Professional Documents
Culture Documents
Journal Entry Example
Journal Entry Example
2 - Stock purchase for sale (cash purchase)= 3,000, credit purchase = 5,000
3 - Wages paid 120,000 (including 20,000 relating to a future year).
4 - Salaries paid 200,000 but due 110,000.
5 - Sales made for cash 600,000 & on credit 800,000.
6 - Depreciation 10 percent on plant & machinery.
7 - Goods costing 20,000 destroyed by fire.
8 - Payment made to creditors to the value of 200,000 at 10 percent discount.
Solution:
1. Dr Cash 8,000
Dr Plant and machinery 3,000
Cr Capital 11,000
2. Dr Purchases 8,000
Cr Cash 3,000
Cr Creditors 5,000
*Note that this is called a prepayment . A prepayment of a future expense is an asset and is
counted as part of debtors - this is because you paid the expense before you should have, so
it's like your business is owed the money right now for paying to early.
Note that prepayments are not really covered on this website, but I do go over them in
my accounting books .
As far as I understand, for journal 4 above, the salaries of 200,000 were actually paid but
another 110,000 are still outstanding (salaries "due" means "owed" or "outstanding").
5. Dr Cash 600,000
Dr Debtors 800,000
Cr Sales 1,400,000
In the end of the day the debit to purchases or inventory both mean less cost of goods sold to
be shown in the income statement .
8. Dr Creditors 200,000
Cr Cash 180,000
Cr Discount Received (200,000 x 0.1) 20,000
The 10% discount which comes to 20,000 is counted as an income for the business. Of course,
only 180,000 is actually paid. This cancels out the entire debt to creditors of 200,000.