Journal Entries Examples

  Following are some examples of  translations and Journal Entries; its analysis is done on the
basis of rules of double entry system:

1. Cash brought in by proprietor as capital Rs. 30000

a) what comes in  business  will be debited 

Cash  has come in business; cash account will be debited in journal entry.
b) Who is giver will be credited 
Proprietor is giver of cash to business but he has business motive and he gives the
money  to  business  as  capital. 
Journal Entry

Cash Account Debit 30, 000

Proprietor’s capital Account Credit 30,000

2. Goods purchased on credit from Mahesh Rs. 5,000

a) What comes in business will be debited

Goods have come in business, so its financial value will be debited with the name of purchase
account. 
b) Name of person is given from whom we bought the goods on  credit, so 1st rule’s second part
will be applied. 

Who is giver, will be credited.

Mahesh is giver, so its account will be credited. 

Purchase account debit 5000

Mahesh account credit 5000

3. Furniture purchased for cash Rs. 10000

a) what comes in business will be debited. In this transaction, furniture came in business, so
we will open furniture account in the debit side of journal entry. 
b) Cash is also  asset  and we paid for purchasing of furniture. 2nd rule’s second part will be
applied.

Furniture Account Debit 10,000

Cash Account Credit 10,000

4. Goods sold on credit to Dev Raj Rs. 1600

a) Dev Raj is receiver of goods, so his  personal account  will be debited.

b) Goods go out, so, goods or sale account will be credited. 

Dev Raj Account Debit 1600

Sale Account Credit 1600
5. Goods purchased for cash Rs. 4500

a) Goods come in, so goods or purchase account will be debited

b) Cash goes out, so cash account will be credited.

Purchase account debit 4500

Cash account credit 4500

6. Goods sold for cash Rs. 2100

a) Cash comes in, so cash account will be debited.

b) Goods go out, so goods or sale account will be credited. 

Cash account debit 2100

Sale account credit 2100

7. Rent paid for shop to landlord 3000

a) Rent is an item of  expenses, so it will be debited. 

b) Cash is an item of asset and it goes out, so it will be credited.

Rent Account Debit 3000

Cash Account Credit 3000

8. Commission received in cash 2000

a) Cash comes in, so cash account will be debited.

b) Commission is an item of income, so commission account will be credited. 

Cash Account Debit 2000

Commission Account Credit 2000

9. Cash deposited into bank 5000

a)  Bank  is receiver of cash, so bank account will be debited. 

b) Cash goes out, so cash account will be credited. 

Bank Account Debit 5000

Cash Account Credit 5000

10. Cash withdrawn from bank for office use Rs. 2000

a) Cash comes in the business, so cash account will be debited.

b) Bank is the giver, so bank account will be credited. 

Cash Account Debit 2000

Bank Account Credit 2000
11. Cash drawn by proprietor from business for personal use Rs. 3000

a) Proprietor is the receiver of cash, but business will give him as  drawing  which is decrease
in his capital, so proprietor’s drawing account will be debited. 

b) Cash goes out, so cash account will be credited. 

Drawing Account Debit 3000

Cash Account Credit 3000

12. Goods given as charity Rs. 1000

a) Charity is an expense of business, so it will be debited.

b) Goods go out, so goods or purchase account will be credited. 

Charity Account Debit 1000

Purchase Account Credit 1000

13. Bad Debts written off Rs. 500

a)  Bad debt  is loss of business due to not paying the amount by our  debtors, so it will be
debited.
b) There is decrease in debtor. We are applying what goes from business, debtor is also our
asset, if he does not pay, and it means this asset has gone from business, so its account will be
credited. 

Bad Debt Account Debit 500

Debtor Account Credit 500

14. Bad debts recovered in cash Rs. 300

a) Cash comes in, so cash account will be debited.

b) Bad debts recovered are an income, so its account will be credited. 

Cash Account Debit 300

Bad Debts Recovered Account Credit 300

15. Carriage paid on machinery ( expenses on purchase of asset ) Rs. 1000

a) Carriage on purchase of machinery is part of cost of machinery, so machinery account will

be debited.
b) Cash goes out, so cash account will be credited. 

Machinery Account Debit 1000

Cash Account Credit 1000

16. Depreciation on fixed assets Rs. 500

a)  Depreciation  on  fixed assets  is the loss of business and every loss will be debited.
b) There is a decrease in asset and we will apply what goes from business on it. So, asset
account will be credited. 
Depreciation Account Debit 500
Fixed Asset Account Credit 500 

17. Carriage paid on the behalf of buyer Rs. 1000

a) This is not our  expenses, but this is increase our  current asset  and its name is debtor, so we
will apply what comes in rule on it. 
b) Cash goes out, so cash account will be credited.

Debtor account Debit 1000

Cash Account Credit 1000

18. Goods given as free samples Rs. 1500

a) Goods are given for advertising, advertising is an expense of business, and so advertising
account will be debited. 
b) Goods go out at the  cost  price, so goods or purchase account will be credited. 

Advertising Account Debit 1500

Purchase Account Credit 1500

19. Interest allowed on capital Rs. 600

a)  Interest  is an expense of business, so it will be debited.

b) There is an increase in the amount of capital. Capital is  liability  account, so increase in the
amount of capital will be also shown in the credit side of journal entry. 

Interest on capital Account Debit 600

Capital Account Credit 600

20 . Interest charged on drawings Rs. 500

a) Decrease in capital or increase in drawing will be debited.

b) Interest on drawing is an income of business.

Drawing Account Debit 500

Interest on drawing account Credit 500

21. Bank charges or interest charged by bank Rs. 200

a) Bank charges are the expenditures of business, so it will be debited.

b) There is decrease in bank balance, so bank account will be credited. 

Bank charge Account Debit 200

Bank account Credit 200
22. Goods lost by fire Rs. 800

a) Goods lost by fire are the loss of business, so loss by fire account will be debited.
b) There is decrease in goods or stock at cost, so purchase account will be credited.

Loss by Fire Account Debit 800

Purchase Account Credit 800

23. Goods insured and a claim is admitted by insurance company in full or in part.

a)  Insurance  company will be our debtor. Transaction has increase in debtors because we
have to get  money  from insurance company. So, this account will be debited. 
b) Decrease in loss by fire, so this account will be credited. 

Insurance company Account Debit XXXX

Loss by Fire Account Credit XXXX

24. Loan taken Rs.1,00,000

a)  Cash  comes in, so cash account will be debited.

b) Lender is giver, so his  loan  account will be credited. 

Cash Account Debit 1,00,000

Lender’s loan Account Credit 1,00,000

25. Interest paid on loan. Rs. 1000

a)  Interest  is an expense of business, so it will be debited.

b) Cash goes out, so it will be credited. 

Interest on loan Account Debit 1000

Cash Account Credit 1000

26. Interest on loan due but not paid in cash. Rs. 500  

a) Interest is an expense of business, so it will be debited.

b) Increase in  creditors  will be credited in journal entry.

Interest on loan Account Debit 500

Loan or Creditor Account 500

27. Investment purchased Rs. 50,000

a)  Asset  in the form of  investment  comes in, so  investment account  will be debited.
b) Cash goes out, so its account will be credited.

Investment Account Debit 50000

Cash Account Credit 50000

28. Cash stolen from office. Rs. 6000

a) Cash stolen from office is loss of business, so this account will be debited.
b) Cash goes out, so its account will be credited.

Loss by Theft Account Debit 6000

Cash Account Credit 6000

29. Cash paid to a creditor in full settlement ( When cash discount is received) Amount
due to Madan Lal Rs. 5000 paid him Rs. 4950 in full settlement.  

a) Decrease in  creditors  = Debit 

b) Decrease in cash = Credit 
c)  Discount  received is income of business = credit

Madan Lal Account Debit 5000

Cash Account Credit 4950
Discount Received Account Credit 50

30. Cash received from a debtor in full settlement (When cash discount is allowed).
Amount receivable from Dev Raj Rs. 1600, received from him Rs. 1570.  

a) Increase in cash = Debit 

b) Discount allowed is the loss of business = Debit
c) Decrease in debtors = credit 

Cash Account Debit 1570

Discount Allowed Account Debit 30

31.Cash received in Advance?

Cash a/c Dr
To Unearned sales revenue a/c

Jan.2   Paid cash to Mohan Rs. 9700 and discount allowed Rs. 400

Mohan Account Dr. 10100

Cash Account Cr. 9700
Discount Received Account Cr.400

Jan. 5 Received Cash from Arjun Rs. 5000 and Discount allowed to him Rs. 100

Cash account Dr. 5000

Discount Allowed Account Dr. 100
Arjun Account Cr. 5100

11 Goods Sold to Hari Rs. 31000

Hari Account Dr. 31000

Sales Account Cr. 31000

Jan. 13 Hari Returned Goods Rs. 1000

Sales Return Account Dr. 1000

Hari Account Cr. 1000
Jan. 15 Received cash from Hari Rs. 28000 in full settlement of his account 
Cash Account Dr. 28000

Discount Allowed account Dr. 2000

Hari Account Cr. 30000

Jan. 21 Sold Goods to Mahesh  of List Price of Rs. 70000 at 10% trade discount. 

Mahesh  Account Dr. 63000

Sales Account Cr. 63000

Jan. 24 Purchased goods from Raj of the list price of Rs. 20000 at 20% Trade Discount.

Purchase Account Dr. 16000

Raj Account Cr. 16000

 prepaid expenses

prepaid expenses A/c Dr

To Expenses A/c

 outstanding income

Outstanding income A/c Dr

To income A/c

 Prepaid income

Income A/c Dr

To prepaid income A/c

 Closing stock

Closing A/c Dr

To Trading A/c

 Provision for bad debts

P & L A/c Dr

To Provision for bad debts A/c

Q. what is Accounts reconciliation?

Reconciliation is a financial tool. It is a documented explanation and analysis of the ending of G.L

Account. It is used for to support business decisions and to avoid surprises.

Q. what is accruals?

Expenses and income should be recorded in same month. Ex: salary (or) in simple way income earned but

not received.

Q. What is corporate bill?

i) Corporate will provide varied services to all hotels.

ii) Hotels would be billed for the services provided by the corporate.

iii) Based on this invoices post the journal debit to expenses and credit to inter-company A/c. once the

payment is made by the hotel to corporate post a journal debit to inter-company and credit to Bank.
Q. what is Mgt fee & Incentive fee?

The calculation of mgt fee and incentive fee is totally based on agreement.

i) Mgt fee calculated on as a percentage of Revenue. And incentive fee calculated on as a

“AGOP”(Adjusted gross operating profit)

Q. Depreciation
Original cost-Residual value
Formula =
Economic value

Q. when invoice is processed (First step)

Expenses A/c Dr
To Liability A/c

ii) When cheque is issued

Liability A/c Dr
To clearing A/c

iii) When cheque is cleared

Clearing A/c Dr
To Operating bank A/c

Q. If gross profit

Trading A/c Dr
To Profit & loss A/c

How to do Reconciliation:

Download dump from bank statement and put it in recon file and take dump from G.L and find matching items and rest of
them will be open items

Month end JE’s:

P –Card: It is also called procurement card or purchase card. It will be given to hotel G.M or A.G.M to purpose of purchase
hotel needs.

11128001: This account shows whether the cheque cleared or not in the bank.
What is accrual: expenses and income should be recorded in the same month ex: sale on credit i.e sale is recorded when
invoice is generated.
Q.What is journal?
It is also called as “Daily record “or “day book”. All the transactions like purchase, returns, sales, cash receipts, and
payments, loans and advances, assets acquired and deposited etc.. first recorded in journal.

Customer A/C dr 75000

Depreciation A/C dr 30000
To asset a/C 100000
To profit on sale a/c 5000

Customer A/C dr 75000

To Asset sales 75000

Asset sale a/c dr 75000

Depreciation a/c dr 30000
To asset a/c 100000
To profit on sale a/c 5000
 What is the difference between P&L account and Trial Balance?
P/l is a statement prepare for the Period showing the profit and loss of the company. where as the
TB shows the actual position of the company as on date.
Pl include only exp and income where as the TB include the asset and lib and Exp and Income