LEARN JOURNAL ENTRIES JUST IN FIVE MINUTES PART 3

• LEARN JOURNAL ENTRIES JUST IN FIVE MINUTES PART 3
  PLUS ONE ACCOUNT
• MBA/BBA/BCOM/CA AND CS FOUNDATION BUSINESS ACCOUNTING
• RULES ( TRADITIONAL RULES)

1. PERSONAL ACCOUNTS :- DEBIT THE RECEIVER AND CREDIT THE GIVER
2. REAL ACCOUNT :- DEBIT WHAT COME IN , CREDIT WHAT GOES OUT
3. NOMINAL ACCOUNT:- DEBIT ALL EXPENSES AND LOSSES AND CREDIT ALL INCOMES AND GAINS

• MODERN APPROACH

1. ASSETS:
2. LIABILITIES
3. CAPITAL
4. REVENUE
5. EXPENSES AND LOSSES

•  RULES:

1. INCREASE IN ASSET ACCOUNT ARE DEBITS AND DECREASE ARE CREDIT
2. INCREASE IN LIABILITY,ACCOUNTS ARE CREDITS.DECREASE ARE CREDITED
3. INCREASE IN OWNER’S EQUITY ACCOUNTS ARE CREDITS,DECREASE ARE DEBITS
4. INCREASE IN EXPENSES /LOSSES/,
5. INCREASE IN INCOME ARE CREDITED

• PROBLEM FOR YOU

1. SHAN INVOICED THE GOODS WORTH RS 5000 AT 2% TRADE DISCOUNT,HALF OF WHICH WAS SOLD TO RAHIM AT 20% ABOVE COST.
2. SUPPLIED GOODS COSTING RS 2000 TO RAM AND ISSUED INVOICE AT 10 % ABOVE COST LESS 3% TRADE DISCOUNT
3. PURCHASED GOODS FROM A RS 6,000 LESS TRADE DISCOUNT 10%
4. SOLD THE ABOVE GOODS TO SHAM AT ORIGINAL PRICE LESS 5% TRADE DISCOUNT
5. ½ OF THE GOODS RETURNED BY SHAM
6. ABOVE GOODS RETURNED TO A

• SOLUTION
• SHAN INVOICED THE GOODS WORTH RS 5000 AT 2% TRADE DISCOUNT,HALF OF WHICH WAS SOLD TO RAHIM AT 20% ABOVE COST.
• LIST PRICE=5000.TD=2/100 X 5000=100.NET PRICE =4900
• HALF =4900/2= 2450.SALE PRICE=(120/100)X 2450=2940
• PURCHASES A/C ------DR 4900
• TO SHAN A/C                 4900
• ( BEING GOODS PURCHASED AT 2% TRADE DISCOUNT)
• RAHIM A/C ---DR 2950
• TO SALES A/C   2950
• ( BEING GOODS SOLD TO RAHIM AT 20% ABOVE COST)     

• SOLUTION
• SUPPLIED GOODS COSTING RS 2000 TO RAM AND ISSUED INVOICE AT 10 % ABOVE COST LESS 3% TRADE DISCOUNT
• WORKING NOTES
• LIST PRICE  =2000 X 110/100=2200
• LESS TRADE DISCOUNT=3/100 X 2200=66
• NET SALE PRICE =2200-66=2134
• ENTRY:
• RAM A/C ---DR 2134
• TO SALES         2134
• ( BEING GOODS SOLD TO RAM AT 10 % ABOVE THE COST AND AT TRADE DISCOUNT)

1. PURCHASED GOODS FROM A RS 6,000 LESS TRADE DISCOUNT 10%
2. SOLD THE ABOVE GOODS TO SHAM AT ORIGINAL PRICE LESS 5% TRADE DISCOUNT
3. ½ OF THE GOODS RETURNED BY SHAM
4. ABOVE GOODS RETURNED TO A

• WORKING NOTES:
• LIST PRICE =6000
• TRADE DISCOUNT=10%X 6000=600
• NET PRICE =6000-600=5400
• SALE PRICE =6000
• TRADE DISCOUNT=6000 X 5/100=300
• NET SALE PRICE=6000-300=5700
• 1/ 2 OF THE GOODS RETURNED BY SHAM I.E 2850
• ½ OF THE GOODS RETURNED TO A=5400/2=2700

• SOLUTION
• PURCHASE A/C ---DR 5400
• TO A A/C          5400
• ( BEING GOODS PURCHASED FROM RAM AT 10% TRADE DISCOUNT)
• SHAM A/C ---DR 5700
• TO SALES A/C – 5700
• ( BEING GOODS SOLD TO SHAM ON 5% TD)
• SALES RETURN A/C ----DR 2850
• TO SHAM A/C ------2850
• ( BEING GOODS RETURNED BY SHAM)
• A /AC ------DR    2700
• TO PURCHASE RETURN A/C 2700
• ( BEING GOODS RETURNED TO A)

• TREATMENT OF BAD DEBTS
• BAD DEBT MEANS MONEY OWED BY THE CUSTOMER IS NOT RECOVERABLE. IT IS A LOSS TO THE BUSINESS.
• ENTRY WILL BE
• BAD DEBT A/C –DR
• TO PARTY A/C
• VISHAL WHO OWED RS 10,000 IS DECLARED INSOLVENT. NOTHING IS RECOVERABLE FROM HIM. THE ENTRY WILL BE:-
• BAD DEBT A/C ----DR =10,000
• TO VISHAL A/C--------  = 10,000
• ( BEING DEBT WRITTEN OFF AS BAD DEBT)

• PARTIAL RECOVERY
• NANDU WHO OWED RS 40,000 IS DECLARED INSOLVENT. ONLY 40 PAISA IN A RUPEE IS RECOVERED FROM HIS ESTATE.
• CASH A/C       DR   = 16,000
• BAD DEBT A/C   DR = 24,000
• TO NANDU A/C     = 40,000
• ( BEING 40 PAISE IN A RUPEE RECOVERED ON INSOLVENCY)
• WORKING NOTES
• AMOUNT DUE=40,000
• PAID=40% OF 40,000=16,000
• BAD DEBT =40,000-16000=24000

• TREATMENT OF BAD DEBTS RECOVERED
•  RECOVERED RS,23,400 FROM MADAN WHOSE ACCOUNT WAS WRITTEN OFF AS BAD DEBT.
• CASH A/C ---DR =23,400
• TO BAD DEBT RECOVERED A/C =23,400
• ( BEING BAD DEBT RECOVERED)
• BANKING TRANSACTIONS
• CASH DEPOSITED INTO BANK 15,000
• BANK A/C ----DR 15,000
• TO CASH A/C --- 15,000
• ( BEING CASH DEPOSITED INTO BANK)
• CASH WITHDRAWN FROM BANK FOR OFFICE USE FOR 10,000
• CASH A/C ------DR =10,000
• TO BANK A/C ------= 10,000
• ( BEING AMOUNT WITHDRAWN FROM BANK FOR BUSINESS)

• BANKING TRANSACTIONS
• CASH WITHDRAWN FROM BANK FOR PERSONAL USE RS 4500
• DRAWINGS A/C ----DR 4500
• TO BANK A/C           = 4500
• ( BEING AMOUNT WITHDRAWN FROM BANK FOR PERSONAL USE)
• CHEQUE RECEIVED FROM AMAN RS,2300 AND DEPOSITED INTO BANK
• BANK A/C ------DR 2300
• TO AMAN A/C ---2300
• THE ABOVE CHEQUE DEPOSITED INTO BANK DISHONORED.
• AMAN  A/C -----DR 2300
• TO BANK A/C ---- 2300
• EXPENSES OUTSTANDING
• WHICH MEANS EXPENSES ARE DUE BUT NOT YET PAID
• IN THIS SITUATION WE MAKE ENTRY IN THIS WAY
• EXPENSE ACCOUNT -----DR
• TO EXPENSE OUTSTANDING A/C
• ( BEING EXPENSES OUTSTANDING)
• SALARIES OF THE CURRENT YEAR OUTSTANDING RS 13000
• SALARIES A/C ----DR. 13,000
• TO  SALARIES OUTSTANDING A/C 13,000
• ( BEING SALARIES OUTSTANDING)

• SALARIES  OF THE PREVIOUS YEAR PAID 3400.
• SALARIES OUTSTANDING A/C ---DR 3400
• TO CASH A/C      -          = 3400
• ( BEING OUTSTANDING SALARY PAID)
• SALARIES PAID IN THE ADVANCE 2000

• SALARY PAID IN ADVANCE A/C ---DR 2000
• TO SALARY                            2000
• ( BEING SALARY PAID IN ADVANCE)
• INCOME RECEIVED AND OUTSTANDING
• RENT OF CURRENT YEAR DUE BUT NOT RECEIVED RS 30,000
• ACCRUED RENT A/C ---DR =30,000
• TO RENT A/C  --------- = 30,000
• ( BEING RENT DUE BUT NOT RECEIVED)
• RENT OF LAST YEAR RS 24000 RECEIVED
• CASH A/C ---- DR. =24,000
• TO ACCRUED RENT A/C = 24,000
• ( BEING OUTSTANDING RENT RECEIVED)
• RENT OF NEXT YEAR RECEIVED 12,000
• CASH A/C ----DR 12,000
• TO RENT RECEIVED IN ADVANCE A/C =12,000
• ( BEING RENT RECEIVED IN ADVANCE)

• PROBLEM FOR YOU

1. RAM COMMENCED BUSINESS WITH RS 40,000
2. PURCHASED MACHINERY FOR RS 12,000
3. GOODS PURCHASED FOR 15,000 FROM SHAM
4. SOLD GOODS FOR 23.000
5. WITHDREW GOODS FOR PERSONAL USE RS 450
6. SOLD GOODS TO MR B FOR 800
7. PAID BY MR B 760 IN FULL SETTLEMENT
8. PAYMENT MADE TO SHAM BY CHEQUE FOR 8,000
9. AMOUNT DUE FROM A WAS RS 2000 ONLY 60 PAISA IS RECOVERABLE DUE TO INSOLVENCY OF THE MR A