LEARN JOURNAL ENTRY JUST IN FIVE MINUTES ACCOUNTS

• LEARN JOURNAL ENTRIES JUST IN FIVE MINUTES PART 2
  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

• MEANING OF TRADE DISCOUNT,CASH DISCOUNT
• IT IS REDUCTION GIVEN BY SUPPLIER FROM THE PRICE LIST OF GOODS AND SERVICES ( SUCH AS QUANTITY BOUGHT,TRADE PRACTICES. OTHER THAN FOR PROMPT PAYMENT. ALLOWED ON PROMOTE THE SALES AND IT IS SHOWN AS DEDUCTION IN INVOICE .
• TRANSACTION IS RECORDED AT THE NET. TRADE DISCOUNT IS NEITHER DEBITED OR CREDITED . ONLY MENTIONED IN THE NARRATION.
• TREATMENT OF TRADE DISCOUNT
• GOODS PURCHASED FROM SANJAY TO THE TUNE OF 3,000 AND TRADE DISCOUNT =10%
• MRP = 3,000  , TRADE DISCOUNT =3,000 X 10/100=300, NET PRICE =2,700
• ENTRY

·         PURCHASE A/C =2700

·         TO SANJAY A/C =2700

·         ( BEING GOODS PURCHASED RS 3,000 FROM SANJAY AT TRADE DISCOUNT 10%)

• TREATMENT OF TRADE DISCOUNT
• GOODS SOLD TO   SANJAY TO THE TUNE OF 3,000 AND TRADE DISCOUNT =10%
• SIMILARLY IF IT IS OF SALE TRANSACTION

·         SANJAY A/C  -DR =2700

·         TO SALES A/C  =2700

·         ( BEING GOODS SOLD TO SANJAY AT TRADE DISCOUNT 10%)

• TREATMENT OF CASH DISCOUNT
• A REDUCTION GRANTED BY A SUPPLIER FROM THE INVOICE IN CONSIDERATION OF IMMEDIATE PAYMENT OR PAYMENT WITH IN STIPULATED PERIOD. ALLOWED TO ENCOURAGE THE PROMPT PAYMENT.
• IF IT IS GIVEN ON THE SALE THEN IT IS DEBITED AS IT IS EXPENSE FOR THE ORGANIZATION
• IF IT IS GIVEN ON PURCHASE THEN IT IS CREDITED BECAUSE IT IS TREATED AS GAIN OR INCOME
• TREATMENT OF CASH DISCOUNT
• RECEIVED IN 9600 FROM RAM IN FULL SETTLEMENT OF 10,000

·         CASH A/C   DR =9600

·         DISCOUNT A/C  DR =400

·         TO  RAM =10,000

·         ( BEING AMOUNT RECEIVED 9600 FROM RAM IN FULL SETTLEMENT OF 10,000)

• PAID 5600 TO SHAM IN FULL SETTLEMENT OF 6,000

·         SHAM A/C  DR =6,000

·         TO CASH A/C =5600

·         TO DISCOUNT =400

·         ( BEING AMOUNT PAID TO SHAM IN FULL SETTLEMENT OF RS 6,000)

• TREATMENT OF  TRADE DISCOUNT AND CASH DISCOUNT
• SOLD GOODS OF THE LIST PRICE OF 10,000 TO VIKAS AT 10% TRADE DISCOUNT AND 10% CASH DISCOUNT. LIST PRICE =10,000
• TRADE DISCOUNT = 10,000 X 10/100 =1,000
• NET PRICE = LIST PRICE – TRADE DISCOUNT= 10,000-1000=9000
• CASH DISCOUNT =9000 X 10/100 =900
• PRICE PAID BY VIKAS =NET PRICE –CASH DISCOUNT =9000-900=8100
• ENTRY IS
• CASH A/C   DR = 8100
• DISCOUNT    DR= 900
• TO SALES A/C     = 9000
• ( BEING GOODS SOLD AT 10% TRADE DISCOUNT AND 10% CASH DISCOUNT TO VIKAS)
• GOODS PURCHASED FROM  RAHIM LIST PRICE 20,000 AND 10 % TRADE DISCOUNT AND 10% CASH DISCOUNT
• LIST PRICE=20,000
• TD=20,000X10/100=2000
• NET PRICE =20,000-2000=18,000
• CASH DOSCOUNT=18,000X10/100=1800
• NET CASH PAID=18000-1800=16,200
• TREATMENT OF CASH DISCOUNT
• PURCHASE A/C ----DR = 18,000
• TO CASH A/C                 = 16,200
• TO DISCONT A/C            =   1,800
• ( BEING GOODS PURCHASED AT 10% TRADE DISCOUNT AND 10% CASH DISCOUNT)
• PROBLEM
• GOODS PURCHASED WORTH RS 50,000 FROM A 60% ON CASH BASIS AND 40 % ON CREDIT BASIS AT 10% TRADE DISCOUNT AND 10% CASH DISCOUNT
• LIST PRICE = 50,000
• 10% TRADE DISCOUNT=50,000 X 10/100=5000
• NET PRICE =50,000-5000=45,000
• 60% ON CASH BASIS= 45,000 X 60/100= 27,000
• 40% ON CREDIT BASIS= 45,000-27,000=18,000
• CASH DISCOUNT IS AVAILABLE ON  CASH TRANSACTIONS ONLY.
• CASH PURCHASE =27,000
• CASH DISCOUNT=27,000X10/100=2700
• NET PRICE= 27,000-2700= 24,300
• SOLUTION
• PURCHASE A/C -----------DR 45,000
• TO CASH A/C---------------24.300
• TO DISCOUNT A/C----------------  2.700
• TO A A/C-----------------------------18,000
• ( BEING GOODS PURCHASED 60% ON CASH BASIS AND 40% ON CREDIT BASIS AND 10% TRADE DISCOUNT AND 10% CASH DISCOUNT)
• PROBLEM
• GOODS SOLD WORTH RS 50,000 TO A 60% ON CASH BASIS AND 40 % ON CREDIT BASIS AT 10% TRADE DISCOUNT AND 10% CASH DISCOUNT.

• TREATMENT OF CASH DISCOUNT
• CASH A/C -----------DR 24,300
• DISCOUNT A/C-------------DR 2700
• A A/C------------------------DR  18,000
• TO SALE A/C --------------- 45,000
• ( BEING GOODS PURCHASED 60% ON CASH BASIS AND 40% ON CREDIT BASIS AND 10% TRADE DISCOUNT AND 10% CASH DISCOUNT)

• TREATMENT OF PURCHASE RETURN
• ALSO CALLED PURCHASE RETURN OR RETURN OUTWARD
• THINGS WHICH ARE OF INFERIOR QUALITY ARE RETURNED BACK TO SUPPLIER.
• SUPPLIER A/C ---DR
• TO PURCHASE RETURN A/C
• ( BEING GOODS RETURNED OF INFERIOR QUALITY)
• GOODS WORTH RS 1000 RETURNED TO A
• A A/C  ------DR 1,000
• TO PURCHASE RETURN A/C 1,000
• ( BEING GOODS RETURNED TO SUPPLIER)
• TREATMENT OF SALES RETURN
• ALSO KNOWN AS SALES RETURN  OR RETURN INWARDS
• SALES RETURN A/C ---DR
• TO PARTY A/C
• ( BEING GOODS RETURNED  BY THE PARTY)
• GOODS WORTH RS 1200 RETURNED BY A
• SALES RETURN A/C -------DR 1200
• TO A A/C -------------------- 1200
• ( BEING GOODS RETURNED  BY A)
• PROBLEM
• PURCHASED GOODS 1000 FROM NANDA AND SUPPLIED IT TO REEMA FOR 1300 AND HALEN RETURNED GOODS WORTH RS 390  AND RETURNED TO NANDA
• WORKING NOTES
• IF SALE PRICE IS 1300 THEN COST PRICE IS =1000
• 1 AND THEN 1000/1300
• 390-----(1000/1300)X 390 = 300
• JOURNAL ENTRY
• PURCHASE A/C DR 1000
• TO NANDA A/C 1000
• ( BEING GOODS PURCHASED FROM NANDA)
• REEMA A/C -------DR 1300
• TO SALES A/C-------1300
• ( BEING GOODS SOLD )
• SALES RETURN A/C ---DR 390
• TO REEMA A/C        390
• ( BEING GOODS RETURNED TO US)
• NANDA A/C ---- DR 300
• TO PURCHASE RETURN A/C 300
• ( BEING GOODS RETURNED
• 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