
so, capital is credited. On the other hand, if liability is paid, it reduces liability, and so, it is debited. Similarly, drawings from capital and net loss reduce the capital,
and so, capital is debited. Thus the rules of debit and credit are same for both liability and capital.
8. What is the purpose of posting J.F numbers that are entered in the journal at the time entries are posted to the accounts.
Ans) J.F refers to journal folio number. Folio, as in its literal meanings also, means a sequence of number of words for the purposes of dividing a book into
meaningful parts or just for reference.
The purpose of journals folio number is used to mention the reference or address of ledger in which the journal entry has been posted, thus giving an easy
access and also easily understanding whether all the entries has been posted in the relevant accounts or not. If a particular journal entry does not have a crossreference to the concerned ledger then it might mean that it has not been posted yet to the ledgers.
9. What entry (debit or credit) would you make to: (a) increase revenue (b) decrease in expense, (c) record drawings (d) record the fresh
capital introduced by the owner.
Ans) (a) Credit.

(b)Credit.

(c)Debit.

(d)Credit.

10. If a transaction has the effect of decreasing an asset, is the decrease recorded as a debit or as a credit? If the transaction has the effect
of decreasing a liability, is the decrease recorded as a debit or as a credit?
Ans. If a transaction has the effect of decreasing an asset, the decrease is recorded as a credit. If a transaction has the effect of
decreasing a liability, the decrease is recorded as a debit.

Long Answers
1. Describe the events recorded in accounting systems and the importance of source documents in those systems?
Ans)The events recorded in accounting systems have to be economic events. It means that events should be expressed into financial terms by using monetary
unit .Any event that cannot be expressed in monetary units, it is not considered for recording in accounting books. Further such economic events must be
supported by source document.
Source document is an accounting terms to describe the original records that contain the details that substantiate the financial transactions that are entered into
the internal accounting system of a business. Typical source documents include sales invoices, cash receipts, cash register slip, credit notes and deposit slip.
Source documents provide the documentary evidence of a business deal or accounting event and are a critical part of an audit trail that establishes the authenticity
and tracking history of an accounting system's financial records.
So, source documents then are the essential inputs that provide the details required by internal accounting systems. They also assist in the internal control of the
resources of the business. Source documents ensure that there is documentary evidence to support the purchase or sale of items of value and the receipt and
payment of money. Source documents provide the evidence or proof that a transaction has actually occurred which makes it difficult for people to misappropriate
or steal cash or other resource items from the business. These source documents are also required by both company and tax auditors.
2. Describe how debits and credits are used to analyse transactions.
Ans) Business activity is all about transactions. A transaction is any event that has a financial impact on the business and can be measured
Transactions provide objective information about the financial impact on a company. Every transaction has two sides:
1. Debit
2. Credit
Following are rules of debit and credit use to analyse transactions :
All accounts are divided into five categories for the purposes of recording the transactions: (a) Asset (b) Liability (c) Capital (d) Expenses/Losses, and (e)
Revenues/Gains.
Two fundamental rules are followed to analyse the changes in these accounts:
(1) For recording changes in Assets/Expenses (Losses):

(i) Increase in asset is debited, and decrease in asset is credited.

(ii) Increase in expenses/losses is debited, and decrease in expenses/ losses is credited.
(2) For recording changes in Liabilities and Capital/Revenues (Gains):
(i) Increase in liabilities is credited and decrease in liabilities is debited.
(ii) Increase in capital is credited and decrease in capital is debited.
(iii) Increase in revenue/gain is credited and decrease in revenue/gain is debited.
3.Describe how accounts are used to record information about the effects of transactions?
Ans)Every transaction is recorded in the original book of entry (journal) in order of their occurrence; however, if we want to know that how
much we receive from our debtors or how much to pay to the creditors, it is not possible to determine at a single movement. Hence,
we prepare accounts to know the position of business activities in the meantime.
Dr.
Date
2006
April
30

Sam A/C
Particulars

J.F.

Amount

To Sales

6,000

Total

6,000

Cr.
Date

Particulars

J.F.

Amount

2006
April
30

By balance c/d

6,000

Total

6,000

Step 1 Locate the account in ledger, i.e., Sams Account.

Step 2 Enter the date of transaction in the date column of the debit side of Sams Account.
Step 3 In the Particulars column of the debit side of Sams Account, the name of corresponding account is to be written, i.e., Sales.
Step 4 Enter the page number of the ledger in the Journal Folio (J.F.) column of Sams Account.
Step 5 Enter the amount in the Amount column.
Step 6 Same steps are to be followed to post entries in the credit side of Sams Account.
Step 7 After entering all the transactions for a particular period, balance the account by totalling both sides and write the difference in shorter side, as
Balance c/d.
Step 8 Total of account is to be written on either sides.

4. What is a journal? Give a specimen of journal showing at least five entries.

Ans) The word journal has been derived from the French word "Jour" Jour means day. So, journal means daily. Transactions are recorded daily in journal and
hence it has named so. As soon as a transaction takes place its debit and credit aspects are analyzed and first of all recorded chronologically (in the order of their
occurrence) in journal with its short description.
The first column in a journal is Date on which the transaction took place. In the Particulars column, the account title to be debited is written on the first line
beginning from the left hand corner and the word Dr. is written at the end of the column. The account title to be credited is written on the second line leaving
sufficient margin on the left side with a prefix To. Below the account titles, a brief description of the transaction is given which is called Narration. Having written
the Narration a line is drawn in the Particulars column, which indicates the end of recording the specific journal entry. The column relating to Ledger Folio records
the page number of the ledger book on which relevant account is appears. This column is filled up at the time of posting and not at the time of making journal
entry. The Debit amount column records the amount against the account to be debited and similarly the Credit Amount column records the amount against the
account to be credited.
Specimen of journal entries:
Transactions during April 2006 were:
01 Goods sold to Manish
02 Purchased goods from Ramesh
03 Received cash from Rahul in full settlement
05 Cash received from Himanshu on account
06 paid to Ramesh by cheque

Rs.
3,000
8,000
9,200
4,000
6,000.

Journal
Date

Particulars

L.F

Amount
Debit

Credit

April
2006
01

02

03

05

06

Manish
To Sales A/C
( Being goods sold to Manish)

Dr.

Purchase A/C
To Ramesh
(Being goods purchased from Ramesh)

Dr.

Cash A/C
Discount allowed A/C
To Rahul
(Being cash received from Rahul in full settlement)

Dr.
Dr.

Cash A/C
To Himanshu
(Being cash received from Himanshu on account)

Dr.

Ramesh
To Bank A/C
(Being amount paid to Ramesh by cheque)

Dr.

3,000
3,000

8,000
8,000

9,200
500
9,700

4,000
4,000

6,000
6,000

TOTAL

30,700

30,700

5. Differentiate between source documents and vouchers.

Basis of
Difference

Source Documents

Vouchers

Meaning

It refers to the documents in writing, containing the details of

events or transactions.

When source document is considered as evidence of an event or

transaction, then it is called voucher.

Purpose

It is used for preparing accounting vouchers.

It is used for analysing the transactions.

Recording

It acts as a basis for preparing accounting voucher that helps in

recording.

It acts as a basis for recording transactions.

Preparation

It is prepared at the time when an event or a transaction occurs.

It can be prepared either when an event or a transaction occurs,

or later on.

Legality/Validity

It can be used as evidence in the court of law.

It can be used for assessing the authentication of transactions.

Prepared By

It is prepared by the persons who are directly involved in the

transactions, or who are authorised to prepare or approve these
documents.

It is prepared by the authorised persons or by the accountants.

Examples

Cash memo, invoice, and pay-in-slip, etc.

Cash memo, invoice, pay-in-slip (if used as evidence), debit note,

credit note, cash vouchers, transfer vouchers, etc.

6. Accounting equation remains intact under all circumstances. Justify the statement with the help of an example.
Ans) Accounting equation signifies that the assets of a business are always equal to the total of its liabilities and capital (owners equity). The equations is as
follows:
A=L+C
Where,
A = Assets
L = Liabilities
C = Capital
The above equation can also be presented in the following forms as its derivatives to enable the determination of missing figures of Capital(C) or Liabilities(L).
(i) A L = C
(ii) A C = L
Since, the accounting equation depicts the fundamental relationship among the components of the balance sheet, it is also called the Balance Sheet Equation.
As the name suggests, the balance sheet is a statement of assets, liabilities and capital.
At any point of time resources of the business entity must be equal to the claims of those who have financed these resources. The proprietors and outsiders
provide the resources of the business.
For example,
Example 1.
1.Rohit started business with a capital of Rs. 5,00,000.
Analysis of transaction: From the accounting point of view, the resources of this business entity is in the form of cash, i.e., Rs. 5,00,000. Sources of this business
entity is the contribution by Rohit (Proprietor) Rs. 5,00,000 as Capital.
2. Opened a bank account in State Bank of India with an amount of Rs. 4,80,000.
Analysis of transaction: This transaction increases the cash in hand (assets) and decreases cash (asset) by Rs. 4,80,000.

3. Bought furniture for Rs. 60,000 and cheque was issued on the same day.
Analysis of transaction: This transaction increases furniture (assets) and decreases bank (assets) by Rs. 60,000.
4. Bought plant and machinery for the business for Rs. 1,25,000 and an advance of Rs. 10,000 in cash is paid to M/s Ramjee Lal.
Analysis of transaction: This transaction increases plant and machinery
(assets) by Rs. 1,25,000, decreases cash by Rs. 10,000 and increases liabilities (M/s Ramjee lal as creditor)by Rs. 1,15,000.
Thus the following is the accounting equation table which shows how that it remains intact under all circumstances:
Assets(Rs.)
Cash
Transaction 1:
Rohit started business with a capital
Rs. 5,00,000
Transaction 2:
Opened a bank account
Rs. 4,80,000
New equation

+5,00,000 +

Bank

= Liabilities(Rs.)
+

Furniture

Plant &
Machinery

Capital (Rs.)

= Creditors

Capital

5,00,000

(- 4,80,000) + 4,80,000

20,000

+ 4,80,000

+ (- 60,000 )

60,000

20,000

+ 4,20,000

60,000

1,25,000

= 1,24,000

60,000

1,25,000

= 1,15,000

5,00,000

Transaction 3:
Bought furniture
Rs. 60,000
New equation

Transaction 4:
Bought plant and machinery for Rs.
1,25,000 and an advance of Rs. 10,000 (-10,000) +
in cash is paid
New equation

Total

10,000

6,15,000

4,20,000

6,15,000

0
5,00,000

5,00,000

Numerical Questions
Analysis of Transactions
1. Prepare accounting equation on the basis of the following :
(a) Harsha started business with cash Rs.2,00,000
(b) Purchased goods from Naman for cash Rs. 40,000
(c) Sold goods to Bhanu costing Rs.10,000 for Rs. 12,000
(d) Bought furniture on credit Rs. 7,000
(Ans: Asset = cash Rs. 1,60,000 + Goods Rs. 30,000 + Debtors Rs. 12,000
+ Furniture Rs. 7,000 = Rs. 2,09,000; Liabilities = Creditors Rs. 7,000 +
Capital Rs. 2,02,000 = Rs. 2,09,000)
Solution:
Accounting Equation

Cash

Assets (Rs.)
Stock
+ of Goods
+

Transaction 1:
Harsha started business with cash
Rs.2,00,000 +2,00,000 +
0
Transaction 2:
Purchased goods from Naman for cash
Rs. 40,000 (-40,000) + 40,000

New equation
Total

+ Furniture

= Creditors

Capital(Rs.)

Capital

2,00,000

12,000

1,60,000 + 30,000

+ 12,000

2,02,000

7,000

7,000

+ 12,000

7,000

7,000

1,60,000 + 40,000
Transaction 3:
Sold goods to Bhanu costing Rs.10,000
for Rs. 12,000
0
+ (- 10,000 )
Transaction 4:
Bought furniture on credit Rs. 7,000

Debtors

New equation

New equation

= Liabilities (Rs.)

1,60,000 + 30,000
2,09,000

2,09,000

2,00,000

2,000

2,02,000

2. Prepare accounting equation from the following:

(a) Kunal started business with cash Rs.2,50000
(b) He purchased furniture for cash Rs. 35,000
(c) He paid commission Rs. 2,000
(d) He purchases goods on credit Rs. 40,000
(e) He sold goods (Costing Rs.20,000) for cash Rs. 26,000
(Ans: Asset = Cash Rs. 2,39,000 + Furniture Rs. 35,000 + Goods Rs. 20,000 = Rs. 2,94,000; Liabilities = Creditors Rs. 40,000 + Capital Rs. 2,54,000=
Rs. 2,94,000)
Solution:
Accounting Equation
Assets Rs)
= Liabilities (Rs.) +
Capital( Rs.)
Stock
Transaction 1:
Cash
+ of Goods
+ Furniture
= Creditors
+
Capital
Kunal started business with cash
Rs.2,50,000
+2,50,000 +
0
+
0
= 0
+
2,50,000
Transaction 2:
purchased furniture for cash Rs. 35,000
(-35,000) +
0
+
35,000
= 0
+
0
New equation 2,15,000

(-2,000)

New equation 2,13,000

40,000

2,13,000

+ 40,000

26,000

+ (-20,000)

2,39,000

+ 20,000

Transaction 3:
He paid commission Rs. 2,000

Transaction 4:
He purchases goods on credit Rs. 40,000
New equation
Transaction 5:
He sold goods (Costing Rs.20,000) for
cash Rs. 26,000
New equation

Total

2,94,000

3. Mohit has the following transactions, prepare accounting equation:

(a) Business started with cash Rs. 1,75,000
(b) Purchased goods from Rohit Rs. 50,000
(c) Sales goods on credit to Manish (Costing Rs. 17,500) Rs. 20,000

35,000
0
35,000
0
35,000
0
35,000

2,50,000

(- 2,000)

40,000

40,000

2,48,000

6,000

2,54,000

40,000

2,48,000
0

2,94,000

(d) Purchased furniture for office use Rs. 10,000

(e) Cash paid to Rohit in full settlement Rs. 48,500
(f) Cash received from Manish Rs. 20,000
(g) Rent paid Rs. 1,000
(h) Cash withdrew for personal use Rs. 3,000
(Ans: Cash Rs. 1,32,500 + Goods Rs. 32,500 + Furniture Rs. 10,000 = Rs. 1,75,000; Liabilities = Capital Rs. 1,75,000)
Solution:
Accounting Equation
Assets (Rs.)
Stock
+ of Goods
+

Cash
Transaction 1:
Mohit started business with cash
Rs. 1,75,000
Transaction 2:
Purchased goods from Rohit Rs. 50,000
New equation
Transaction 3:
Sales goods on credit to Manish
(Costing Rs. 17,500) Rs. 20,000

+1,75,000 +
0

New equation
Transaction 7:
Rent paid

Rs. 1,000

= Creditors

Capital

1,75,000

50,000

1,75,000 + 50,000

= 50,000

1,75,000

+ 20,000

2,500

+ 20,000

50,000

1,77,500

10,000

+ (- 17,500 )

1,65,000 + 32,500

+ 20,000

10,000

(-48,500 ) +

New equation 1,16,500 + 32,500

Transaction 6:
Cash received from Manish Rs. 20,000

+ Furniture

Capital(Rs.)

1,75,000 + 32,500
Transaction 4:
Purchased furniture for office use Rs. 10,000 (-10,000) +
0
Transaction 5:
Cash paid to Rohit in full settlement
Rs. 48,500

Debtors

+ 50,000

New equation

New equation

= Liabilities (Rs.)

+20,000 +

1,36,500 + 32,500
(-1000 ) +

New equation 1,35,500 + 32,500

+ 20,000

+ (-20,000)

10,000

50,000

1,77,500

=(-50,000)

1,500
1,79,000

10,000

1,79,000

(-1000)

10,000

1,78,000

Transaction 8:
Cash withdrew for personal use Rs. 3,000

(-3,000) +

New equation 1,32,500 + 32,500

Total

10,000

1,75,000

0
0

(-3000)

1,75,000

1,75,000

4. Rohit has the following transactions :

(a) Commenced business with cash Rs.1,50,000
(b) Purchased machinery on credit Rs. 40,000
(c) Purchased goods for cash Rs. 20,000
(d) Purchased car for personal use Rs. 80,000
(e) Paid to creditors in full settlement Rs. 38,000
(f) Sold goods for cash costing Rs. 5,000 Rs. 4,500
(g) Paid rent Rs. 1,000
(h) Commission received in advance Rs. 2,000
Prepare the Accounting Equation to show the effect of the above transactions on the assets, liabilities and capital.
(Ans: Assets = Cash Rs. 17,500 + Machine Rs. 40,000 + Goods Rs. 15,000 = Rs. 72,500; Liabilities = Commission Rs. 2,000 + Capital Rs. 70,500
= Rs. 72,500)
Solution:
Accounting Equation
Assets (Rs.)
Stock
+ of Goods
+

Cash
Transaction 1:
Rohit started business with cash
Rs. 1,50,000
+1,50,000 +
Transaction 2:
Purchased machinery on credit Rs. 40,000
0
+
New equation 1,50,000 +
Transaction 3:
Purchased goods for cash

Rs. 20,000 (-20,000)+

Machinery

= Liabilities (Rs.)
+
Advance
=
Creditors + Commission

Capital(Rs.)
+

Capital

1,50,000

40,000

40,000

40,000

40,000

1,50,000

1,50,000

20,000

New equation 1,30,000 + 20,000

Transaction 4:
Purchased car for personal use Rs. 80,000 (-80,000) +
0

+
+

0
40,000
0

=
=

40,000
0

(- 80,000)

New equation

50,000

+ 20,000

Transaction 5:
Paid to creditors in full settlement Rs. 38,000 (-38,000 ) +
New equation 12,000
Transaction 6:
Sold goods for cash costing
Rs. 5,000 Rs. 4,500

+ 20,000

+4,500 + (-5,000)

New equation 16,500 + 15,000

Transaction 7:
Paid rent Rs.

1,000

(-1000 ) +

New equation 15,500

Transaction 8:
Commission received in advance Rs. 2,000

2,000

72,500

40,000

70,000

(-40,000)

2,000

+ 40,000

72,000

+ 40,000

71,500

(-1000)

(- 500)

+ 15,000

+ 40,000

2,000

2,000

70,500

New equation 17,500 + 15,000

Total

+ 40,000

0
40,000

70,500

72,500

5. Use accounting equation to show the effect of the following transactions of M/s Royal Traders:
(a) Started business with cash Rs.1,20,000
(b) Purchased goods for cash Rs. 10,000
(c) Rent received Rs. 5,000
(d) Salary outstanding Rs. 2,000
(e) Prepaid Insurance Rs. 1,000
(f) Received interest Rs. 700
(g) Sold goods for cash (Costing Rs. 5,000) Rs. 7,000
(h) Goods destroyed by fire Rs. 500
(Ans: Assets = Cash Rs. 1,21,700 + Goods Rs. 4,500 + Prepaid insurance Rs. 1,000; Liabilities = Outstanding salary Rs. 2,000 + Capital Rs. 1,25,200)

Solution:

Accounting Equation
Assets (Rs.)
Stock
+ of Goods
+

Cash
Transaction 1:
M/s Royal Traders started business with
cash
Rs. 1,20,000 +1,20,000 +
Transaction 2:
Purchased goods for cash
Rs. 10,000 (-10,000) +
Transaction 3:
Rent received

10,000

10,000

1,20,000

5,000

+ 10,000

1,25,000

2,000

(-2,000)

+ 10,000

2,000

1,23,000

1,000

+ 10,000

1,000

2,000

1,23,000

700

1,000

2,000

1,23,700

2,000

+ 1,000

2,000

1,25,700

+ (-500)

(-500)

New equation 1,21,700 + 4,500

1,000

2,000

1, 25,200

Rs. 5,000 5,000

Rs. 2,000

New equation 1,15,000

Transaction 5:
Prepaid Insurance

Rs. 1,000

Rs. 700

+
+

(-1000) +

New equation 1,14,000

Transaction 6:
Received interest

700

New equation 1,14,700 + 10,000

Transaction 7:
Sold goods for cash (Costing Rs. 5,000)
Rs. 7,000
7000
+ (-5,000)
New equation 1,21,700 +
Transaction 8:
Goods destroyed by fire

Capital

New equation 1,15,000

Transaction 4:
Salary outstanding

Capital(Rs.)

New equation 1,10,000

Prepaid
Insurance

= Liabilities (Rs.)
+
Outstanding
Creditors + Salary
+

Rs. 500

Total

1,27,200

5,000

1,20,000

1,27,200

6. Show the accounting Equation on the basis of the following transaction:

(a) Udit started business with:
(i) Cash Rs. 5,00,000
(ii) Goods Rs. 1,00,000
(b) Purchased building for cash Rs. 2, 00,000
(c) Purchased goods from Himani Rs. 50,000
(d) Sold goods to Ashu (Cost Rs. 25,000) Rs. 36, 000
(e) Paid insurance premium Rs. 3,000
(f) Rent outstanding Rs. 5,000
(g) Depreciation on building Rs. 8,000
(h) Cash withdrawn for personal use Rs. 20,000
(i) Rent received in advance Rs. 5,000
(j) Cash paid to himani on account Rs. 20,000 (k) Cash received from Ashu Rs. 30,000
(Ans : Assets = Cash Rs. 2,92,000 + Goods Rs. 1,25,000 + Building Rs. 1,92,000 + Debitors Rs. 6,000 = 6,15,000: Laibilities = Creditors Rs. 30,000 + Outstanding
Rent Rs. 5,000 + Rent Rs. 5,000 + Capital Rs. 5,75,000 = Rs. 6,15,000)
Solution:

Transaction 1:
Udit started business with:
(i) Cash
(ii) Goods
Transaction 2:
Purchased building for cash

Cash

Accounting Equation
Assets (Rs.)
= Liabilities (Rs.) +
Capital(Rs.)
Stock
Outstanding
Advance
+ of Goods + Debtors + Building = Creditors +
Rent
+ Rent Received + Capital

Rs. 5,00,000
Rs. 1,00,000 +5,00,000 + 1,00,000

Rs. 2,00,000 (-2,00,000) +

+ 2,00,000 =

3,00,000 + 1,00,000

+ 2,00,000 =

50,000

New equation 3,00,000 + 1,50,000

New equation
Transaction 3:
Purchased goods from Himani

Rs. 50,000

Transaction 4:
Sold goods to Ashu (Cost Rs. 25,000)
Rs. 36, 000
New equation
Transaction 5:
Paid insurance premium Rs. 3,000
New equation

+ (-25,000)

3,00,000 + 1,25,000
(-3,000 ) +
2,97,000 +

+ 6,00,000

= 50,000

+ 2,00,000 = 50,000

+ 6,00,000

+ 6,11,000

+ 6,08,000

36,000 +

1,25,000 +

+ 36,000 +2,00,000 = 50,000

+

+ 6,00,000

36,000 +2,00,000 = 50,000

11,000

(-3,000)

Transaction 6:
Rent outstanding

Rs. 5,000
New equation

Transaction 7:
Depreciation on building

Rs. 8,000

2,97,000 +
0

(-20,000 ) +

New equation 2,77,000 +

Transaction 9:
Rent received in advance Rs. 5,000

(-20,000 ) +

New equation 2,62,000 +

Transaction 11:
Cash received from Ashu Rs. 30,000

30,000

New equation 2,92,000 +

Total

6,15,000

5000

+ (-5,000)

5000

+ 6,03,000

+ (-8000)

5000

+ 5,95,000

+ (-20,000)

+1,92,000 = 50,000

5000

+ 5,75,000

5,000

+(-8,000)

1,25,000 + 36,000 +1,92,000 = 50,000

1,25,000 + 36,000

5,000 +

New equation 2,82,000 +

Transaction 10:
Cash paid to Himani on account Rs. 20,000

1,25,000 + 36,000 +2,00,000 = 50,000

New equation 2,97,000 +

Transaction 8:
Cash withdrew for personal use Rs. 20,000

1,25,000 + 36,000
0

1,25,000 + 36,000
0

6,000

+1,92,000 = 50,000

5000

5,000

+ 5,75,000

5000

5,000

+ 5,75,000

5000

5,000

+ 5,75,000

= (-20,000)

+1,92,000 = 30,000

+ (-30,000) + 0

1,25,000 +

+1,92,000 = 30,000

6,15,000

7. Show the effect of the following transactions on Assets, Liabilities and Capital through accounting equation:
(a) Started business with cash Rs. 1,20,000
(b) Rent received Rs. 10,000
(c) Invested in shares Rs. 50,000
(d) Received dividend Rs. 5,000
(e) Purchase goods on credit from Ragani Rs. 35,000
(f) Paid cash for house hold Expenses Rs. 7,000
(g) Sold goods for cash (costing Rs.10,000) Rs. 14,000
(h) Cash paid to Ragani Rs. 35,000

(i) Deposited into bank Rs. 20,000

(Ans: Assets = Cash Rs. 37,000 + Shares Rs. 50,000 + Goods Rs. 25,000 + Bank Rs. 20,000 = Rs. 1,32,000; Liabilities = Capital Rs. 1,32,000)
Solution:

Cash
Transaction 1:
Started business with cash
Transaction 2:
Rent received

Transaction 3:
Invested in shares

Rs.1,20,000

Accounting Equation
Assets (Rs.)
Stock
+
Shares + of Goods
+ Bank

= Liabilities (Rs.)
= Creditors

Capital(Rs.)
Capital

+1,20,000 +

1,20,000

10,000 +

10,000

New equation 1,30,000 +

1,30,000

+ 50,000

1,30,00

5,000

+ 50,000

1,35,00

35,000

35,000

35,000

35,000

1,35,000

(-7000)

+ 50,000

35,000

35,000

1,28,000

+ (-10,000)

4,000

35,000

1,32,000

Rs. 10,000

Rs. 50,000

(-50,000) + 50,000

New equation 80,000

Transaction 4:
Received dividend

Rs. 5,000 5,000

New equation
Transaction 5:
Purchase goods on credit from Ragani
Rs. 35,000

85,000

New equation 85,000

+ 50,000
Transaction 6:
Paid cash for household Expenses Rs. 7,000 (-7,000) +
0
New equation 78,000
Transaction 7:
Sold goods for cash (costing Rs.10,000)
Rs. 14,000

14,000

New equation 92,000

Transaction 8:
Cash paid to Ragani

+ 50,000

25,000

= (-35,000)

+ 50,000

25,000

Rs. 35,000 (-35,000) +

New equation

Transaction 8:
Deposited into bank Rs. 20,000

57,000

(-20,000) +

20,000

0
1,32,000
0

New equation 37,000

Total

+ 50,000

5,000

20,000

1,32,000

1,32,000

1,32,000

8. Show the effect of following transaction on the accounting equation:

(a) Manoj started business with
(i) Cash Rs. 2,30,000
(ii) Goods Rs. 1,00,000
(iii) Building Rs. 2,00,000
(b) He purchased goods for cash Rs. 50,000
(c) He sold goods(costing Rs.20,000) Rs. 35,000
(d) He purchased goods from Rahul Rs. 55,000
(e) He sold goods to Varun (Costing Rs. 52,000) Rs. 60,000
(f) He paid cash to Rahul in full settlement Rs. 53,000
(g) Salary paid by him Rs. 20,000
(h) Received cash from Varun in full settlement Rs. 59,000
(i) Rent outstanding Rs. 3,000
(j) Prepaid Insurance Rs. 2,000
(k) Commission received by him Rs. 13, 000
(l) Amount withdrawn by him for personal use Rs. 20,000
(m) Depreciation charge on building Rs. 10,000
(n) Fresh capital invested Rs. 50,000
(o) Purchased goods from Rakhi Rs.10,000
(Ans: Assets = Cash Rs. 2,42,000 + Goods Rs. 1,43,000 +Building Rs.1,90,000 + Prepaid Insurance Rs. 2,000 = Rs. 5,77,000; Liabilities = Outstanding Rent
Rs. 3,000 + Creditor Rs. 10,000 + Capital Rs. 5,64,000 = Rs. 5,77,000)
Solution:

Accounting Equation
Assets (Rs.)
Stock
Prepaid
Cash + of Goods + Building + Debtors + Insurance

Transaction 1:
Manoj started business with
(i) Cash
Rs. 2,30,000
(ii) Goods
Rs. 1,00,000

= Liabilities (Rs.)
=

Creditors

+
Capital(Rs.)
Outstanding
+
Rent
+ Capital

(iii) Building
Rs. 2,00,000 +2,30,000 + 1,00,000 + 2,00,000 +
Transaction 2:
He purchased goods for cash Rs. 50,000 (-50,000) + 50,000 +
0
+

5,30,000

New equation 1,80,000 + 1,50,000 + 2,00,000

Transaction 3:
He sold goods(costing Rs.20,000)
Rs. 35,000 35,000 +(-20,000 ) +
0

5,30,000

15,000

New equation 2,15,000 + 1,30,000 + 2,00,000

5,45,000

55,000

55,000

5,45,000

+ 60,000

8,000

+ 60,000

5,53,000

2,000

+ 60,000

5,55,000

5,35,000

(-1,000)

Transaction 4:
He purchased goods from Rahul Rs. 55,000

+ 55,000 +

New equation 2,15,000 + 1,85,000 + 2,00,000

Transaction 5:
He sold goods to Varun (Costing Rs. 52,000)
Rs. 60,000

+ (-52,000)+

New equation 2,15,000 + 1,33,000 + 2,00,000

Transaction 6:
He paid cash to Rahul in full settlement
Rs. 53,000

(-53,000) +

New equation 1,62,000 + 1,33,000 + 2,00,000

Transaction 7:
Salary paid by him

Rs. 20,000 (-20,000) +

New equation 1,42,000 + 1,33,000 + 2,00,000

Transaction 8:
Received cash from Varun in full settlement
Rs. 59,000 59,000 +
0
+
0

New equation 2,01,000 + 1,33,000 + 2,00,000

Transaction 9:
Rent outstanding

Rs. 3,000

New equation 2,01,000 + 1,33,000 + 2,00,000

Transaction 10:
Prepaid Insurance Rs.

2,000

-(2000) +

New equation 1,99,000 + 1,33,000 + 2,00,000

+ 60,000

(-60,000 ) +

55,000

(-55,000)

+ 2,000

2,000

(-20,000)

5,34,000

+ 3,000

(-3,000)

+ 3,000

5,31,000

+ 3,000

0
5,31,000

Transaction 11:
Commission received by him

Rs. 13, 000 13,000

13,000

2,000

+ 3,000

5,44,000

+ (-20,000)

+ 3,000

+ (-10,000)

+ 3,000

5,14,000

50,000

+ 3,000

+ 5,64,000
+

New equation 2,12,000 + 1,33,000 + 2,00,000

Transaction 12:
Amount withdrawn by him for personal use
Rs. 20,000 (-20,000) +
0
+
0

New equation 1,92,000 + 1,33,000 + 2,00,000

2,000

2,000

2,000

10,000

2,000

10,000

+ 3,000

Transaction 13:
Depreciation charge on building Rs. 10,000

+ (-10,000)

New equation 1,92,000 + 1,33,000 + 1,90,000

Transaction 14:
Fresh capital invested

Rs. 50,000

50,000 +

New equation 2,42,000 + 1,33,000 + 1,90,000

Transaction 13:
Purchased goods from Rakhi

Rs. 10,000 0

+ 10,000

New equation 2,42,000 + 1,43,000 + 1,90,000

Total

5,77,000

=
=

5,77,000

9. Transactions of M/s Vipin Traders are given below.

Show the effects on Assets, Liabilities and Capital with the help of accounting Equation.
(a) Business started with cash Rs. 1,25,000
(b) Purchased goods for cash Rs. 50,000
(c) Purchase furniture from R.K. Furniture Rs. 10,000
(d) Sold goods to Parul Traders (Costing Rs. 7,000 vide Rs.9,000 bill no. 5674)
(e) Paid cartage Rs. 100
(f) Cash Paid to R.K. furniture in full settlement Rs. 9,700
(g) Cash sales (costing Rs.10,000) Rs. 12,000
(h) Rent received Rs. 4,000
(i) Cash withdrew for personal use Rs. 3,000
(Ans: Asset = cash Rs. 78,200 + Goods Rs. 33,000 + Furniture Rs. 10,000 Debtors Rs. 9,000= Rs. 1,30,200; Liabilities = Capital Rs. 1,30,200)

5,24,000

+ 5,64,000

Solution:

Accounting Equation
Assets (Rs.)
Stock
+ of Goods
+

Cash
Transaction 1:
Business started with cash Rs. 1,25,000 +1,25,000 +
Transaction 2:
Purchased goods for cash Rs. 50,000

(-50,000)

New equation 75,000

Transaction 3:
Purchase furniture from R.K. Furniture
Rs. 10,000 0
New equation 75,000
Transaction 4:
Sold goods to Parul Traders (Costing
Rs. 7,000 for Rs.9,000) 0
New equation
Transaction 5:
Paid cartage

75,000

Transaction 6:
Cash Paid to R.K. furniture in full
settlement Rs. 9,700
New equation
Transaction 7:
Cash sales (costing Rs.10,000)
Rs. 12,000
New equation
Transaction 8:
Rent received Rs. 4,000
New equation

Debtors

+ Furniture

Capital(Rs.)

Capital

1,25,000

50,000

50,000

1,25,000

10,000

10,000

10,000

= 10,000

1,25,000

2,000

+
+

0
50,000

(-7000)

9,000

43,000

9,000

10,000

74,900

43,000

9,000

10,000

(-9,700)

65,200

9,000

12,000

+ (-10,000)

77,200

+ 33,000

9,000

10,000

4,000

+ 33,000

9,000

81,200
Transaction 9:
Cash withdrew for personal use
Rs. 3,000 (-3,000)

= Creditors

Rs. 100 (-100)

New equation

= Liabilities (Rs.)

0
43,000

= 10,000

1,27,000

(-100)

= 10,000

1,26,900

= (-10,000)

300

10,000

1,27,200

2,000

1,29,200

4,000

10,000

1,33,200

(-3,000)

New equation

Total

78,200

+ 33,000

9,000

10,000

1,30,200

1,30,200

1,30,200

10. Bobby opened a consulting firm and completed these transactions during November, 2005:
(a) Invested Rs. 4,00,000 cash and office equipment with Rs. 1,50,000 in a business called Bobbie Consulting.
(b) Purchased land and a small office building. The land was worth Rs. 1,50,000 and the building worth Rs. 3, 50,000. The purchase price was price was paid with
Rs. 2,00,000 cash and a long term note payable for Rs. 3,00,000.
(c) Purchased office supplies on credit for Rs. 12,000.
(d) Bobbie transferred title of motor car to the business. The motor car was worth Rs. 90,000.
(e) Purchased for Rs. 30,000 additional office equipment on credit.
(f) Paid Rs. 7,500 salary to the office manager.
(g) Provided services to a client and collected Rs. 30,000
(h) Paid Rs. 4,000 for the months utilities.
(i) Paid supplier created in transaction c.
(j) Purchase new office equipment by paying Rs. 93,000 cash and trading in old equipment with a recorded cost of Rs. 7,000.
(k) Completed services of a client for Rs. 26,000. This amount is to be paid within 30 days.
(l) Received Rs. 19,000 payment from the client created in transaction k.
(m) Bobby withdrew Rs. 20,000 from the business.
Analyse the above stated transactions and open the following T-accounts: Cash, client, office supplies, motor car, building, land, long term payables,
capital, withdrawals, salary, expense and utilities expense.
Solution:
(a) Invested Rs. 4,00,000 cash and office equipment with Rs. 1,50,000 in a business called Bobbie Consulting.
Analysis of Transaction : The transaction increases cash and office equipment on one hand and increases capital on the other hand. Increases in assets are
debited and increases in capital is credited. Therefore record the transaction with debit to cash, office equipment and credit to Bobbie Consulting Capital.
Dr.
Date
2005
Nov

Particulars

To Capital(a)
To Sales (g)
To Client(l)

J.F.

Cash A/C
Amount
Date

4,00,000
30,000
19,000

Particulars

By Land (b)
By Building (b)
By Salary( f)
By Utility (h)
By Creditor for Office Supplies (i)
By Office Equipment (j)
By Drawing (m)

Cr.
J.F. Amount

1,50,000
50,000
7,500
4,000
12,000
93,000

Dr.
Date
2005
Nov

Dr.
Date

Particulars

J.F.

To Capital(a)
To Creditor for Office Equipment
(e)
To Cash (j)
To Disposal of Equipment (j)
(purchase of new asset in
exchange)

Particulars

Office Equipment A/C

Amount
Date

2005
1,50,000
Nov.

Particulars
By Disposal of Equipment (j)
(transfer of old asset)

Cr.
J.F. Amount

7,000

30,000
93,000
7,000

J.F.

Capital A/C
Amount
Date

2005
Nov

Particulars

By Cash (a)
By Office Equipment (a)
By Motor Car (d)

Cr.
J.F. Amount

4,00,000
1,50,000
90,000

(b) Purchased land and a small office building. The land was worth Rs. 1,50,000 and the building worth Rs. 3, 50,000. The purchase price was paid with
Rs. 2,00,000 cash and a long term note payable for Rs. 3,00,000.
Analysis of Transaction : The transaction increases land & building on one hand , decreases cash and increases bills payable on the other hand.
Increases in assets are debited , decrease in assets are credited and increases in Bills Payables are also credited. Therefore record the transaction
with debit to land & building and credit to cash & Bills Payables.
Note : Till the end of the problem we will make only one given account and use for all transactions.
Dr.
Date

Particulars

2005
Nov

To Cash (b)

J.F.

Land A/C
Amount
Date

1,50,000

Particulars

Cr.
J.F. Amount

Dr.
Date
2005
Nov

Dr.
Date

Particulars

J.F.

To Cash (b)
To Bills Payables (b)

Particulars

Building
Amount

A/C
Date

Particulars

Cr.
J.F. Amount

Particulars

Cr.
J.F. Amount

50,000
3,00,000

J.F.

Bills Payables A/C

Amount
Date

2005
Nov.

By Building (b)

3,00,000

(c) Purchased office supplies on credit for Rs. 12,000.

Analysis of Transaction : The transaction increases office supplies on one hand and increases creditor for office supplies on the other hand.
Increases in assets are debited and increases in liabilities are credited. Therefore record the transaction with debit to office supplies
and credit to creditor for office supplies.
Dr.
Date

Particulars

2005
Nov

To Creditor for Office Supplies (c)

Office Supplies A/C

J.F.
Amount
Date

12,000

Particulars

Cr.
J.F. Amount

Dr.
Date

Particulars

2005
Nov

To Cash (i)

Creditor for Office Supplies A/C

J.F.
Amount
Date

2005
12,000
Nov.

Particulars

By Office Supplies (c)

Cr.
J.F. Amount

12,000

(d) Bobbie transferred title of motor car to the business. The motor car was worth Rs. 90,000.
Analysis of Transaction : The transaction increases motor car on one hand and increases capital on the other hand. Increases in assets are debited
and increases in capital is credited. Therefore record the transaction with debit to Cash and credit to Capital.
Dr.
Date

Particulars

2005
Nov

To Capital (d)

J.F.

Motor Car
Amount

A/C
Date

Particulars

Cr.
J.F. Amount

90,000

(e) Purchased for Rs. 30,000 additional office equipment on credit.

Analysis of Transaction : The transaction increases office equipment on one hand and increases creditor for office equipment on the other hand.
Increases in assets are debited and increases in liabilities are credited. Therefore record the transaction with debit to office equipment
and credit to creditor for office equipment.
Dr.
Date

Particulars

Creditor for Office Equipment A/C

J.F.
Amount
Date

2005
Nov.

Particulars

By Office Equipment (e)

Cr.
J.F. Amount

30,000

(f) Paid Rs. 7,500 salary to the office manager.

Analysis of transaction : The payment of salary is an expense which decreases capital thus, are recorded as debits.
Credit Cash to record decrease in assets.
Dr.
Date

Particulars

2005
Nov

To Cash (f)

J.F.

Salary A/C
Amount
Date

.
7,500

Particulars

Cr.
J.F. Amount

(g) Provided services to a client and collected Rs. 30,000

Analysis of transaction : Debit Cash to record increase in assets.
The payment from client on providing service is an income which increases capital thus, are recorded as credit.
Dr.
Date

Particulars

J.F.

Sales A/C
Amount
Date

2005
Nov.

Particulars

By Cash (g)
By Client (k)

Cr.
J.F. Amount

30,000
26,000

(h) Paid Rs. 4,000 for the months utilities.

Analysis of transaction : The payment for utilities is an expense which decreases capital thus, are recorded as debits.
Credit cash to record decrease in assets.
Dr.
Date

Particulars

2005
Nov

To Cash (h)

J.F.

Utilities A/C
Amount
Date

4,000

Particulars

Cr.
J.F. Amount

(i) Paid supplier created in transaction c.

Analysis of transaction : The payment to supplier creditors decreases liabilities capital thus, are recorded as debits. Credit cash to record decrease in assets.
(j) Purchase new office equipment by paying Rs. 93,000 cash and trading in old equipment with a recorded cost of Rs. 7,000.
Analysis of Transaction : The transaction increases office equipment on one hand and decreases cash and old office equipment on the other hand.
Increases in assets are debited and decreases in assets are credited. Therefore record the transaction with debit & credit to office equipment,
disposal of equipment and credit cash .
Dr.
Date
2005
Nov

Particulars

To Office Equipment (j)

(Balance of old equipment brought
forward)

Disposal of Equipment A/C

J.F.
Amount
Date

2005
7,000
Nov.

Particulars

By Office Equipment (j)

(Amount transferred to purchase
the new equipment in exchange of
old equipment)

Cr.
J.F. Amount

7,000

(k) Completed services of a client for Rs. 26,000. This amount is to be paid within 30 days.
Analysis of transaction : This transaction increases sales (Revenue) and increases assets (client as debtors). Increases in assets are debited and
increases in revenue are credited. Therefore record the entry with credit to Sales account and debit to client account.
Dr.
Date
2005
Nov

Particulars

To Sales (k)

J.F.

Client A/C
Amount

26,000

Date

Particulars

Cr.
J.F. Amount

2005
Nov.

By Cash (l)

19,000

(l) Received Rs. 19,000 payment from the client created in transaction k
Analysis of transaction : This transaction increase assets( cash) on the one hand and decreases assets( client as debtors) on the other hand.
Increase in assets is debited whereas decrease in assets is credited. Therefore record the entry with debit to cash account and credit to client account.

(m) Bobby withdrew Rs. 20,000 from the business.

Analysis of transaction : This transaction decreases Capital , hence debit drawing account. Credit cash to record decrease in assets.
Dr.
Date

Particulars

2005
Nov

To Cash (m)

J.F.

Drawing A/C
Amount
Date

2005
20,000
Nov.

11. Journalise the following transactions in the books of Himanshu:

2005 Rs.
Dec.01 Business started with cash 75,000
Dec.07 Purchased goods for cash 10,000
Dec.09 Sold goods to Swati 5,000
Dec.12 Purchased furniture 3,000
Dec.18 Cash received from Swati In full settlement 4,000
Dec.25 Paid rent 1,000
Dec.30 Paid salary 1,500

Particulars

Cr.
J.F. Amount

19,000

Solution
Journal
Date

Particulars

L.F

Amount
Debit

2005
Dec.01

Dec.07

Dec.09

Dec.12

Dec.18

Dec.25

Dec.25

Cash A/C
To Capital A/C
(Being Business started with cash)

Purchase A/C
To Cash A/C
(Being goods purchased)

Dr.

Credit

75,000
75,000

Dr.

10,000
10,000

Swati
To Sales A/C
(Being goods sold for cash)

Dr.

5,000
5,000

Furniture A/C
Cash A/C
(Being furniture purchased)

Dr.

3,000
3,000

Cash A/C
Dr.
Discount Allowed A/C
Dr.
To Swati
(Being Cash received from Swati in full settlement & discount allowed)

4,000
1,000

Rent A/C
To Cash
(Being rent paid)

Dr.

1,000

Salary A/ C
To Cash
(Being salary paid)

Dr.

5,000

1,000

1,500
1,500

TOTAL

100,500

100,500

12. Enter the following Transactions in the Journal of Mudit :

2006
Rs.
Jan.01 Commenced business with cash
1,75,000
Jan.01 Building
1,00,000
Jan.02 Goods purchased for cash
75,000
Jan.03 Sold goods to Ramesh
30,000
Jan.04 Paid wages
500
Jan.06 Sold goods for cash
10,000
Jan.10 Paid for trade expenses
700
Jan.12 Cash received from Ramesh
29,500
Discount allowed
500
Jan.14 Goods purchased for Sudhir
27,000
Jan.18 Cartage paid
1,000
Jan.20 Drew cash for personal use
5,000
Jan.22 Goods use for house hold
2,000
Jan.25 Cash paid to Sudhir
26,700
Discount received
300

Solution
Journal
Date

Particulars

L.F

Amount
Debit

2006
Jan.01

Jan.02

Jan.03

Jan.04

Cash A/C
Building A/C
To Capital A/C
(Being Business Started With Cash & Building )

Dr.
Dr.

Purchases A/C
To Cash A/C
(Being Goods Purchased)

Dr.

Ramesh
To Sales A/C
(Being Good Sold To Ramesh On Credit)

Dr.

Wages A/C

Dr.

Credit

1,75,000
1,00,000
2,75,000

75,000
75,000

30,000
30,000

500

To Cash A/C
(Being Wages Paid)
Jan.06

Jan.10

Jan 12

Jan.14

Jan.18

Jan.20

Jan.22

Jan.25

500

Cash A/C
To Sales A/C
(Being Goods Sold For Cash)

Dr.

Trade Expenses A/C

To Cash A/C
(Being trade expenses paid)

Dr.

10,000
10,000

700
700

Cash A/C
Dr.
Discount Allowed A/C
Dr.
To Ramesh
(Being cash paid by Ramesh in full settlement of his account)

29,500
500

Purchases A/C
To Sudhir
(Being goods purchased on credit from Sudhir)

27,000

Cartage A/C
To Cash A/C
(Being cartage purchased)
Drawing A/C
To Cash
( Being cash withdrawn by owner for personal use)

Dr.

30,000

27,000

Dr.

1,000
1,000

Dr.

5,000
5,000

Drawings A/C
Dr.
To Purchases
(Being goods withdrawn by owner for personal use)

2,000

Sudhir
To Discount Received A/C
To Cash A/C
(Being cash paid to Sudhir & received a discount )

27,000

Total

Dr

2,000

300
26,700

483,200

483,200

13. Journalise the following transactions:

2005
Dec. 01 Hema started business with cash
Dec. 02 Open a bank account with SBI
Dec. 04 Purchased goods from Ashu
Dec.06 Sold goods to Rahul for cash
Dec.10 Bought goods from Tara for cash
Dec.13 Sold goods to Suman
Dec.16 Received cheque from Suman
Discount allowed
Dec.20 Cheque given to Ashu on account
Dec.22 Rent paid by cheque
Dec.23 Deposited into bank
Dec.25 Machine purchased from Parigya
Dec.26 Trade expenses
Dec.28 Cheque issued to Parigya
Dec.29 Paid telephone expenses by cheque
Dec.31 Paid salary

Rs.
1,00,000
30,000
20,000
15,000
40,000
20,000
19,500
500
10,000
2,000
16,000
10,000
2,000
10,000
1,200
4,500

Solution
Journal
Date

Particulars

L.F

Amount
Debit

2005
Dec. 01

Dec .02

Dec .04

Dec .06

Cash A/C
To Capital A/C
(Being Business Started With Cash)

Dr.

Bank A/C
To Cash A/C
(Being bank account opened)

Dr.

Purchases A/C
To Ashu
(Being Good purchased from Ashu on Credit)

Dr.

Cash A/C
To Sales A/C
(Being goods sold to Rahul for cash)

Credit

1,00,000
1,00,000

30,000
30,000

20,000
20,000

Dr.

15,000
15,000

Dec.10

Dec .13

Dec. 16

Dec.20

Dec.22

Dec.23

Dec .25

Dec .26

Dec. 28

Dec. 29

Purchases A/C
To Cash A/C
(Being Good purchased goods from Tara for cash)

Dr.

Suman
To Sales A/C
(Being goods sold to Suman)

Dr.

40,000
40,000

20,000
20,000

Bank A/C
Dr.
Discount Allowed A/C
Dr.
To Suman
(Being cheque from Suman received in full settlement of his
account)

19,500
500

Ashu
To Bank A/C
(Being cheque given to Ashu on account)

Dr.

10,000

Rent A/C
To Cash A/C
(Being rent paid by cheque)

Dr.

Bank A/C
To Cash
( Being cash deposited into bank)

Dr.

Machine A/C
To Parigya
(Being machine purchased from Parigya)

20,000

10,000

2,000
2,000

16,000
16,000

Dr.

10,000
10,000

Trade Expenses A/C

To Cash A/C
(Being trade expenses paid)

Dr.

Parigya
To Bank
(Being cheque issued to Parigya)

Dr.

Telephone Expenses A/C

To Bank A/C
(Being telephone expenses by cheque)

Dr.

2,000
2,000

10,000
10,000

1,200
1,200

Dec 31

Salary A/C
To Cash A/C
(Being salary paid)

Dr.

4,500
4,500

Total

3,00,700

3,00,700

14. Jouranlise the following transactions in the books of Harpreet Bros.:

(a) Rs.1,000 due from Rohit are now a bad debts. (b) Goods worth Rs.2,000 were used by the proprietor.
(c) Charge depreciation @ 10% p.a for two month on machine costing Rs.30,000.
(d) Provide interest on capital of Rs. 1,50,000 at 6% p.a. for 9 months.
(e) Rahul become insolvent, who owed is Rs. 2,000 a final dividend of 60 paise in a rupee is received from his estate.

Solution :
Date

(a)

(b)

(c )

(d )

(e)

Journal
Particular12s

L.F

Bad Debt
To Rohit
(Being amount due from Rohit are now a bad debt )

Dr.

Drawing A/C
To Purchases A/C
(Being Goods taken by the proprietor)

Dr.

Amount
Debit

1,000

1,000

2,000
2,000

Depreciation A/C
Dr.
To Machine A/C
(Being depreciation charged @ 10% p.a for two month on
machine 30000*10% *2/12)

500

Interest on Capital A/C

Dr.
To Capital A/C
(Being interest on capital provided 1,50,000*6%*9/12)

6750

Cash A/C
Dr.
Bad Debt A/C
Dr.
To Rahul
(Being Rahul become insolvent, who owed is Rs. 2,000 a
final dividend of 60 paise in a rupee is received)

1,200
800

Total

Credit

500

6750

2,000

12,250

12,250

15. Prepare Journal from the transactions given below :

(a) Cash paid for installation of machine Rs. 500
(b) Goods given as charity Rs. 2,000
(c) Interest charge on capital @7% p.a. when total Rs. 70,000 capital
(d) Received Rs.1,200 of a bad debts written-off last year.
(e) Goods destroyed by fire Rs. 2,000
(f) Rent outstanding Rs. 1,000
(g) Interest on drawings Rs. 900
(h) Sudhir Kumar who owed me Rs. 3,000 has failed to pay the amount. He pays me a compensation of 45 paise in a rupee.
(i) Commission received in advance Rs. 7,000

Solution
Journal
Date

Particulars

L.F

Amount
Debit

(a)

(b)

(c )

(d)

(e)

(f)

Machine A/C
To Cash A/C
(Being cash paid for installation of machine)

Dr.

Charity A/C
To Purchases A/C
(Being goods given as charity)

Dr.

Credit

500
500

2,000
2,000

Interest on Capital A/C

Dr.
To Capital A/C
(Being Interest charge on capital @7% p.a. 70,000*7%)

4,900

Cash A/C
Dr.
To Bad Debt Recovered A/C
(Being cash received of a bad debts written-off last year)

1,200

Goods lost by fire A/C

To Purchases A/C
(Being goods lost due to fire)

Dr.

2,000

Rent A/C
To Rent Outstanding A/C
(Being rent outstanding)

Dr.

4,900

1,200

2,000

1,000
1,000

(g)

(h)

(i )

Drawings A/C
To Interest on Drawing
(Being Interest on drawing charged )

Dr.

900
900

Cash A/C
Dr.
Bad Debt A/C
Dr.
To Rahul
(Being Sudhir Kumar who owed money has failed to pay the
amount & compensation of 45 paise in a rupee
3000*45/100)

1,350
1,650

Commission A/C
To Commission in advance A/C
(Being commission received in advance)

7,000

Dr.

3,000

7,000

22,500
Total

Posting
16. Journalise the following transactions, post to the ledger:
2005 Rs.
Nov. 01 Business started with (i) Cash 1,50,000 (ii) Goods 50,000
Nov. 03 Purchased goods from Harish 30,000
Nov. 05 Sold goods for cash 12,000
Nov. 08 Purchase furniture for cash 5,000
Nov. 10 Cash paid to Harish on account 15,000
Nov. 13 Paid sundry expenses 200
Nov. 15 Cash sales 15,000
Nov. 18 Deposited into bank 5,000
Nov. 20 Drew cash for personal use 1,000
Nov. 22 Cash paid to Harish in full settlement of account 14,700
Nov. 25 Good sold to Nitesh 7,000
Nov. 26 Cartage paid 200
Nov. 27 Rent paid 1,500
Nov. 29 Received cash from Nitesh 6,800 Discount allowed 200
Nov. 30 Salary paid 3,000

22,500

Solution
Journal
Date

Particulars

L.F

Amount
Debit

2005
Nov. 01

Nov. 03

Nov. 05

Nov. 08

Nov. 10

Nov. 13

Nov. 15

Nov. 18

Cash A/C
Stock A/C
To Capital A/C
(Being Business Started With Cash)

Dr.
Dr.

Purchases A/C
To Harish
(Being goods purchased from Harish)

Dr.

Cash A/C
To Sales A/C
(Being good sold for cash)

Dr.

Furniture A/C
To Cash A/C
(Being furniture purchased for cash)

Dr.

Harish
To Cash A/C
(Being cash paid to Harish on account)

Dr.

Sundry Expenses
To Cash A/C
(Being sundry expenses paid)

Dr.

Cash A/C
To Sales
(Being goods sold for cash)

Bank A/C
To Cash A/C
(Being cash deposited into bank)

Credit

1,50,000
50,000
2,00,000

30,000
30,000

12,000
12,000

5,000
5,000

15,000
15,000

200
200

Dr.

15,000
15,000

Dr.

5,000
5,000

Nov. 20

Nov. 22

Nov. 25

Nov. 26

Nov. 27

Nov. 29

Nov. 30

Drawing A/C
To Cash A/C
(Being cash withdrawn for personal use)

Dr.

1,000
1,000

Harish
Dr.
To Discount Received
To Cash
( Being Cash paid to Harish in full settlement of account)

15,000

Nitesh
To Sales A/C
(Being goods sold to Nitesh)

7,000

300
14,700

Dr.

7,000

Cartage A/C
To Cash A/C
(Being cartage paid)

Dr.

Rent A/C
To Cash
(Being rent paid)

Dr.

200
200

1,500
1,500

Cash A/C
Discount Allowed A/C
To Nitesh
(Being Received cash from Nitesh)

Dr.
Dr.

Salary A/C
To Cash A/C
(Being salary paid)

Dr.

6,800
200
7,000

3,000
3,000

Total

3,16,900

Dr.
Date

Particulars

2005
Nov1

To Capital a/c

J.F.

Stock A/C
Amount

50,000

Date

3,16,900

Particulars

Cr.
J.F. Amount

Dr.
Date
2005
Nov.1
Nov. 5
Nov .15
Nov . 29

Dr.
Date

Particulars

J.F.

To Capital A/C
To Sales A/C
To Sales A/C
To Nitesh

Particulars

Dr.
Date

Particulars

2005
Nov. 2

To Harish

Cash A/C
Amount

1,50,000
12,000
15,000
6,800

J.F.

J.F.

Date

Particulars

2005
Nov. 8
Nov. 10
Nov. 13
Nov. 18
Nov. 20
Nov. 22
Nov. 26
Nov .27
Nov . 30

By Furniture A/C
By Harish
By Sundry Expenses A/C
By Bank A/C
By Drawing A/C
By Harish
By Cartage A/C
By Rent A/C
By Salaries A/C

Capital A/C
Amount
Date

2005
Nov.1

Purchases A/C
Amount
Date

30,000

Particulars

By Stock A/C
By Cash A/C

Particulars

Cr.
J.F. Amount

5,000
15,000
200
5,000
1,000
14,700
200
1,500
3,000

Cr.
J.F. Amount

50,000
1,50,000

Cr.
J.F. Amount

Dr.
Date
2005
Nov.10
Nov. 22

Dr.
Date

Particulars

J.F.

To Cash A/C
To Cash A/C
To Discount Received

Particulars

Dr.
Date

Particulars

2005
Nov

To Cash

Dr.
Date

Particulars

2005
Nov.13

To Cash

J.F.

J.F.

Harish A/C
Amount
Date

2005
15,000
Nov.2
14,700
300

Sales A/C
Amount

Particulars

By Purchases A/C

Date

Particulars

2005
Nov.5
Nov. 15
Nov. 25

By Cash A/C
By Cash A/C
By Nitesh

Futniture A/C
Amount
Date

Cr.
J.F. Amount

30,000

Cr.
J.F. Amount

12,000
15,000
7,000

Particulars

Cr.
J.F. Amount

Particulars

Cr.
J.F. Amount

5,000

J.F.

Sundry Expenses A/C

Amount
Date

200

Dr.
Date

Particulars

2005
Nov. 18

To Cash A/C

Dr.
Date

Particulars

2005
Nov. 20

To Cash

Dr.
Date

Particulars

Dr.
Date

Particulars

2005
Nov 25.

To Sales A/C

J.F.

Bank A/C
Amount

Date

Particulars

Cr.
J.F. Amount

Particulars

Cr.
J.F. Amount

Particulars

Cr.
J.F. Amount

5,000

J.F.

Drawing A/C
Amount
Date

1,000

J.F.

J.F.

Discount Received A/C

Amount
Date

2005
Nov.

Nitesh
Amount

7,000

Date
2005
Nov.29

By Harish

Particulars

By Cash A/C
By Discount Allowed

300

Cr.
J.F. Amount

6,800
200

Dr.
Date

Particulars

2005
Nov. 26

To Cash

Dr.
Date

Particulars

2005
Nov. 27

To Cash

Dr.
Date

Particulars

2005
Nov. 29

To Nitesh

Dr.
Date

Particulars

2005
Nov. 30

To Cash

J.F.

Cartage A/C
Amount
Date

Particulars

Cr.
J.F. Amount

Particulars

Cr.
J.F. Amount

Particulars

Cr.
J.F. Amount

Particulars

Cr.
J.F. Amount

200

J.F.

Rent A/C
Amount

Date

1,500

J.F.

Discount Allowed A/C

Amount
Date

200

J.F.

Salaries A/C
Amount
Date

3,000

17. Journalise the following transactions is the journal of M/s Goel Brothers and post them to the ledger.
2006
Rs.
Jan. 01 Started business with cash
1,65,000
Jan. 02 Open bank account in PNB
80,000
Jan. 04 Goods purchased from Tara
22,000
Jan. 05 Goods purchased for cash
30,000
Jan. 08 Goods sold to Naman
12,000
Jan. 10 Cash paid to tara
22,000
Jan. 15 Cash received from Naman
11,700
Discount allowed
300
Jan. 16 Paid wages
200
Jan. 18 Furniture purchased for office use
5,000
Jan. 20 withdrawn from bank for personal use
4,000
Jan. 22 Issued cheque for rent
3,000
Jan. 23 goods issued for house hold purpose
2,000
Jan. 24 drawn cash from bank for office use
6,000
Jan. 26 Commission received
1,000
Jan. 27 Bank charges
200
Jan. 28 Cheque given for insurance premium
3,000
Jan. 29 Paid salary
7,000
Jan. 30 Cash sales
10,000

Solution
Journal
Date

Particulars

L.F

Amount
Debit

2006
Jan. 01

Jan. 02

Jan. 04

Cash A/C
To Capital A/C
(Being Business Started With Cash)

Dr.

Bank A/C
To Cash
(Being bank account opened in PNB)

Dr.

Purchases A/C

Dr.

Credit

1,65,000
1,65,000

80,000
80,000

22,000

To Tara
(Being goods purchased from Tara on Credit)
Jan. 05

Jan. 08

Jan. 10

Jan. 15

Jan. 16

Jan. 18

Jan. 20

Jan. 22

Jan. 23

Jan .24

22,000

Purchases A/C
To Cash A/C
(Being goods purchased for cash)

Dr.

Naman
To Sales A/C
(Being goods sold to Naman)

Dr.

30,000
30,000

12,000
12,000

Tara
To Cash A/C
(Being cash paid to Tara)

Dr.

Cash A/C
Discount Allowed
To Naman
(Being cash received from Naman)

Dr.
Dr.

22,000
22,000

11,700
300
12,000

Wages A/C
To Cash A/C
(Being wages paid)

Dr.

Furniture A/C
To Cash A/C
(Being furniture purchased for office use)

Dr.

Drawings
To Bank
( Being Cash withdrawn from bank for personal use)

200
200

5,000
5,000

Dr.

4,000
4,000

Rent A/C
To Bank A/C
(Being Issued cheque for rent)

Dr.

Drawing A/C
To Purchases A/C
(Being goods issued for house hold purpose)

Dr.

Cash A/C
To Bank
(Being cash withdrawn from bank for office use)

Dr.

3,000
3,000

2,000
2,000

6,000
6,000

Jan. 26

Jan. 27

Jan. 28

Cash A/C
To Commission A/C
(Being commission received)

Dr.

Bank charges A/C

To Bank A/C
(Being bank charges paid)

Dr.

1,000
1,000

200
200

Insurance A/C
To Bank A/C
(Being cheque given for insurance premium)

Dr.

3,000
3,000

Jan . 29 Salaries A/C

To Cash A/C
(Being salaries paid)

Dr.

7,000

Jan. 30

Dr.

7,000

Cash A/C
To Sales A/C
(Being goods sold for cash )

10,000
10,000

Total

Dr.
Date
2006
Jan. 01
Jan. 15
Jan. 24
Jan. 26
Jan. 30

3,84,400

Particulars

To Capital A/C
To Naman
To Bank A/C
To Commission A/C
To Sales A/C

J.F.

3,84,400

Cash A/C
Amount

Date

Particulars

1,65,000
11,700
6,000
1,000
10,000

2006
Jan. 02
Jan. 05
Jan .10
Jan .16
Jan. 18
Jan.29

By Bank A/C
By Purchases A/C
By Tara
By Wages A/C
By Furniture A/C
By Salaries A/C

Cr.
J.F. Amount

80,000
30,000
22,000
200
5,000
7,000

Dr.
Date

Particulars

Dr.
Date

Particulars

2006
Jan. 02

J.F.

J.F.

To Cash A/C

Particulars

2006
Jan. 04
Jan . 05

To Tara
To Cash A/C

Dr.
Date
2006
Jan. 10

Particulars

To Cash A/C

Bank A/C
Amount

80,000

Dr.
Date

Capital A/C
Amount
Date

2006
Jan. 01

J.F.

J.F.

22,000

By Cash A/C

Date

Particulars

2006
Jan. 20
Jan .23
Jan .24
Jan . 27
Jan . 28

By Rent A/C
By Drawing A/C
By Cash
By Bank Charges A/C
By Insurance A/C

Purchases A/C
Amount
Date

2006
22,000
Jan. 22
30,000

Tara A/C
Amount

Particulars

Particulars

By Drawing

Date

Particulars

2006
Jan. 04

By Purchases A/C

Cr.
J.F. Amount

1,65,000

Cr.
J.F. Amount

3,000
4,000
6,000
200
3,000

Cr.
J.F. Amount

2,000

Cr.
J.F. Amount

22,000

Dr.
Date

Particulars

Dr.
Date

Particulars

2006
Jan. 08

To Sales A//C

Dr.
Date

Particulars

2006
Jan. 15

To Naman A/C

Dr.
Date

Particulars

2006
Jan .16

To Cash

Sales A/C
J.F.
Amount

J.F.

J.F.

Date

Particulars

2006
Jan. 08
Jan . 30

By Naman
By Cash A/C

Naman A/C
Amount
Date

2006
12,000
Jan. 15

Discount Allowed A/C

Amount
Date

Particulars

By Cash A/C
By Discount Allowed A/C

Cr.
J.F. Amount

12,000
10,000

Cr.
J.F. Amount

11,700
300

Particulars

Cr.
J.F. Amount

Particulars

Cr.
J.F. Amount

300

J.F.

Wages A/C
Amount
Date

200

Dr.
Date

Particulars

2006
Jan .18

To Cash

J.F.

Particulars

2006
Jan. 20

To Bank A/C

Dr.
Date

Particulars

2006
Jan.22
Jan. 23

To Purchases A/C
To Bank A/C

Dr.
Date

Particulars

Particulars

Cr.
J.F. Amount

Particulars

Cr.
J.F. Amount

Particulars

Cr.
J.F. Amount

Particulars

Cr.
J.F. Amount

5,000

Dr.
Date

Furniture A/C
Amount
Date

J.F.

Rent A/C
Amount
Date

3,000

J.F.

Drawing A/C
Amount
Date

2,000
4,000

J.F.

Commission A/C
Amount
Date

2006
Jan. 26

By Cash A/C

1,000

Dr.
Date

Particulars

2006
Jan. 27

To Bank A/C

Dr.
Date

Particulars

2006
Jan. 27

To Bank A/C

Dr.
Date

Particulars

2006
Jan. 20

To Cash A/C

J.F.

Bank Charges A/C

Amount
Date

Particulars

Cr.
J.F. Amount

Particulars

Cr.
J.F. Amount

Particulars

Cr.
J.F. Amount

200

J.F.

Insurance A/C
Amount
Date

3,000

J.F.

Salaries A/C
Amount
Date

7,000

18 Give journal entries of M/s Mohit traders, Post them to the Ledger from the following transactions :
August
2005
Rs.
1. Commenced business with cash
1,10,000
2. Opened bank account with H.D.F.C.
50,000
3. Purchased furniture
20,000
7. Bought goods for cash from M/s Rupa Traders
30,000

8. Purchased good from M/s Hema Traders

10. Sold goods for cash
14. Sold goods on credit to M/s. Gupta Traders
16. Rent paid
18. Paid trade expenses
20. Received cash from Gupta Traders
22. Goods return to Hema Traders.
23. Cash paid to Hema Traders
25. Bought postage stamps
30. Paid salary to Rishabh

42,000
30,000
12,000
4,000
1,000
12,000
2,000
40,000
100
4,000

Solution
Journal
Date

Particulars

L.F

Amount
Debit

2005
Aug. 01

Aug. 02

Aug. 03

Aug. 07

Aug. 08

Aug. 10

Cash A/C
To Capital A/C
(Being Business Started With Cash)

Dr.

Credit

1,10,000
1,10,000

Bank A/C
To Cash
(Being bank account opened in H.D.F.C)

Dr.

Furniture A/C
To Cash A/C
(Being furniture purchased)

Dr.

50,000
50,000

20,000
20,000

Purchases A/C
Dr.
To Cash A/C
(Being goods purchased for cash from M/s Rupa Traders)

30,000

Purchases A/C
To M/s Hema Traders
(Being goods purchased from M/s Hema Traders)

Dr.

42,000

Sales A/C
To Cash A/C
(Being goods sold for cash)

Dr.

30,000

42,000

30,000
30,000

Aug. 14

Aug. 16

Aug. 18

Aug. 20

Aug. 22

Aug. 23

Aug. 26

Aug. 30

Sales A/C
Dr.
To M/s. Gupta Traders
(Being goods sold for credit to M/s. Gupta Traders )

12,000

Rent A/C
To Cash A/C
(Being rent paid)

Dr.

4,000

Trade Expenses A/C

To Cash A/C
(Being trade expenses paid)

Dr.

Cash A/C
To Gupta Traders
( Being cash received from Gupta Traders)

Dr.

Hema Traders
To Purchase Return / Return Outwards A/C
(Being goods return to Hema Traders)

Dr.

Hema Traders A/C

To Cash A/C
(Being cash paid to Hema Traders)

Dr.

Postage A/C
To Cash
(Being postage stamps bought)

Dr.

Salaries A/C
To Cash A/C
(Being salary paid to Rishabh)

Dr.

Total

12,000

4,000

1,000
1,000

12,000
12,000

2,000
2,000

40,000
40,000

100
100

4,000
4,000

3,57,100

3,57,100

Dr.
Date

Particulars

Dr.
Date

Particulars

2005
Aug. 01
Aug.10
Aug .20

To Capital A/C
To Sales A/C
To Gupta Traders

Dr.
Date

Particulars

2005
Aug. 02

To Cash A/C

J.F.

Capital A/C
Amount
Date

2005
Aug . 01

J.F.

J.F.

Cash A/C
Amount
Date

2005
1,10,000
Aug. 02
30,000
Aug. 03
12,000
Aug. 07
Aug. 16
Aug. 18
Aug . 23
Aug. 26
Aug. 30

Bank A/C
Amount
Date

1,10,000

Particulars

J.F.

By Cash A/C

Particulars

1,10,000

J.F.

By Bank A/C
By Furniture A/C
By Purchases A/C
By Rent A/C
ByTrade Expenses A/C
By M/s Hema Traders
By Postage A/C
By Salaries

Particulars

Cr.
Amount

Cr.
Amount

50,000
20,000
30,000
4,000
1,000
40,000
100
4,000

J.F.

Cr.
Amount

Dr.
Date
2005
Aug. 03

Particulars

J.F.

Furniture A/C
Amount
Date

To Cash A/C

20,000

Dr.
Date

Particulars

Purchases A/C
Amount
Date

2005
Aug. 07
Aug. 08

To Cash A/C
To M/s Hema Traders

Dr.
Date

Particulars

2005
Aug. 22
Aug .23

To Purchase Return
To Cash A/C

Dr.
Date

Particulars

J.F.

Particulars

Particulars

J.F.

Cr.
Amount

J.F.

Cr.
Amount

J.F.

Cr.
Amount

30,000
42,000

J.F.

J.F.

M/s Hema Traders A/C

Amount
Date
Particulars

2005
2,000
Aug. 08
By Purchases A/C
40,000

Sales A/C
Amount
Date

2005
Aug. 10
Aug. 14

Particulars

By Cash A/C
By M/s. Gupta Traders

42,000

J.F.

Cr.
Amount

30,000
12,000

Dr.
Date

Particulars

2005
Aug. 14

To Sales A/C

M/s. Gupta Traders A/C

J.F.
Amount
Date

2005
12,000
Aug. 14

Dr.
Date

Particulars

2005
Aug. 16

To Cash A/C

4,000

Particulars

Trade Expenses A/C

Amount
Date

Dr.
Date
2005
Aug. 18

Dr.
Date
2005
Aug. 22

J.F.

J.F.

Rent A/C
Amount
Date

To Cash A/C

1,000

Particulars

Purchase Return A/C

Amount
Date

To M/s Hema Traders

J.F.

2,000

Particulars

J.F.

By Cash A/C

Particulars

Particulars

Particulars

Cr.
Amount

12,000

J.F.

Cr.
Amount

J.F.

Cr.
Amount

J.F.

Cr.
Amount

Dr.
Date
2005
Aug. 26

Dr.
Date
2005
Aug. 30

Particulars

J.F.

Postage A/C
Amount
Date

To Cash A/C

100

Particulars

Salaries A/C
Amount
Date

To Cash A/C

J.F.

Cr.
Amount

Particulars

J.F.

Particulars

Cr.
J.F.
Amount

4,000

19. Journalise the following transaction in the Books of the M/s Bhanu Traders and Post them into the Ledger.
December,
2005
Rs.
1. Started business with cash
92,000
2. Deposited into bank
60,000
4. Bought goods on credit from Himani
40,000
6. Purchased goods from cash
20,000
8. Returned goods to Himani
4,000
10. Sold goods for cash
20,000
14. Cheque given to Himani
36,000
17. Goods sold to M/s Goyal Traders.
35,000
19. Drew cash from bank for personal use
2,000
21. Goyal traders returned goods
3,500
22. Cash deposited into bank
20,000
26. Cheque received from Goyal Traders
31,500
28. Goods given as charity
2,000
29. Rent paid
3,000
30. Salary paid
7,000
31. Office machine purchased for cash
3,000

Solution
Journal
Date

Particulars

L.F

Amount
Debit

2005
Dec. 01

Dec .02

Dec .04

Dec .06

Dec .08

Dec.10

Dec .14

Dec. 17

Dec.19

Cash A/C
To Capital A/C
(Being Business Started With Cash)

Dr.

Bank A/C
To Cash A/C
(Being cash deposited in the bank account )

Dr.

Purchases A/C
To Himani
(Being Good purchased from Himani on Credit)

Dr.

Purchases A/C
To Cash A/C
(Being Good purchased for cash)

Dr.

Himani
To Purchase Return A/C
(Being goods returned to Himani)

Dr.

Cash A/C
To Sales A/C
(Being goods sold)

Dr.

Himani
To Bank A/C
(Being cheque given to Himani )

Dr.

M/s Goyal Traders

To Sales A/C
(Being good sold to M/s Goyal Traders)

Dr.

Drawings A/C
To Bank A/C
(Being cash withdrawn from bank for personal use)

Dr.

Credit

92,000
92,000

60,000
60,000

40,000
40,000

20,000
20,000

4,000
4,000

20,000
20,000

36,000
36,000

35,000
35,000

2,000
2,000

Dec.21

Dec.22

Dec .26

Dec .28

Dec. 29

Dec. 30

Dec 31

Sales return / Return inwards A/C

To M/s Goyal Traders
( Being goods returned by Goyal traders)

Dr.

Bank A/C
To Cash A/C
(Being cash deposited into bank)

Dr.

Bank A/C
To Goyal traders
(Being Cheque received from Goyal Traders)

Dr.

CharityA/C
To Purchases A/C
(Being goods issued for charity)

Dr.

Rent A/C
To Cash A/C
(Being rent paid)

Dr.

Salary A/C
To Cash A/C
(Being salary paid)

Dr.

Office machine A/C

To Cash
(Being Office machine purchased for cash)

Dr.

3,500

20,000
20,000

31,500
31,500

2,000
2,000

3,000
3,000

7,000
7,000

3,000
3,000

Total

Dr.
Date

3,500

3,79,000

Particulars

J.F.

Capital A/C
Amount
Date

2005
Dec. 01

Particulars

By Cash A/C

3,79,000

J.F.

Cr.
Amount

92,000

Dr.
Date
2005
Dec. 01
Dec.10

Dr.
Date
2005
Dec. 02
Dec . 14
Dec . 22
Dec . 26

Dr.
Date
2005
Dec.04
Dec .06

Particulars

J.F.

To Capital A/C
To Sales A/C

Particulars

J.F.

To Cash A/C
To Himani
To Cash A/C
To M/s Goyal Traders

Particulars

To Himani A/C
To Cash A/C

J.F.

Cash A/C
Amount
Date

2005
Dec. 02
92,000
Dec . 06
20,000
Dec . 22
Dec. 29
Dec. 30
Dec. 31

Bank A/C
Amount
Date

2005
Dec . 19
60,000
36,000
22,000
31,500

Purchases A/C
Amount
Date

2005
Dec. 28
40,000
20,000

Cr.
Particulars

J.F.

Amount

By Bank A/C
By Purchases A/C
By Bank A/C
By Rent A/C
By Salaries A/C
By Office machine A/C

60,000
20,000
22,000
3,000
7,000
3,000

Cr.
Particulars

J.F.

To Drawing A/C

Particulars

By Charity A/C

Amount

2000

J.F.

Cr.
Amount

2,000

Dr.
Date
2005
Dec.08
Dec. 14

Dr.
Date

Dr.
Date

Dr.
Date
2005
Dec . 17

Particulars

J.F.

To Purchase Return A/C

To Bank A/C

Particulars

Particulars

Particulars

To Sales

J.F.

J.F.

J.F.

Himani
Amount
Date

2005
Dec.04
4,000
36,000

Particulars

By Purchases A/C

Purchase Return A/C

Amount
Date
Particulars

2005
Dec.08
By Himani

Sales A/C
Amount
Date

2005
Dec.08
Dec. 17

J.F.

Particulars

40,000

J.F.

Cr.
Amount

4,000

J.F.

To Cash A/C
To M/s Goyal Traders

M/s Goyal Traders A/C

Amount
Date
Particulars

2005
Dec. 21
35000
By Sales Return A/C
Dec. 26
By Bank A/C

Cr.
Amount

Cr.
Amount

20,000
35,000

J.F.

Cr.
Amount

3,500
31,500

Dr.
Date
2005
Dec . 19

Dr.
Date
2005
Dec . 21

Dr.
Date
2005
Dec. 28

Dr.
Date
2005
Dec . 29

Particulars

J.F.

Drawing A/C
Amount
Date

Particulars

To Bank A/C

2,000

Particulars

Sales Return or Return Inwards A/C

Amount
Date
Particulars

J.F.

To M/s Goyal Traders

3,500

Particulars

Charity A/C
Amount
Date

J.F.

To Purchases A/C

2,000

Particulars

Rent A/C
Amount
Date

To Cash A/C

J.F.

3,000

Particulars

J.F.

Cr.
Amount

J.F.

Cr.
Amount

J.F.

Cr.
Amount

Cr.
Particulars

J.F.

Amount

Dr.
Date
2005
Dec . 30

Dr.
Date
2005
Dec . 31

Particulars

J.F.

Salaries A/C
Amount
Date

Particulars

To Cash A/C

7,000

Particulars

Office machine A/C

Amount
Date
Particulars

To Cash A/C

J.F.

3,000

20. Journalise the following transaction in the Book of M/s Beauti traders. Also post them in the ledger.
Dec.
2005
Rs.
1. Started business with cash
2,00,000
2. Bought office furniture
30,000
3. Paid into bank to open an current account
1,00,000
5. Purchased a computer and paid by cheque
2,50,000
6. Bought goods on credit from Ritika
60,000
8. Cash sales
30,000
9. Sold goods to Karishna on credit
25,000
12. Cash paid to Mansi on account
30,000
14. Goods returned to Ritika
2,000
15. Stationery purchased for cash
3,000
16. Paid wages
1,000
18. Goods returned by Karishna
2,000
20. Cheque given to Ritika
28,000
22. Cash received from Karishna on account
15,000
24. Insurance premium paid by cheque
4,000

J.F.

J.F.

Cr.
Amount

Cr.
Amount

26. Cheque received from Karishna

28. Rent paid by cheque
29. Purchased goods on credit from Meena Traders
30. Cash sales

8,000
3,000
20,000
14,000

Solution
Journal
Date

Particulars

L.F

Amount
Debit

2005
Dec. 01

Dec .02

Dec .03

Dec .05

Dec .06

Dec.08

Dec .09

Dec. 12

Cash A/C
To Capital A/C
(Being Business Started With Cash)
Office Furniture A/C
To Cash A/C
(Being office furniture purchased)

Dr.

2,00,000
2,00,000

Dr.

30,000
30,000

Bank A/C
Dr.
To Cash A/C
(Being cash paid into bank to open a current account)

1,00,000

Computers A/C
To Bank A/C
(Being computer purchased and paid by cheque)

Dr.

2,50,000

Purchases A/C
To Ritika
(Being goods purchased from Ritika)

Dr.

Cash A/C
To Sales A/C
(Being goods sold)

Dr.

Karishna
To Sales A/C
(Being goods sold to Karishna on credit)

Dr.

Mansi
To Cash A/C
(Being cash paid to Mansi on account )

Credit

1,00,000

2,50,000

60,000
60,000

30,000
30,000

25,000
25,000

Dr.

30,000
30,000

Dec.14

Dec.15

Dec.16

Dec .18

Dec .20

Dec. 22

Dec. 24

Dec. 26

Dec. 28

Dec. 29

Ritika
To Purchases Return A/C
(Being Goods returned to Ritika)

Dr.

Stationery A/C
To Cash A/C
( Being stationery purchased)

Dr.

Wages A/C
To Cash A/C
(Being wages paid)

Dr.

Sales Return A/C

To Karishna
(Being goods returned to Karishna)

Dr.

Ritika
To Bank A/C
(Being Ritika paid by cheque)

Dr.

Cash A/C
To Karishna
(Being cash received from Karishna on account)

Dr.

Insurance A/C
To Bank A/C
(Being insurance paid by cheque)

Dr.

Bank A/C
To Karishna
(Being cheque received from Karishna)

Dr.

Rent A/C
To Bank A/C
(Being rent paid by cheque)

Dr.

2,000
2,000

3,000
3,000

1,000
1,000

2,000
2,000

28,000
28,000

15,000
15,000

4,000
4,000

8,000
8,000

Purchases A/C
Dr.
To Meena Traders
(Being goods purchased on credit from Meena Traders)

3,000
3,000

20,000
20,000

Dec. 30

Cash A/C
To Sales A/C
(Being goods sold for cash)

Dr.

14,000

Total

Dr.
Date

Dr.
Date
2005
Dec. 01
Dec.08
Dec. 22
Dec. 30

Dr.
Date
2005
Dec. 02

14,000

8,25,000

Particulars

Particulars

J.F.

J.F.

To Capital A/C
To Sales A/C
To Krishna
To Sales A/C

Particulars

To Cash A/C

J.F.

Capital A/C
Amount
Date

2005
Dec. 01

Cash A/C
Amount
Date

2005
Dec. 02
2,00,000
Dec . 05
30,000
Dec . 12
15,000
Dec. 15
14,000
Dec. 16

Particulars

J.F.

Cr.
Amount

By Cash A/C

2,00,000

Cr.
Particulars

J.F.

By Office Furniture A/C

By Bank A/C
By Mansi
By Stationery A/C
By Wages A/C

Office Furniture A/C

Amount
Date
Particulars

30,000

8,25,000

Amount

30,000
1,00,000
30,000
3,000
1,000

J.F.

Cr.
Amount

Dr.
Date
2005
Dec.03
Dec .26

Dr.
Date
2005
Dec.05

Dr.
Date
2005
Dec.06
Dec . 29

Dr.
Date

Particulars

J.F.

To Cash A/C
To Krishna

Particulars

J.F.

Bank A/C
Amount
Date

2005
Dec. 05
1,00,000
Dec. 20
8,000
Dec. 24
Dec.28

Computers A/C
Amount
Date

To Bank A/C

2,50,000

Particulars

Purchase A/C
Amount
Date

J.F.

To Ritika
To Meena Traders

60,000
20,000

Particulars

Ritika A/C
Amount
Date

J.F.

Particulars

J.F.

By Computers A/C
By Ritika
By Insurance A/C
By Rent A/C

Cr.
Amount

2,50,000
28,000
4,000
8,000

Cr.
Amount

Particulars

J.F.

Particulars

Cr.
J.F.
Amount

Particulars

Cr.
Amount

J.F.

2005
Dec.14
Dec. 20

Dr.
Date

Dr.
Date
2005
Dec . 09

Dr.
Date
2005
Dec . 12

To Purchases Return A/C

To Bank A/C

Particulars

Particulars

2,000
28,000

J.F.

J.F.

To Sales A/C

Particulars

To Cash A/C

J.F.

2005
Dec.06

Sales A/C
Amount
Date

2005
Dec. 08
Dec. 09
Dec .30

Karishna A/C
Amount
Date

2005
Dec. 18
25,000
Dec. 22
Dec. 26

Mansi A/C
Amount

30,000

Date

By Purchases A/C

Particulars

60,000

J.F.

Cr.
Amount

By Cash A/C
By Karishna
By Cash

30,000
25,000
14,000

Particulars

Cr.
Amount

J.F.

By Sales Return A/C

By Cash A/C
By Bank A/C

2,000
15,000
8,000

Particulars

Cr.
Amount

J.F.

Dr.
Date
2005
Dec. 14

Dr.
Date
2005
Dec . 15

Dr.
Date
2005
Dec . 16

Dr.
Date
2005
Dec . 18

J.F.

Cr.
Amount

Particulars

J.F.

Cr.
Amount

Particulars

Cr.
J.F.
Amount

To Cash A/C

1,000

Particulars

Sales Return A/C

Amount
Date
Particulars

Cr.
Amount

Particulars

J.F.

Purchase Return A/C

Amount
Date
Particulars

To Ritika

2,000

Particulars

Stationery A/C
Amount
Date

J.F.

To Cash A/C

3,000

Particulars

Wages A/C
Amount
Date

To Karishna

J.F.

J.F.

2,000

J.F.

Dr.
Date
2005
Dec . 24

Dr.
Date
2005
Dec . 28

Dr.
Date

Particulars

J.F.

To Bank A/C

Particulars

Cr.
Amount

Particulars

J.F.

Particulars

Cr.
J.F.
Amount

4,000

J.F.

To Bank A/C

Particulars

Insurane A/C
Amount
Date

Rent A/C
Amount
Date

8,000

J.F.

Meena Traders A/C

Amount
Date
Particulars

2005
Dec .29
By Purchases A/C

21. Journalise the following transaction in the books of Sanjana and post them into the ledger :
January,
2006
Rs.
1. Cash in hand
6,000
Cash at bank
55,000
Stock of goods
40,000
Due to Rohan
6,000
Due from Tarun
10,000

J.F.

Cr.
Amount

20,000

3. Sold goods to Karuna

4. Cash sales
6. Goods sold to Heena
8. Purchased goods from Rupali
10. Goods returned from Karuna
14. Cash received from Karuna
15. Cheque given to Rohan
16. Cash received from Heena
20. Cheque received from Tarun
22. Cheque received from to Heena
25. Cash given to Rupali
26. Paid cartage
27. Paid salary
28. Cash sale
29. Cheque given to Rupali
30. Sanjana took goods for Personal use
31. Paid General expense

15,000
10,000
5,000
30,000
2,000
13,000
6,000
3,000
10,000
2,000
18,000
1,000
8,000
7,000
12,000
4,000
500

Solution
Journal
Date

Particulars

L.F

Amount
Debit

2006
Jan . 01 Cash A/C
Bank A/C
Stock A/C
Tarun
To Rohan
To Capital A/C (Balancing Figure)
(Being balance of previous year bought forward)
Jan .03

Jan .04

Dr.
Dr.
Dr.
Dr.

Credit

6,000
55,000
40,000
10,000
6,000
1,05,000

Karuna
To Sales A/C
(Being goods to Karuna)

Dr.

Cash A/C
To Sales A/C
(Being goods sold for cash)

Dr.

15,000
15,000

10,000
10,000

Jan .06

Jan .08

Jan.10

Jan .14

Jan.15

Jan .16

Jan .20

Jan .22

Jan .25

Jan .26

Jan. 27

Heena
To Sales A/C
(Being goods sold to Heena)

Dr.

Purchases A/C
To Rupali
(Being goods purchased from Rupali)

Dr.

Sales Return A/C

To Karuna
(Being goods returned from Karuna)

Dr.

Cash A/C
To Karuna
(Being cash received from Karuna )

Dr.

Rohan
To Bank A/C
(Being cheque given to Rohan)

Dr.

5,000

2,000
2,000

13,000
13,000

6,000
6,000

Dr.

Bank A/C
To Tarun A/C
( Being Cheque received from Tarun)

Dr.

Bank A/C
To Heena A/C
(Being cheque received from to Heena)

Dr.

Rupali
To Cash A/C
(Being Cash given to Rupali)

Dr.

Salaries A/C
To Cash A/C
(Being salary paid)

30,000
30,000

Cash A/C
To Heena
(Being cash received from Heena)

Cartage A/C
To Cash A/C
(Being cash paid for cartage)

5,000

3,000
3,000

10,000
10,000

2,000
2,000

18,000
18,000

Dr.

1,000
1,000

Dr.

8,000
8,000

Jan. 28

Jan . 29

Jan .30

Jan .31

Cash A/C
To Sales A/C
(Being goods sold for cash)

Dr.

Rupali
To Bank A/C
(Being Cheque given to Rupali)

Dr.

Drawings A/C
To Purchases A/C
(Being goods taken for Personal use)

Dr.

General expense A/C

To Cash A/C
(Being general expenses paid)

Dr.

7,000

Dr.
Date
2006
Jan . 01
Jan .04
Jan. 14
Jan. 16
Jan. 28

12,000
12,000

4,000
4,000

500
500

Total

Dr.
Date

7,000

2,57,500

Particulars

Particulars

To Balance b/d
To Sales A/C
To Karuna
To Heena
To Sales A/C

J.F.

J.F.

Capital A/C
Amount
Date

2006
Jan . 01

Cash A/C
Amount
Date

2006
Jan. 25
6,000
Jan. 26
10,000
Jan. 27
13,000
Jan. 31
3,000
7,000

Particulars

2,57,500

J.F.

By Balance A/C

Cr.
Amount

1,05,000

Cr.
Particulars

By Rupali
By Cartage A/C
By Salaries A/C
By General expense A/C

J.F.

Amount

18,000
1,000
8,000
500

Dr.
Date
2006
Jan. 01
Jan. 20
Jan. 22

Dr.
Date
2006
Jan. 01

Dr.
Date
2006
Jan .01

Dr.
Date
2006
Jan.

Particulars

J.F.

To Balance b/d
To Tarun
To Heena

Particulars

J.F.

To Balance b/d

Particulars

To Bank A/C

Stock A/C
Amount
Date

Cr.
Particulars

J.F.

Amount

By Rohan
By Rupali

6,000
12,000

Particulars

J.F.

Cr.
Amount

J.F.

Cr.
Amount

40,000

J.F.

To Balance b/d

Particulars

Bank A/C
Amount
Date

2006
Jan. 15
55,000
10,000
Jan. 29
2,000

J.F.

Tarun A/C
Amount
Date

2006
Jan. 20
10,000

Rohan A/C
Amount
Date

2006
Jan. 01
6,000

Particulars

By Bank A/C

Particulars

By Balance b/d

10,000

Cr.
J.F.

Amount

6,000

Dr.
Date
2006
Jan .03

Dr.
Date

Dr.
Date
2006
Jan. 06

Dr.
Date
2006
Jan. 25
Jan. 29

Particulars

J.F.

To Sales

Particulars

Particulars

J.F.

J.F.

To Sales A/C

Particulars

To Cash A/C
To Bank A/C

J.F.

Karuna A/C
Amount
Date

2006
Jan. 10
15,000
Jan. 14

Sales A/C
Amount
Date

2006
Jan. 03
Jan. 04
Jan. 06
Jan .28

Heena A/C
Amount
Date

2006
Jan. 16
6,000
Jan. 22

Rupali A/C
Amount

18,000
12,000

Particulars

J.F.

Cr.
Amount

By Sales Return
By Cash A/C

2,000
13,000

Particulars

Cr.
Amount

J.F.

By Karuna
By Cash A/C
By Heena
By Cash A/C

Particulars

15,000
10,000
6,000
7,000

J.F.

Cr.
Amount

By Cash A/C
By Bank A/C

3,000
2,000

Date

Particulars

Cr.
Amount

2006
Jan. 08

By Purchases A/C

J.F.

30,000

Dr.
Date
2006
Jan. 08

Dr.
Date
2006
Jan . 10

Dr.
Date
2006
Jan . 26

Dr.
Date
2006
Jan . 27

Particulars

J.F.

To Rupali

Particulars

J.F.

Purchase A/C
Amount
Date

2006
Jan. 30
30,000

2,000

Particulars

Cartage A/C
Amount
Date

To Cash A/C

1,000

Particulars

Salaries A/C
Amount
Date

To Cash A/C

J.F.

8,000

J.F.

By Drawings A/C

Sales Return A/C

Amount
Date
Particulars

To Karuna

J.F.

Particulars

Particulars

Particulars

Cr.
Amount

4,000

J.F.

Cr.
Amount

J.F.

Cr.
Amount

J.F.

Cr.
Amount

Dr.
Date
2006
Jan . 30

Dr.
Date
2006
Jan . 31

Particulars

J.F.

To Purchases A/C

Particulars

To Cash A/C

Drawings A/C
Amount
Date

Particulars

J.F.

Cr.
Amount

4,000

J.F.

General expense A/C

Amount
Date
Particulars

500

J.F.

Cr.
Amount