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Hey! Welcome back! This is the continue lesson of how to pass compound journal entries
Part 2
15. Purchased goods from Desai worth Rs 20,000, trade Discount 10%, cash Discount 5%. Cash paid immediately.
Here is the compound entry for this transactions:
Purchase A/c --------------Dr 18,000(20,000 – Trade discount 10%)
To cash A/c 17,100
To discount received A/c 900
(Being purchase goods from Desai for cash and discount received)
Note: Here you have to understand that trade discount is not recorded in the books of account but it is deducted from the actual amount, when Desai purchase goods worth of 20,000 and get 10% trade discount so first deduct the trade discount from the actual amount that mean (20,000-2,000)18,000 is taken as a purchase amount and is debited. Now always remember cash discount is calculated on payment not on actual amount. so out of 18,000 you get 5% discount that means you pay cash of Rs 17,100 and received discount of Rs 900. Remember cash discount is on payment so it should be calculated on amount after deducting trade discount.
16. Sold goods to Varma having invoice price of Rs 40,000, allowing trade discount 10 %, cash discount 5%. Cash paid immediately.
Here is the compound entry for this transactions:
Cash A/c--------------------Dr 34,200Discount allowed A/c---Dr 1,800
To sales A/c 36,000
(40,000 – Trade discount 10%)
(Being goods sold and cash discount allowed to him)
Note: Same as earlier transaction but for sales, you sold goods worth of Rs 40,000 allowing trade discount 10% so sale is going out so it is credited with 36,000 i.e. after deducting trade discount (40,000-4,000). Now cash is coming in so it should be debited but discount is allowed of 5% so on 36,000-1,800 = 34,200 cash is debited and 18, 00 is discount allowed which is a loss so it is also debited separately.
17. Purchase goods from Dinesh worth Rs 50,000, 10% Trade discount and 5% cash discount. Half of the amount paid to him immediately.
Here is the compound entry for this transactions:
Purchase A/c---------Dr 45,000To Cash A/c 21,375
(22500 – 5%)
To Discount received A/c 1,125
(22500 x 5%)
To Dinesh A/c 22,500
(45000/2)
(Being goods purchased and half amount paid cash discount received on payment)
Note: here purchase account is debited (after deducted trade discount 50,000-5000) with Rs. 45,000. Now you must always remember cash discount is calculated only on payment made not on full amount. Here in this transaction only half payment is made so cash discount of 5 % is calculated on the half payment only i.e. 22,500 but not on 45,000. So cash account is credited with 21,375 and discount received is credited with 1,125 and Dinesh account is also credited with remaining half amount of Rs 22,500 as he is giving on credit.
18. Sold goods to Rajesh worth Rs 60,000 Trade discount 10% and cash discount 5%, half of the amount received immediately.
Here is the compound entry for this transactions:
Cash A/c--------------------Dr 25,650
(27000 – 5%)
Discount Allowed A/c----Dr 1,350
(27000 x 5%)
Rajesh A/c-----------------Dr 27,000
(54000/2)
To Sales A/c 54,000
(Being sold goods to Rajesh half amount received and cash discount allowed to him on payment)
Note: same as earlier transaction first deduct trade discount and sales account is credited then half payment is received after deducting cash discount and discount allowed (calculated on half amount) is debited and remaining half amount is debited to Rajesh account.
19. Purchased goods for cash Rs 10,000. VAT paid@ 10%.
Here is the compound entry for this transactions:
Purchase A/c----------------Dr 10,000VAT A/c ------------------------Dr 1,000
To cash A/c 11,000
(Being purchase goods for cash and VAT paid)
Note: vat means value added tax it is calculated on goods purchased or sold and paid to government. So when goods are purchased then vat is to be paid along with purchase amount. Here vat is expenses to the firm so it is debited. Purchase account is debited with 10,000 and vat account is also debited with 1,000 (10,000 * 10%). And as both are paid in cash so cash account is credited with 11,000.
20. Sold goods for cash Rs 20,000, VAT charged @ 10%.
Here is the compound entry for this transactions:
Cash A/c --------------------Dr 22,000To sales A/c 20,000
To VAT A/c 2,000
(Being sold goods for cash and VAT charges received from customer)
Note: same as the earlier transaction but for sales. When goods are sold then vat is collected from the customers so it is income to the business so it is credited along with sales account and as cash is coming in sum of sale and vat will be debited.
21. Sold household furniture for Rs 20,000 and invested the money into business.
Here is the compound entry for this transactions:
Cash A/c-----------------Dr 20,000To Capital A/c 20,000
( Being sold household furniture and cash invested into business)
Note: as household furniture of businessman is sold and the money is brought into business so cash account is debited and businessman capital account is credited.
22. Withdrawn cash Rs 1000 and goods costing Rs 2000 from business for personal use.
Here is the compound entry for this transactions:
Drawing A/c -----------------Dr 3,000To cash A/c 1,000
To purchase A/c 2,000
(Being cash and goods withdrawn for personal use debited to drawing account)
Note: here both cash and goods are withdrawn for personal use of businessman so his drawing account is debited with sum amount of both cash and goods, cash is going out so cash account is credited, remember goods are recorded in purchase account so purchase account is also credited.
23. Paid life insurance premium Rs 2000, income tax Rs 1000 and bicycle for son Rs 5000.
Here is the compound entry for this transactions:
Drawing A/c -----------------Dr 8,000To cash A/c 8,000
(Being life insurance premium, income tax and bicycle for son are personal expenses debited to drawing account)
Note: life insurance premium, income tax and bicycle for son all are personal expenses so sum of all these three expenses is debited to his drawing accounts, and as cash is going out of business so cash account is credited with total amount.
24. Paid rent Rs 6000 by cheque, half of the building is used for residential purpose of the proprietor.
Here is the compound entry for this transactions:
Rent A/c-----------------------Dr 3,000Drawing A/c------------------Dr 3,000
To Bank A/c 6,000
(Being rent paid through cheque,, from which half is debited to drawing account as it is used by businessmen)
Note: half of the building is used for residential purpose of the businessmen so his drawing account is to be debited with half amount and half amount is debited to rent account. As the payment is made through cheque so bank account is credited.
25. Charge interest on capital Rs 1000 and provide interest on drawing Rs 200.
Here is the compound entry for this transactions:
Interest on capital A/c-------Dr 1,000Drawing A/c----------------------Dr 200
To Capital A/c 1,000
To Interest on drawing A/c 200
(Being interest on capital and interest on drawing charged.)
Note: first interest is received by the businessman on his capital so interest on capital is debited to his capital account. And interest is paid by the businessman on his drawings so interest on drawing is credited to drawing account.
26. Provide outstanding salaries Rs 3000, and prepaid insurance Rs 200.
Here is the compound entry for this transactions:
Salaries A/c---------------------Dr 3,000Prepaid insurance A/c-----Dr 200
To outstanding salaries A/c 3,000
To insurance A/c 200
(Being outstanding salaries and prepaid insurance in their respective accounts)
Note: salary account is having outstanding salaries so it should be credited to salaries account. And insurance account is having prepaid insurance so it should be debited to insurance account.
27. Rent Rs 600, carriage inward Rs 500, stationery Rs 100 expenses paid in cash.
Here is the compound entry for this transactions:
Rent A/c------------------------Dr 600Carriage inward A/c-------Dr 500
Stationery A/c----------------Dr 100
To Cash A/c 1,200
(Being cash paid for expenses)
Note: rent, carriage and stationery are expenses so debited and as cash is paid for all these expenses so cash account is credited with sum amount of all expenses.
Now let me give you one (DIY) for your practice let’s see how you will do! 🤔Well I have shared my knowledge with you let’s see did you gained that knowledge?
DO IT YOURSELF (DIY):
1. Journalise the following in the books of Ram
April2016 Ram commenced business with cash Rs 20,000, stock costing 50,000, furniture costing 1,00,000 and machinery costing 5,00,000.
2 Purchase good for cash from Narayana Rs 5000
3 Sold goods for cash Rs 10,000
4 Commission received from Sania Rs 2000
5 Paid for electricity expenses to landlord Rs 1000
6 Purchase machinery of Rs 80,000, payment made by cheque, carriage Rs 4,000, and wages Rs 6,000 for installation paid in cash.
7 Purchase goods from Narayana on credit Rs 22,000
8 Sold goods to Rahul on credit Rs 25,000
9 Issued cheque to Narayana of Rs 21,500 in full settlement of his account.
10 Received cheque from Rahul of Rs 24,500 in full settlement of his account and deposited into bank.
11 Cheque received from Rahul dishonoured.
12 Cheque received from Desai Rs 24,500, Discount allowed Rs 500, cheque deposited in bank.
13 Cheque issued to Harman Rs 11,500, Discount received Rs 200.
14 Old Furniture appearing in the books at Rs 60,000 is exchanged for new furniture of Rs 200,000. The old Furniture has been valued for new furniture of Rs 40,000 for exchange purpose.
15 Sold goods to Anita Rs 60,000
16 Anita becomes insolvent only Rs 20,000 is received from his estate as full and final payment.
17 Goods destroyed by fire Rs 15,000. How would you deal:
(i)If the goods are uninsured (ii) insurance co., accepted full claim
(iii) Insurance company accepted the claim to the extent of 10,000.
18 Goods costing Rs 12,000 given as charity, good costing Rs 13,000 is distributed as samples and Rs 1,800 distributed among employees
19 Purchased goods from Mohan worth Rs 60,000, trade Discount 10%, cash Discount 5%. Cash paid immediately.
20 Sold goods to Veena having invoice price of Rs 80,000, allowing trade discount 10 %, cash discount 5%. Cash paid immediately.
21 Purchase goods from Raja worth Rs 90,000, 10% Trade discount and 5% cash discount. Half of the amount paid to him immediately.
22 Sold goods to Sonia worth Rs 1, 20,000 Trade discount 10% and cash discount 5%, half of the amount received immediately.
23 Purchased goods for cash Rs 5,000. VAT paid@ 10%.
24 Sold goods for cash Rs 25,000, VAT charged @ 10%.
25 Sold household furniture for Rs 25,000 and invested the money into business.
26 Withdrawn cash Rs 10,000 and goods costing Rs 25,000 from business for personal use.
27 Paid life insurance premium Rs 1200, income tax Rs 1500 and bicycle for son Rs 500.
28 Paid rent Rs 9000 by cheque, half of the building is used for residential purpose of the proprietor.
29 Charge interest on capital Rs 1800 and provide interest on drawing Rs 1200.
30 Provide outstanding salaries Rs 5000, and prepaid insurance Rs 8,200
30 Rent Rs 1,600, carriage outward Rs 900, stationery Rs 500 expenses paid in cash.
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