Financial Accounting

How to pass journal entries with examples

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In the following tables, you can see some data regarding transactions that took place during the month of December in 2020

Illustration.

2020 Particulars$
December1Jack started the business with cash 10000
Deposited cash into the bank7000
3Bought goods in cash500
6Withdrawn cash from the bank100
13Sold goods to Dimple on credit150
15Received cash from Peter145
15Discount allowed to Peter5
20Dimple paid cash150
25Cash sales made during the month1000
30Rent paid for the month of December50
30Salary paid for the month of December75

Journalise the above transactions

Solution

DateParticularsL.F.Amount Dr ($)Amount Cr. ($)
(2020)

Dec. 1

 

Cash A/c                                                     Dr.

To Capital A/c

 

1

4

 

10000

 

 

10000

Dec  1Bank A/c                                                     Dr.

To Cash A/c

(being cash deposited into the bank)

5

1

 

7000 

7000

Dec  3Purchase A/c                                             Dr.

To cash A/c

(Being goods purchased in cash)

7

1

 

500

 

 

500

 

Dec 6Cash A/c                                                     Dr

To Bank A/c

(Being cash withdrawn from the bank)

1

5

 

100

 

 

100

 

Dec 13Dimple                                                            Dr

To Sales A/c

(Being sold to Dimple on credit)

9

7

 

150 

150

Dec 15Cash A/c                                                      Dr.

To Discount A/c Dr.

To  Peter A/c

(Being cash received from Peter and discount allowed to him)

1

12

10

 

145

5

 

 

 

150

Dec 20Cash A/c                                                     Dr

To Dimple

1

9

150 

150

Dec 25Cash A/c                                                      Dr

To Sales A/c

(Being goods sold for cash)

1

7

1000 

1000

Dec 30Rent A/c                                                        Dr.

Salaries A/c                                                  Dr.

To Cash A/c

(Being the amount paid for rent and salary for the month of December)

13

14

1

50

75

 

 

 

125

 

Illustration 3.
Following are some examples of  translations and Journal Entries, we have analysed each entry with golden rules to understand it better

  1. Cash brought in by proprietor as capital $ 30000
    a) debit what comes in
    Cash came in business;
    cash account will be debited in journal entry.

    b) credit the giver
    Proprietor gives cash to business

Journal Entry
Cash Account Debit 30,000                                
         To Capital Account 30,000

2. Goods purchased on credit from Monty for $ 5,000

a) debit what comes in

Goods have come in business
b) credit the giver

Monty is a giver, so his account will be credited

Journal Entry.
Purchase account Dr. 5000
          To Monty                    5000

3. Furniture purchased for cash $ 10000

a) debit what comes in

furniture came in business
b) Cash is what goes out

Entry
Furniture Account Dr. 10,000
        To Cash Account         10,000

4. Goods sold on credit to Deven $ 1600

a) Deven is the receiver of goods (DEBIT)
b) Goods go out (CREDIT)

Deven Account Dr. 1600
   To Sales Account               1600

5. Goods purchased for cash $ 4500

a) Goods come in, so purchase account DEBIT
b) Cash goes out, so cash account will be CREDIT

Purchase account Dr 4500
        To Cash account                      4500

6. Goods sold for cash $ 2100
a) debit what comes in, Cash comes in,
b) credit what goes out, Goods go out
Cash account Dr. 2100

      To Sale account 2100

7. Rent paid for the shop to landlord $3000

a) debit all expenses, Rent is an item of expense, it will be debited.
b) credit what goes out Cash is an item of asset and it goes out

Entry


Rent Account Dr.  3000
      To Cash Account       3000

8. Commission received in cash $2000

Cash A/CDr$2000
To Commission$2000
Cash A/CDr$2000
To Commission$2000

9. Cash deposited into bank $5000

a) Bank is the receiver of cash, so the bank account will be debited.
b) Cash goes out, so the cash account will be credited.

Bank A/CDr$5000
To Cash$5000

10. Cash is withdrawn from bank for office use $ 2000

a) debit what comes in, Cash comes in the business
b) Bank is the giver, so the bank account will be credited.

Cash A/CDr$2000
To Bank$2000

11. Cash has drawn by the proprietor from the business for personal use $ 3000

a) Debit the Receiver, Proprietor is the receiver of cash
b) Cash goes out, so the cash account will be credited

Entry

Drawings A/CDr$3000
To Cash$3000

12. Goods given as charity $ 1000

a) Debit all expenses, Charity is an expense of business
b) Goods go out, so the purchase account will be credited.

Entry

Charity AccountDr$1000
To Purchase Account$1000

In this way, we have cleared the art of passing journal entries along with the explanation of each entry.

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