\Ke HAPTER 70 know different types of Source Documents. > Tounderstand the process of creating Journal entry > To understand the Rules of Journalising Source Documents. ~“{norder to record the These documents provide evidence pay in slip, cheque, debit transactions in the books of account, source d of business transaction there. include cash memo, invoice, receipt These documents must be preserved till the period are completed. A source document also serves as a legal evidl Fispute, Accounts are debited or credited on the basis of these docum: common source documents are given as under 1. Cash Memo. When goods are sold or purchased for eash, the firm receive tstiiimemos which’provide details regarding cash transactions. These Co result from cash transactions) become the basi r recording these tran books of accounts. 2. Invoice or Bill. This document is prepared when goods 1 SY eredits"A’sale invoice is prepared to record credit sales. It contains inforn jamie of therparty.to;whom goods are sold, the deschip™ 1h ot old and the t fntukb of dates. The original copy is sent to the buyer ane the duplicate copy is kept a Purchases, made from various suppliers ar future reference evidence of sales for ie supported by credit bills. One make interchargeable and mean the same thin 8. Receipt. When a firm rece ives cash from proof for receiving cash. It is pré pared in duplicate the party making payment and the duplicat document contains the det Hato, amount, NAM Payment. nice but receives it issues a receip s handed over Tt customers the original copy record for future reference oof tho party and the nat 6 is kept as ails such a8 ¢ank for depositing 'e depositer by th, slips for dey ques are at counterfoi] ver 2 specified banker and Payable 5, tin ¢ party to whom the pay made is to be written Re fumns We Pay to’. The date of the Fhedue, the amount both, figures and worgr ately ™ Fee Ea itieldrawer sent be filled in or done Ite 2 eh? drawer must tir y° the! | ep details also on th tobe natell for future record, Sher Sounterfoil forms the sours = docume ' be made in the acesant books. ee of de 6. Debit it Notes. Thea notes ar Prepared when goods are TERS, | Wie to recent Supplier or an additional amount 18 recoverable from a customer. For the party | od ed on AC from whom th Money is recoverabj, this document eecomes debit note and for tee Party ee Who is to recover the amount the document becomes credit note Casually in red ‘ink; 1 Increas When goods are returned Seustomer, a proper credit net. Should be sent to hin 2, Increases i The decision as to which ie pennt lt % be dobited and which, is to be credited is very 3, Increases i important in i i8 Senerally taken by vse ee Ponsible person, usually ere Chief Accountant deaation8 a6 recorded in thn books of Youchers ic. written document, transact ases i basis of Soa Though the small businesses, the ° Posted to the ledger Eqn « ns 5. Increases i day. Journal Y transaction is ‘S posted to the r. The form in or entering a iven below The columns have Practice they are n, Column (1), Year on the been numbered only to make those lever numbered The date of f0p, the col ate, clear to the re, ‘eader otherwise in Fansactions umn is subdivide is writ ten in the fj id into Wo sub-co}2). In this column the account to be debited ay so that it may start leaving few spaces from the me 3 against it near the line L.F. In the next line the a kee any \ written by the word ‘To’ leaving few space from the | and credited are written in date line and the word Dr. is ‘account to be credited is written Seer line of debit entry. Narration or to nag tion is given in the bracket a Figure ome, Seale (Ik indicates the page number of the ledger where the account is opened rawen 78 anit eet rrenithe journals made ieee a foid gr ™uet yet nd posting from the j form fy Columns (4 & 8). In these columns, the amount to be debited and credited ia written the Ay ely mentioning the nature of currency. is namter. tng Riles of Journal GS 7 Note ang Fe recs nave alttaidy been discussed in the previous cha,ter but in order to recaptulate, these are given again Based on Accounting Equation 1, Increases in assets are debits, decreases in assets are credits. 2. Increases in liabilities are credits, decre: 3, Increases in capital are credits, decre 4 Increases in profits are credits, de ases in liabilities are debits ses in capital are debits. creases in profits are 5, Increases in expenses are debits, de Based on Traditional Approach 1. Debit the receiver, credit the giver 2. Debit what comes in, credit what goes out 4. Debit all expenses and losses, credit all incomes and g; Points to be noted before Journalising 1. Capital Account. If the proprietor has introduced cash or goods or business, itis known as capital. It should be debited to Cash/Stock of Gorn Property Arcount and credited to the Proprietor’s Capital Account. It must be clearly un = that the entity of the proprietor is totally different from the business bits, creases in expenses are credits. Property in lerstood 2. Drawings Account. If the proprietor has withdrawn cash or goods from the business for his personal or domestic use, it is called drawings. It should be debited to Drawings Account and credited to Cash/Purchases Account 8. Cash/Credit Transactions. When goods are purchaséd or sold for eashy it is Ti 28 cash transaction. If the goods are purchased or sold on credit i.e. the payment will be made or received after some time, it will be a credit transaction. If nothing is (rentioned whether it is a credit or cash transaction, then it should be treated as a credit Sansaction. For example, goods sold to X for % 2,000 or goods purchased from Y for * 1,000 ete. 4. Casts and Carry Forwards. When journal entries extend to several pages of the Journal, the totals are cast (done) at the end of each page. At the end of each page the words ‘Total C/f (C/f stands for carried forward) are written in the particulars column Against the debit and credit totals. On the next page, in the beginning the words “Total 4 (bit stands for brought forward) are written in the particulars column against theIs. At the end of a specifi 5. Goods given awa; y as Charity, to a particular Person or inst Ifsor ituti al Entry. If there ng on the same day and eit “an be conver para sactions , making a se fe entry for each transact Entry ion, niently recorded in the ied period or on the last page me goods from the ion, it should be del business are bited to Char, ity 4 are two or more t eactions ofa igi her Drivor Cr. account ig common, sy form of one journal ¢ try inst Such entry is a8 compound ,j known Our 1 7. Opening Entry, The ces of the’ previous year are brought forward iq yy ays the es beginning of the year by means of debitie sy EOns COnGEIN. Such entry is mane OD the Pd ee basis of accounting equation i.e. by debiting all assets and c ‘diting liabilities and capit Fiows 2% a account. frould pay ® wo" 20,000 Treatment of GST in Opening Entry. In case of the existing business, the firs eis x parate patty which is passed in new nancial year is to record and bring forward the elo amjebited and balances of previous year's balance sheet This entry is called Opening Entry. Whi, a Cah Be dean cPening entry all assets are DS Ge dually and capital and labile pao Gen eceed individually. Output Coen STVIGST are set-off again Tnpw SSSUSGSTIGST. Any balance i Input CGST/SGSTIGST afte Setting of outputs js Cash debit balance and is shown ar ca. rent asset in balance sheet Any balance in Output CasTsas7 TGST after set-off Input CGST/SGST/GST in Prrpectloriler is credit balance and isch ™m as current liability in Balance She aus the Opening Entry on 1et Apr on the basis of following information Mallable from the books of Mr. tend? Sures] z z To Cash in hand 30,000 Plant 1,00,000 1 Sundry Debtors 50,000 Land & Building 2,50,00¢ oe Closing Stock 60,000 Sundry Crediton, 2,00,000, RGaah, Input IGST Account 10,000 r Input CGST Ave 5,000 Input SGST Ave 5,000 SOLUTION Im the books of Mr. Jitendera JOURNAL Particulars Cash are Sundry Debtors Closing Stock Input IGST ave Input CGST Ale Passed wy an, less 296 10,000 Pur 5,000 |5,000 4,920,000 2,50,000 2,00,000 3,10,000 Capital has been calcula! e oy Suck wet fa ch entry jg we ‘piscount. This discount is allowed by a creditor to x debtor when the latter ting Ij is ® a iabilitigg wee ‘the amount of goods purchased by him either immedi ly or within a spec mag [PAE foram incentive given to a debtor for making an early payment. Thus if the cisti = Tips 2% discount 10F fayment within a month, On a bill of € 20,000, the cult iinen, busi pay % 19,600 ifthe payment is made within a month otherwise he would forward gute py € 20,000 8 ea Ranguntof the bil. This discount is recorded inthe ooks of ccs iOPening Byes anda separate int is opened in the ledger. Being « nominal account discount promote the sale of the business. It should d ment Ac s credited to Purchases Account — 16. Bad Debts. When an amo: e s b insolvency or otherwise, it is a lose fo : Account and credited to Cu stomer’s Accoun 17. Interest Due on Loan: to be paid, it should be debited to interest n 18 Loss of Stock by Fi ‘ : y Fire. If some s stock by fire and cre a from insurance Loss of Stock by dited to pur company, it Fire accoun chases a, an enterprise toa rvices relating te purchast ransactions, some se:agents, commission inyolved. Commission paid to selling/buying rt js of amount i ers for services rendered, commission paid to export-impo ea the vbankers and bro jo Ly ‘p foreign trade, commission paid to a consignee for selling goods on behalf of se commission paid to property dealers for helping in getting the premises on casein or purchase or sale of properties etc. are some examples of commission mmission is a nominal account, when paid will be debited as an expense and credited Ke ested Commission i diferent from discount, Commission is always shown in Ts of account whereas trade discount is not shown in the books. Discount is shase or sale of goods or on discounting the bills or on issue of rally given on purel fern or debentures but commission is always give ting in certain business transactions. a ‘sy “Journalise the following transactions. n to the agents or brokers for bd 2021 be Dag, Jan. tat Rajint started business with a capital of € 50,000 rite te Qnd She purchased furniture for * 5,000 tocay 8rd She bought goods on credit from Vinod for ® 8,000 14th She sold goods to Suresh for * 5,000 Pence ay 15th She received cash from Suresh ® 3,000 the assets, 18th She purchased goods for cash * 12,000 ANY ere 25th She sold goods for cash % 8,000 * debited 1p 28th She paid rent ¥ 1,200 31st She paid Vinod 7 3,000 on account. proprietors (BBM Bangalore, Dec., 2006 Modified) © premig; SOLUTION ess. JOURNAL age/freight and nots To Rajinis Capital Alc $ (Being capital brought in) — count and 2 | Furiture Alc Dr. | 5.000 To Cash Ale 5,000 (Being furniture purchased) a. 3 | Purchases Ac Dr.) 8,000 To Vinod's Ale 000 {Being goods purchased oncredt) * 44 |'Suresh’s Alc Seo To Sales Alc oo (@eing goods sold on credit) +48 [Cash Are era To Suresh's Ac Sa | (Gash received from Suresh) "18 | Purchases Ac Dr | 12.000] so0 To Gash Alc forcash) (Goods purchaseTo Salos Ale (Being goods sold for cash) Rent Aic = To Cash Ne (Being rent paid in cash) Vinod's Alc = To Cash Ac (Being cash paid to Vinod) Grand Total ILLUSTRATION 5 ‘Journalise the following transactions in the books of Tmran 2021 June z 1 Started business with cash 000 18 Cash received from Arvind Walia 1 Paid into bank 25,000 3,760 and discount 2 Goods purchased forcash 15,000 __allowed to him 40 8. Purchase of furniture and 21 Withdrew from bank for payment by cheque 5,000 private use 1,000 Sold goods for cash 8,500 Withdrew from bank for use Sold goods to Arvind Walia 4,000 -—_in the business 5,000 Goods purchased from Paid telephone rent for one year 400 Amrit Lal 7,000 28 Cash paid to Amrit Lal in full Goods returned to Amrit Lal 1,000 _settlement of his account 5,940 Goods returned by Arvind Walia 200 30 Paidfor: Stationery 200 Rent 1,000 Salaries to staff 00 JOURNAL OF IMRAN Dr. Gr. Particulars LF.| Amount| Amount (Cash Account (000 To Capital Account (Being cash brought in to start business) Bank Account To Cash Account (Being cash paid into bank) Purchases Account Journal To Cash Account i) Goo | (Being goods purchased for cash) R Fumiture Account Dr. k To Bank Account Res Tec (Being purchase ol furniture and payment made by cheque)Cash Account To Sales Account (Being goods sold for cash) 8 | Arvind Wal Or, 4,000 To Sales Account 4,000 (Being goods sold to Arvind Walia on credit) 40 | Purchases Account Dr 7,000 To Amrit Lal 7,000 (Being credit purchases from Amrit Lal) + 42 | Amrit Lal Dr 1,000 To Returns Outwards Account 1,000 (Being goods returned to Amrit Lal) 8,500 » 45 | Returns inwards Alc Or. 200 To Arvind Walia 200 (Being goods returned by Arvind Walia) * 48. Cash Account Dr 3,760 Discount Account 40 To Arvind Walia 3,800 (Being € 3,760 received from Arvind Walia and © 40 discount allowed to him) * 21 | Drawings Account OF. 1,000 Cash Account Or, 5,000 To Bank Account 6,000 (Being cash withdrawn trom bank for personal use and for use in the business) * 25 | Telephone Rent Account Dr 400 To Cash Account (Being payment of telephone rent) * 28 | Amrit Lal Dr, 6,000 To Cash Account To Discount Account (Being cash paid to Amrit Lal and discount allowed by from Arvi count Waa | bank for 4 bank for use bi rent for oneyear 4p arit Lal in fal Saccount 54g, ionery ” : 1 ries to staff —25t SY DT EE Aes 5,940 60 fim) ri * 30 | Stationery Account Dr 200 Rent Account Or. 1,000 Or 2,500 Salaries Account To Gash Account (Being payment of stationery, rent and salaries) ~ Total 1,30,600 |", DS 6 Journalise the following transactions : (©) Goods worth % 5,000 given as charity (ii) Received % 9,750 from Ramkrishan in full s (iii) Received a first and final dividend of 60 paise receiver of Mr. Rajesh, who owed in © 10,000. jettloment of his account for € 10,000, in the rupee from the officialJOURNAL (iv) Sold to £10,000 loss 3% cash din ld to Mohan good worth € £0,000 los 3% cash discount and reeaived € 9,709 Net on account hy cheque (©) Bought from Raman & Go. goods worth © 60,000 at 10% trade d ight from Raman & rade discount and 2% cash discount terms and paid them half the amount in ash, "4 (vi) Paid & 600 in eaah as wages on installation of machino, (oii) Supplied goodn coating € 1,000 to Mohan insted invoice at 20% above coat town trade discount (viii) Goods worth © 2,000 were used by the proprietor for personal use (ix) Goods uninsured worth € 8.000 wore dostroyed by fire SOLUTION sold JOURNAL 7 sit : . 7 Boul (9 Jenarty Ne or 5,000 7 sold To Purchasos Ac 5000 1 on (Boing goods givon as charity) OE (w [Cash ac Dr 9.750 9. Dra Discount A’e br 250 es for ti To Ramkrishan 10,000 (Boing cash rocelved and discount allowed) Goo (i [Cash Ae Dr 6,000 for Bad Dobts A/c Or 4,000 9 Cas To Rajosh's Ac 10000] | 10 Sold (Boing 60% cash recolved and balance treated as bad a Bair dobts) thr (i) [Bank Ae Dr 9,700 a Cas Discount Av Dr 304 a To Sales 10,000 (Being goods sold & cheque received atter allowing 14 Cas discount) dod) (w | Purchases Are Dr 45,000 Ca To Raman & Co. 22,500 full To Discount received 450 To Cash Ne 220s} 18 Bal (Being purchases made and half amount paid in cash Adi ftor recoiving 2% discount) ea (vy [Machinery Dr 00 ToCash oe een (Boing wages paid on installation of machine) (vin. | Mohan Ave Dr 1.140 To Sales Ale 4140 {Being goods of * 1,000 supplied to Mohan at 20% fnbove cost loss trade discount 5%) (vit). | Drawings Arc ; a pela Puchases Nc 7 00 | aoe {Being goods used by the proprietor for personal use) 7 (i) | Goods Lost by Fire Avo To Purchasos Ale Ks 8,000 {eiog goods of € 8,000 destroyed by tre) 8,000a 3 — it rjournalise the following transactions ve E fey a ed business with cash 5,00,000 18 Purchase of a Scooter 4 Purchased furniture for cash 20,000 for cash 30,000 {cash Purchase 29,000 20. Sold goods to Gupta 16,000 § Deposited with bank 30,000 fold to Natin 4,000 © Bought from Prakash 40,000 24 Electricity bill paid 1,000 ai Sold to Nath for cash 28,000 Cartage paid in cash 100 me + Stationery purchased 1,000 24 Repairs to Scooter, Paymen ") 7 Bought from Sunil 13,000 not yet made 500 Sty] 7, Sold to Banerjee 16,000 26 Payment ofcash for petrol 1,600 9 Rent for two years paid 26 Purchases of goods for cash 12,000 oa in advance 24,000 26 Purchases of Office Equipment 9 Drawings by the proprietor for cash 25,000 or) for household expenses 8,000 27 Repairs bill paid in cash 500 Goods taken out by the proprietor 28 Gupta returns goods 1,000 = for domestic use 5,000 31 Depreciation in furniture 2,000 =o 9 Cash withdrawn from Bank 25,000 Depreciation on Scooter 3,000 109m} 10. Sold te Mittal on credit 18,000 31 Salary toclerk outstanding 2,000 11 Purchases made, payment 31 Adjustment for the through cheque 5,000 month's rent 1,000 sed 14 Cash received from Prakash 31 Bank charges for the month 100 oY a on account 10,000 31 Interest on capital for 14 Cash paid to Sunil after the month 10,000 deduction of discount € 1,000 12,000 Salary to be credited to 00 IT Cash received from Mittal in proprietor 5,000 2a full settlement of his account —_—17,000 31. Sunil!agrees to take some 43) 18 Balance becomes insolvent. defective goods purchnsed ze A dividend of 60 paise in a from him and rupee is received 8,000 immediately refunds the money 400 ol al JOURNAL LF] Devit | Croat a —— Amount] Amount 4) ooo | , S Jian. 2: | Cash Account oe Be aca obal To Capital Account 0} a] (For cash brought in by proprietor as his — ae Man.4 | Furniture Account 20,000 To Cash AccountPurchases Account To Cash Account (For purchase of goods for cash) Bank Account is To Cash Account (For cash deposited in bank) © | Purchases Account To Prakash's Account (For creat purchases of goods in wade, Prakash being supplier) Cash Account To Sales Account (For cash salos made to Nath) Stationory Account To Cash Account (For purchase of stationery for cash) Purchase Account To Sunil's Account (For credit purchases of goods to Sunil) Banerjeo's Account To Sales Account (For credit sales of goods to Banerjee) Fiont paid in Advance Account To Cash Account (For rent paid in advance) Drawings Account To Cash Account To Purchases Account (For drawings in cash and goods made b; Cash Account To Bank Account For cash withdrawn for Bank) n Mitia's Account To Sales Account (Forsales toMitialon credit) Purchases Account To Bank Account (For purchases of Cash Account To Prakash's Account (For cash received from Prakash) To Cash Account To Discount Account Discount Account To Mittal's Account (For cash }oods, payment made by means of cheque) Sunit's Account —— Dr 40,900 10,000 13,000 17,000 1,000 18,000 5,000 10,000 12,000 1,000 1,000 28 a a o yar&, ola “n 00 2am) 000 Ja 000 "3a 000 W8eoe| 000, on) 200 Bom 50m) 00 25.001 00 16,0 0 sot) | soa 0) 20 o | 00 | “a + 28 est post 3 from Banerjee on his Insolvency and . (exer of 3 bad Se) Dr or AOU Se Cash Account ‘To Sales Account {rorcredt sales made to Gupta for¢ 16 (000 and to Nitin sty Charges Account Cartage Account ‘To Cash Account (Forelctic charges, catage pad) _ Repairs Account ._ Fo Repairs Outstanding Account (For rpairs charges, outstanding) _ Petrol Expense Account To Cash Account (For petrol expenses paid in Purchases Account To Cash Account (For cash purchases) ‘Office Equipment Account To Cash Account For cash purchases Repairs Outstanding Account "To Cash Account For repairs outstanding paid) _ Sales Returns Account To Gupta's Account (For sales returns from Gupta) Depreciation Account To Furniture Account (For depreciation on furniture) ____— Depreciation Account (Scooter) ‘To Scooter Account (For depreciation on scooter) _— Salary Account "To Salary Outstanding Account (For salary outstanding) —__ Fient Account "To. Rent Outstanding Account (For rent outstanding) Bank Charges Account To Bank (For bank charges) ~ Account "Or. Or Dr Or. 16,000 30,000 30,000 16,000 4,000 20,000 1,000 400 1,100 500 500 4,500 1,500 42,000 32,000 25,000 500 4,000 2,000 3,000 2,000 4,000 100Interest on Capital Account Or. ee Salary to Proprietor Account Or. 5.000 To Capital Account 15,000 (For intorest on capital, © 10,000 and salary for the Proprietor credited with ® 5,000) * 31 | Cash Account aw r Or 400 To Purchases Returns Account 400 (For cash received from Sunil on retum of some det {900ds s0ld to him) Accounting Treatment of GST while passing Journal Entries Whenever a transaction happens where GST is to be paid or collected, it will have an impact on the Journal Entry also. GST paid shall be debited and GST collected shall be credited. That is, Input GST is debited and Output GST is credited. Following are the examples of Journal Entries to passed when GST is paid or collected (@ Purchase of Goods Purchases A/c Dr. Input CGST Ave Dr. Input SGST Ave Dr. To Creditors A/c (Being Intra-state purchases made) Note : In case purchases are made inter-state, then instead of CGST and SGST A/c, IGST A/c shall be debited. (i) Sale of Goods or Debtor's A/c Dr. Be To Sales Ale ‘To Output CGST A/e (citi) Jour ‘To Output SGST A/c Out (Being intra-state sales made). Note : In case of vales are made inter-state, t) instead of CGST and SGST A/c, IGST Ae Be shall be credited ees (iii) Purchases Return eo Creditor’s A/c Dr. To Purchases Return A/c ‘To Input CGST A/e ( To Input SGST A/c ) Set. or (To IGST A/c) a (Being the purchases return) (iv) Sales Return Rs Sales Return A/e Dr. ey ees Output CGST A/c Dr. Set-o Output SGST A/c Dr. O or (Out IGST Ave) Dr ‘To Debtor's A/e B (Being the Sales Return)purchase of Fixed Asset (oP ixed Asset Ale be Input CGST A/c ne Input SGST A/c 2 og Anput IGST Ae) = ‘To Vendor's Alc (Being Fixed Asset purchased) (oi) Expenses Made Rent Ae oe Electricity Expenses A/c “a Input CGST Ale me Input SGST A/c a To Cash/Bank A/c (Being Rent and Electricity Expenses paid) Journal Entry for free samples distributed, goods stolen, goods destroye by fire, drawn for personal use by proprietor moar ce Advertisement A/c Dr. Loss of Goods in Fire A/c Dr. Loss of Goods by Theft A/e Dr. Capital A/c ; To Purchases A/c iST Ale, 0ST 4, To Input CGST A/c To Input SGST A/c or (To Input IGST A/c) (Beings goods distributed as samples, destroyed in fire, by theft and drawings T (oi i Gye (viii) Journal Entry for Setting up of Input CGST against Output c Output CGST A/e Dr. To Input CGST ST A, 16st (Being the input GST set-off against Output GS’ (ix) Set-off Entry of Input CGST against Output IG: Output IGST Ave To Input CGST A/e (Being the input CGST (x) Set-off Entry for Input SGST against Output SGST Output SGST A/c Dr To Input SGST A/c (Being the input SGST set-off against Output SGST) (xi) Set-off Entry for Input SGST against Output IGST Output IGST Ave Dr. ‘To Input SGST A/e (Being the input SGST set-off against out Dr. off against Output IGST put IGST)off Entry for Input IGST against Output 1G8T Output IGST Ae Dr. ie To Input IGST Ae top (Boing the input IGST seL-off against Output IGS) BI (xiii) Payment of GST to Government Ibe Output CGST Ave Dr Ae Output SaST Ave Dr ai Output GST Ave Dr m To bank Ale Being the GST payable deposite lise the following transactions ® Bought goods for ® 60,000. CGST and SGST paid @ 6% eae (i) Bought goods trom Rajeo fr € 30,000 plus CCST and S08 a 6 acy (it) Purchased goods from Mano} for €40,000 plus CGST and sag at e payment made through cheque % each and st (iv) Sold goods to Manish for ® 1,50,000, charged COST @ 6%. ana Sesst @ on Cle (0) Sold goods for € 16,000, charged CGST and SCS @ 6% act, (ot) Sold goods for €60,000 to Anita, charged IGST @ 12% and payment recng through cheque. 7 (ui) Laptop purchased for € 60,000 by Raj & Co, for office use, charged 1680.@ gq and made payment through cheque a (ul) Free samples were given from purchased costing *5,000 on which COST ag SGST @ 6% each had been paid (ix) Telephone bills paid ® 4,000 plus CGST and SGST @ 6% each G2) Purchases costing € 10,000 on which CGST and SGST @ 6% was also paid wen given as donations in Old Age Home. i (i) Goods costing € 30,000 on which IGST @ 12% had been paid were destroyed» floods. These goods were insured and the Insurance Company admitted theca « for only ® 20,000 van} a Gli) An old machinery was sold for € 15,000, received cheque and charged CGST wt SGST @ 6% each. SOLUTION JOURNAL ( —|— LE] On) [_@ s ()| Purchases Ave x soo 0) Input CAST We 5 ae \ Input Sa8T We = an ' To Cash ic aa Sone geet purchased for cash, paid CGST andach, To Output CAST Avo ees To Output SABT Alo a ihe goods vold to Manish, chargod COAT and SOST © 6% aag {gat a o> onc) iy and SGST@. oa wl orm Ae . ach, > and payment reg » charged 1087 55 a] )0 on which CGST a ach, 6% was also paidve paid were destroyed any admitted the de xz ind charged CGST# wish —_ == wn] ean 89 he goods given as sampla, Input CST and input (4) Tolophono Exponsos Ac Dr. Inout COST Ajc Dr. oa Sa8T Ao 5 o rs Toba A onthe poo purchased hom Mano) a pyinnt ero che) oa To Output CAST Avo To Output SAST A/o- {nang tho goods Hold for cash, charged © Gowen dank Wo Or To Séles Ae ‘To Ouput GST Ave (Qaig tho goods Bold to Anta, charged IGS @ 12%) aT and SANT Laplon Alo br np a iast Mo by ToBank Ao (Going he Laptop purchased, paid (G97) Avortsomant Mo Dr ToPurchasos A/c Toinpul CST Ave Tolnput SST Alo ST dobiod atthe timo of purchanos is now rovorsod) Dr ToCashiBank Aro ang th telephone by 000 400) 1,006,000 17/000 7,200 67,200 300 300 4,000 240 240 4,480in) or 11,200 | To Purchases A/c wt To Input C@ST Ave a : (Being the goods given as donation, Input CGST and input c SGST debited atthe time of purchoaee reversed) i (x) Insurance Co, a Or. 20,000 Loss of Stock by Flood Ave Or. 13,600 To Purchases A/c 30,000 To Input GST Ave 3,600 Trang the goods destroyed by food, Inut IGS reversed Giese insurance company admitted claim of 20,000) in the journal (xi) Bank Ae Dr. 16,800 (i) The 5 To Machinery Ate 15,000 transactions To Output CGST Ave 900 may be avail: To Output SGST Ave (Being the old mi lachinery sold for ® 15,000 CGST and Sst @ 6% gach) Advantages of Journal Important advantages of Journ: 900 (iii) It be and charged urnal to th al are given below : (© It provides a chronological (i.e Provides permanent record () lt provides the information of del make it understandable properly datewise) record of all transactions and hence bit and credit in an entry and an explanation to 1. What 2 What ii) It reduces the possibility of error as both aspects of a business transaction are 3. What i Traian side by side. There is a possibility of error of monearn 88 debit or credit if 4. What the accounts are written up directly. 5. Define Gv) It eliminates the need for a reliance on memory of the accounts keeper. Some & What i pransactions are of a complicated nature and without the journal, the entries may 7. What j be difficult, if not impossible. & Whon (0) Journal provides information relating to the following aspects What (@) Credit sale and purchase of fixed assets, investment or anything else not dealt 10. What j in by the firm. L. State t ©) Special allowances received from supplier or given to custome 12. Give t (©) Writing off extra-ordinary losses viz. losses due to f , earth quakes, theft ete 13, What and bad debts. 1. athe! (d) Recording reduction in the value of the assets i.e. depreciation. 15. What i (©) Receipt and issue of bills of exchange, promissory notes, hundies and their 18. State t dishonour, renewal etc (unless separate books are kept for such transactions) 17. What 'P Transactions with Bank (unless the Bank Column added to the Cash Book) 18. What i {) Income earned but not received in cash, 19. State tiy ‘tions and besg 1 explanation transaction a debit or credii 3 keeper. Sox he entries a (h) Expenses incurred but not yet paid for in ¢ entries. (@Mransfer entries viz. posting total of subsidiary books to the ‘ash and other similar adjusting respective See ean ledger at the end of every month, trereh profit or loss to the Profit and Loss A/e Drawings A/c. to the Capital Account r of nd net profit or net loss and at the end of the trading period, and {j) Closing entries—entries to close the books and profit & loss account. Limitations of Journal _ j at the time of preparing trading I Following are the main limitations of the journal; {@) The journal will be too long and becomes unwieldy if all trans, in the journal. (i) The journal is unable to ascertain daily transactions are directly recorded in may be available. \ factions are recorded cash balance. That is wh @ separate cash book so that dail (ii) Tt becomes difficult in practice to post each journal to the ledger. Hence in order to make the transactions are recorded in total in different books ME UST10ns a 1. Whatis a Cash Memo ? What is an invoice ? Is it a legal document What is meant by a Receipt ? 4. What is pay in slip? 5. Define cheque. How will you fill up a cheque ? 6. What is debit note ? % What is credit note? 8. Who makes credit note and when ? 9. What is meant by Journal ? 10. What is a journal entry ? (BBM Bangalore, Dec., 2007 & 2008) 11. State two advantages of Journal and every transaction from th accounting easier and systemati 12. Give two limitations of Journal 13. What are compound Journal Entries ? Give an e: 14. Is the Journal a book of Original 15. What is an opening entry ? G 16, State the importance of journal, (BBM, Bangalore) 17, What is opening entry ? Give an example. (BBM, Bangalore) 18, What is narration ? Why every journal entry should have a narration (BBM, 19. ‘State the different classes of Account and the corresponding ple intry ? walore) rules for debit and eredit 8 angaloreyCS J What is meant by source document ? plain briefly various source documents, 2 What do you mean by Journal ? Why init called the book of original entry ? 3. Give the rules, advantages and limitations of journalising Practica PROBLEMS 3S pu 1st April, 2021, the position of Mathur was as follows Payable 400; Cash at Bank © 5,500; Owing to Creditors, ® ‘What was the amount of M Ans. [Capital 7 16,500). Stock in Han 504300 Plant and Machinery, 7 4,000; Owing 500; Investments € 2,000; Loan from 8, Sethi; © Pocy athur's capital on this date ? Pass the opening 2. Journalise the following transactions 2021 z 2001 : tan 3 Received cash fromRam 15,000 Jan 17 Received from Li eh 4 Purchased goods for cash _2'509 20 Bought furnitur 11 Sold goods to Hari 3,200 * 27 Paid rent 48 13 Paid Ramesh 1400 * 30 Paid salary 0 Ans. [Total of Journal 7 26,980) ‘ S Transactions of Ramesh for April, 2021 are given below Journali q 2021 April 1 Ramesh started busi 2 Paid into Bank Apri ness with cash 4¢ 00 24 Received from Krish 28,000 lowed him 2 5 3 Bought goods for cash 2,500 28 Paid Shyam Cash 4 Drew cash from Bank for office 1.100 Discount al 225 15 Sold to Krishna goods on credit > the month 8, 20 Bought from Shyam goods on credit Ans. [Total of Journal * 93,850). 4. Journalise the following transac 1 2021 Jan, 1 Started business with cash 2 Paid into bank 3 Bought goods from M/ & Co. on credit 4 Purchased furniture 36,000 Diss 's Singh Purchased adding machine is typewriter 8400 by them 456 feayment in all cases made by cheque 31 Paid for : Electric ¢ $100 6 Paid for postage 215 Paid salar 2 8 Sold goods for cash 5400 Paid rent by ck 2 9 Sold goods on credit to M/s Sharda & Co, Ans. (Total of Journal ¢ 1,69,515),m Krishna 2.109 discount “ Cash 400 wed 5 rthe month 80) Co 10m ass oo eats tse exitrtctine © 10,000 esas Cree tcn ae cere ea oeea, ora daed oe €,00,000 out af wtich cheque as issued for € 60,000. Pee ee ete cae eoy, Det fr €2,00000, Fe 00 ty chaces fom Sentony fs eivement of he acount FP a eto ca are decisis fal cetera creer ofa Peete tine of © 90,000 was purchased fs rte ten La, Moores tachange fan old machine valued a" 50,000, He gave chs anger = aes fel) Purchased teschinery fos Ro Shyama & Co Deli fer € 150,000 on cet les) Depretistion of 15 000 wen provided os mice: een Fe eet et gon x C8000 aa Ye feearaumes ices te [GA disque erocunting to £50,000 deposited in the bon from bi ered en {CGST and SGOT @ 5. each is fo be levi on intestate (within the rata par snd ele) wile OST soe lao ue and a building 6. Journalise the following transactions in the books of a trader 2021 z 2021 z Dee. Dee. 1 Started business with cash 50,000 22 Cash received from Naresh Kuma: 3 Goods purchased for cash 30,000 in full settlement of his account 7 3 Furniture purchased for cash 5,000 Cash paid to Vinod Kumar 7. Sold goods for cash 10,000 ind he allowed discount, 9 Sold goods toNareshKumar 8,000 28 Cash paid for purchase of stationery 250 12 Goods purchased from 31 Paid office rent 800 Vinod Kumar 5,000 31 Goods returned to Vinod Kumar 500 16 Goods sold to Anil and allowed 31 Paid salaries to staff 900 him 10% trade discount 6,000 Ans. [Journal Total 7 1,25,850]. 7. Enter the following transactions in the Journal of Viswanath for the month of M 2021 2021 % 202 : Mar. Mar 1 Viswanath commenced 10 Received interest from Mukund 2,000 business with a capital of 30,000 11 Deposited eash into Bank 6,000 2 Bought Machine: 6,000 14 Paid cash to Jai Simha € 2,900 in 3 Bought goods for cash full settlement of his account from Madan Lal 500 16 Sold goods to Venkat 4,000 3 Sold goods for cash to Giri 4,000 Venkat settled his account by cheque 4 Purchased goods from Jai Simha 3,000 and deposited with the Bank 3,890 6 Cash Sales 5,000 29 Paid rent by cheque 500 Ans. (Journal Total 69,000), 8 Journalise the following transactions in the books of Ravi 2021 © 2021 dan. Jan, 1 Started business with cash —_1,00,000 21. Withdrow from bank for 1 Paid into Bank 50,000 personal use 20 2 Goods purchased for cash 90,000 ‘Withdrew from bank for use aia in business use 3 Purchase of furniture and Pala telephone rent forene your 2,200 payment by cheque 10,000 2520,000 28 Cash paid to Ajay in full & Sold goods to Ramesh 10,000 settlement of his account 12 Goeds Purchased from Ajay 15,000 81 Paid for stationery ¢ 4,400, 1g, Goede returned to Ajay 1,000 rent ® 2,000 and salaries ¢, 1g Gords returned by Reesesh 500 stat? 5,000. 18 Cash received from Ramesh * 9,300 and discount allowed to im t Ans. (Journal Total ¢ 2,86,600). a Journalise the folt 2021 July 1 Business started with & 1 00,000 and gash deposited in Bank 60,000 2 Machinery Purchased from, Aon credit = 20,000 Furniture purchased from B for cash 12 Goods sold for cash ¥ 20,000 Ans. [Total of Journal z Personal use of the proprietor 2,72,500). 10. Journalise the following "Tansactions in the books of Rama & Co. é 2021 2021 x Jan, 1 Business started with 7 50,000. Cash deposited in ik 7 20,000. Goods purchased for ? 10,000 2 Furniture Purchased for cash ? 3,000. Office stationery purchased for cash % 2,000. 3° Goods purchased from X % 20,000. 5 Goods sold to Y = 25,000. Paid rent % 1,000. 8 Paid for repairs @ 800, 9 Paid for advertisement 7 1,500. Cash paid to X % 10, 000 and discount received 2 50. 10 Goods purchased from Z = 9,000. Goods purchased in cash from A = 6,000. 15 Cash paid to Z 2 8,800 in full settlement of his account. Ans. [Total of Journal ¢ 2,25,950]. 11. Journalise the following : lowing transactions of M/s H, ari and Sons, 2021 July Te, Purchase of goods for cash ® 10,090 18 Cash received from Y. 20 Cash paid to X * 8,000 25 Cash withdrawn from bank ? 28 Advertisement expenses ? 5,000 30 Office Stationery purchased for ¢ 31 Paid Rent 7 1,000 81 Cash withdrawn fh om bank for t Jan, 16 Cash received from Y ¥ 24,500 in full ttlement of his account 20 Goods sold to B for ® 6,000. Goods purchased for & 9,000 25 Cash withdrawn from Bank = 8,000, Cash paid to X = 4,000 and he ell us a discount of ® 100, 28 Cash received from B = 3,000 and he was being allowed a discount of € 200 30 Cash deposited in bank € 4.000, 31 Cash paid for electricity ® 400, Cash paid for salaries ? 1,000. Wages paid & 500 Rent paid @ 400. ® Commenced business with cash % 30,000, (i) Paid rent in advance ® 500. (ii) Purchased goods for cash ? 15,000 and for credit & 10,000, @) Bought Motor Cycle for personal use for ¢ 6 000 usiness money. and the payment made out of (0) Received cash for a bad debt written off last year 7 100, (wh rupee Goods (vit: che oD Sen Paid ip Sale o 39 th) Sold @ Ram ) Ws 0" reali Ans, (Total ¢# a debtor of the firm became insolvent. A first and final payment of 60 paise in a va Se alent x ‘worth € 500 were taken away by the proprietor for his Ua) cae of € 4.900 was received from etn nestnae Sl at real oe A ched due from him, The cheque was deposited into bank on the same dey Aer €5iays the bani intimates the dishonouring of Mohan's cheque nt ANT jouralise the following transactions: Bought goods on credit from A 2,000. (8). Goods returned by B 7 250. (@) Paid carringe inwards ¢ 50, ; (a) Cheque £700, received from C in settlement of « debt of ¢ 750 retu te) te) Paid insurance premium € 150 {(). Sale of typewriter for € 1,500. G) © 1,250 owing by M written off as bad debt. ati (h)_ Sold goods 7 1,250 to X on credit. = Pere 2 86a Pave 2775 In fl settlement. ay G) Mis A & Co. who owes © 6,000 becomes insolvent. Only 30% ofthe amount due is ne (&) Withdrew for domestic use 900. ay () Issued cheque in favour of M/s Kashiram and S machinery € 7,500. (m) Paid Rao and Co. 7 490 in full settlement of a debt of * 500. ‘ans. [Total of Journal ¢ 24,950). 15. Parkash started his business with the following assets and liabilities at 2021 Jon. 1 Cash in hand Stock in hand Debtors: Khanna Bros. Nirman & Co. Creditors: Kripal Bros. Mitra Sen & Co, 5,000 His transactions for the month were Jan, 2 Sold goods to Karmakar subject to a trade discount of 10% = 4 Received from Nirman & Co. Discount allowed = 8 Settled Mitra Sen & Co's account deductin * 10 Purchased stationery articles * 12 Paid rent for the month 0 * 18. Bought goods from S. K. & Co. 16 Paid Kripal Bros. in full settlement of account * 90. Withdrew cash for personal expenses 500 + 94 Tetued a Credit Note to Mr, Karmakar for the goods damaged in transit 0%) = 25 Returned goods to S.K. & Co. and receives ” > 29 Paid S.K. & Co. on account Discount allowed * 29 Cash sales = 31 Paid salaries Enter the above transactions in the Journal of Prakash nt @) ns on account of purchase of a g 5% for cash discount .d their Credit Note x 10,000 Ans. [Total of Journal 7 1,87,500)-14. Journalise the following transactions in the books of Ram Naresh. October, 1, 2021 ape Assets : Furniture ® 5,000 ; Machinery, € 10,000 ; Stock € 4,000 ; Cash in hand : Cash at bank € 7,450 ; Amount due from Ramesh ? 1,000 ; and amount due from gy c % 2,000. t Liabilities : Amount due to Ram & Co. ® 4,500 ; Amount due to Ranjeet & Co, 2 . and amount due to Shyam Sunder ® 1,500. (rot 2021 z= 2021 ? BPS pgs Oct. 1 Purchased goods from Oct. 25 Cash purcha Bn) Ajey Kumar 4,500 ” 27 Goods worth 7 500 * 3. Sold goods for cash 1,500 were damaged in transit © ” 5 Paid to Himanshu by a claim was made on the cheque 5,500 railway authorities for the o * 10 Deposited in bank 2,800 same id * 18. Sold goods on credit to * 28 Suresh is declared insolvent « Mukesh 1,700 and a dividend of 50 paise in ° 15. Paid for postage 100 the rupee is received from him f * 16 Received cash from in full settlement Rakesh 2200 * 28 Bought a horse for ? ” Paid telephone charges 2,600 and a carriage for 17. Jou 7 18 Cash sales 15 Z 1,200 for delivering * 20 Purchased government goods to customers. Sati securities 5,000." 30. The horse bought on Oct Oct. 22 Purchased goods worth 29 died, and its carcase was % 16,000, less 20% a for F 100. trade discount and 5% Oct. 31 Allowed interest on capital cash discount from Malhotra 10% p.a. for one year & Co. for cash and supplied ” 31 Paid for them to Ramesh & Co. at list Salaries : 7 1,500 rice less 10% trade discount Rent : 7 600. Ans. [Total of Journal 7 1,11,950). ( 15. Journalise the following transactions in the books of a trader x April, 2021 Debit Balance ; Cash in hand t 16,000; Cash at Bank ¢ 5: ¥ 40,000; Furniture Z 8,000 and Building ® 20,000. Debtors; Vijay ? 5,400; Anil * 3,000; Ashwani © 4,000; Anupam ¢ 3,600. 7 200, Creditors : Anand % 10,800; Arya & Co. ® 15,400 % 20,000 2021 April 1 Purchased goods worth € 10,000 less 20% trade discount and 5 * 8 25,292 received from Vijay and allowed him discount ® 108 Jan. 5 Bought 100 shares in Bharat Ltd. @ & 30 per share, b * 8 Goods worth f 1,000 were damaged in tran authorities for the same * 10 Cash % 10,584 paid to Anand and discount allowed by * 21¢ * 13. Received cash from railway in settlemen * 15 Anupam is declared insolvent and a divi from him in full settlement 7 18 Sold 40 shares in Bharat Ltd @ € 36 per share; broke * 20 Bought a horse for % 4,000 and a carriage for customers * 22 Paid for Charity * 202 ; Postage ¢ 400 nd Madhu d Balwant Rai 7 10,400; Mrs. Loan ash discount brokerage paid & 60. a claim was made on railway t of claim for damages in transit d of 50 paise in the rupee is received ge paid & 30, 2,000 for delivering goods to Stationery ¢ 398.Ans. 16. a7. Jan. 30 One month's interest on Mrs, Loan @ 12% became due but enuld not be paid 30 The horse bought on January 20 died, its carcase sold for ® 100. April30 Received from travelling salesman Z 6,000 for goods sold by him, after deducting his travelling expenses * 300. * 30 Paid for Salaries * 7,000 Paid for Rent 7 3,000 » 30. Sold goods worth € 20,000 less 10% trade [Total of Journal ¢ 2,531,170). Pass necessary entries to make the following adjustments at 31st Dec. 2021 (@) Depreciation at 5% om Office Furniture valued at 7 8,000, at 10% on Plant and Machinery of € 80,000 ; at 5% on Factory Building of ? 2,00,000. (®) The insurance premium has been paid for the year ending on 31st March next 72,400, (©) The telephone rent for one year was paid on last 30th April 7 300. (@) Interest on capital at 6% p.a. is to be allowed. Capital in the beginning was T 3,00,000. (©) Following outstanding liabilities for expenses are to be provided for viz. wages * 300, salaries € 305, trade expenses ¢ 215 () An unsold machinery appearing in the books at ¢ 5,000 is exchanged for = new machinery of 7 5,000. The old machinery has been valued at purpose. Journalise the following transactions in the books of BK Bhandari (@) Cheque 7 100 previously received from S.C. Puri in settlement of 2 returned dishonoured. (@) Fire insurance premium of € 250 paid for one year. (©) Sold goods 7 50 to R.N. Bose on credit (d) Goods returned from J.N. Basak 7 (©) 50 owing by S.K. Prashad written off as bad debt (f) Paid ® 500 by cheque for purchase count.