Complex Compound Journal Entries - Problems and Solutions

Prb 9

Problem - 1

Journalise the following transactions.

Jun 5th : Acquired the running business of Max, for cash 50, 000 by taking over the following assets and liabilities at values stated against them:

Stock of Goods 15,000; Cash 25,000; Furniture 10,000; Debtors 7,000; Machinery 8,000 & Creditors 15,000.

6th : Opened a bank account with 5,000
7th : Bought goods worth 6, 000 from Usha & Co. & paid half the amount in cash.
8th : Sold to Bee & Co. goods worth 5,000 and a cheque received for the due
14th : Sold private car for 4,000 and bought a new one for business with the proceeds plus 5,000 from office cash.
16th : Bought furniture worth 4,000 of which, those worth 1,000 are for office use and the balance for stock.
18th : Sold goods to Arial & Co. 8,000 and to Wheel & Co. 7,000
19th : Payment made to Creditors 4,500
20th : Cash received from Debtors 5,800
25th : Paid Rent by cheque 2,500
30th : Commission received 3,000

Solution

  • Jun 5th
    Assets taken over:
    Stock of Goods
    Cash
    Furniture
    Debtors
    Machinery
    - Liabilities taken over:
    Creditors
    Net Assets (Capital) (?)
    15,000
    25,000
    10,000
    7,000
    8,000

    15,000





    65,000

    15,000
    50,000
  • Jun 7th
    Total value of goods bought
    - Paid in cash
    Bought on credit (?)     		6,000
    3,000
    3,000
  • Jun 14th
    Realisation from sale of private car
    + Office cash used for purchase
    Value of car bought (?)     		4,000
    5,000
    9,000
  • Jun 16th
    Value of Furniture bought
    - Furniture for office
    Value of Furniture bought for goods (?)     		4,000
    1,000
    3,000
Journal in the books of M/s ___
for the period from June. 5th, _5 to June. 30th, _5
Date V/R
No. 		Particulars L/F Amount
(Dr) 		Amount
(Cr)
June 5th – Goods/Stock a/c
Cash a/c
Furniture a/c
Debtors a/c
Machinery a/c
To Creditors a/c
To Capital a/c
Dr
Dr
Dr
Dr
Dr
 –
–
–
–
–
–
–
 15,000
25,000
10,000
7,000
8,000




15,000
50000
[Being the amount of assets and liabilities acquired from Mr. Max]
6th – Bank a/c
To Cash a/c
Dr
 –
–
 5,000
5,000
[Being the amount of cash deposited into bank on:__]
7th – Purchases a/c
To Cash a/c
To Usha & Co. a/c
Dr
 –
–
–
 6,000
3,000
3000
[Being the value of stock purchased from M/s. Usha & Co on credit and paid half the amount in cash vide bill no:___, voucher no:___ dated:__]
8th – Bank a/c
To Sales a/c
Dr
 –
–
 5,000
5,000
[Being the value of stock sold to M/s. Bee & Co. and received amount due by cheque no:___ dated:__]
14th – Car a/c
To Capital a/c
To Cash a/c
Dr
 –
–
–
 9,000
4,000
5,000
[Being the amount paid for car purchase for office from private cash and business cash vide voucher no:___ dated:__]
16th – Purchases a/c
Furniture a/c
To Cash a/c
Dr
Dr
 –
–
–
 3,000
1,000

4,000
[Being the value of furniture purchased for office decoration and for stock vide bill no:___ dated:__]
18th – Arial & Co. a/c
Wheel & Co. a/c
To Sales a/c
Dr
Dr
 –
–
–
 8,000
7,000

15,000
[Being the value of stock sold to M/s Arial & Co. and M/s Wheel & Co. on credit vide invoice nos:___ dated:__]
19th – Creditors a/c
To Cash a/c
Dr
 –
–
 4,500
4,500
[Being the amount paid to creditors vide voucher no:___ dated:__]
20th – Cash a/c
To Debtors a/c
Dr
 –
–
 5,800
5,800
[Being the amount of cash received from debtors vide cash receipt no:___ dated:__]
25th – Rent paid a/c
To Bank a/c
Dr
 –
–
 2,500
2,500
[Being the amount paid for rent vide cheque no:___ dated:__]
30th – Cash a/c
To Commission Received a/c
Dr
 –
–
 3,000
3,000
[Being the amount of cash received for commission vide cash receipt no:___ dated:__]

General Ledger
[Books of __]

Goods/Stock a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
05/06/_5 To Sundry Accounts – 15,000 30/06/_5 By Balance c/d – 15,000
tl 15,000 tl 15,000
01/07/_5 To Balance b/d – 15,000
Cash a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
05/06/_5
20/06/_5
30/06/_5 		To Sundry Accounts
To Debtors a/c
To Commission Received a/c 		–
–
– 		25,000
5,800
3,000 		06/06/_5
07/06/_5
14/06/_5
16/06/_5
16/06/_5
19/06/_5
30/06/_5 		By Bank a/c
By Purchases a/c
By Car a/c
By Purchases a/c
By Furniture a/c
By Creditors a/c
By Balance c/d 		–
–
–
–
–
–
– 		5,000
3,000
5,000
3,000
1,000
4,500
12,300
tl 33,800 tl 33,800
01/07/_5 To Balance b/d – 12,300
Furniture a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
05/06/_5
16/06/_5 		To Sundry Accounts
To Cash a/c 		–
– 		10,000
1,000 		30/06/_5 By Balance c/d – 11,000
tl 11,000 tl 11,000
01/07/_5 To Balance b/d – 11,000
Debtors a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
05/06/_5 To Sundry Accounts – 7,000 20/06/_5
30/06/_5 		By Cash a/c
By Balance c/d 		–
– 		5,800
1,200
tl 7,000 tl 7,000
01/07/_5 To Balance b/d – 1,200
Machinery a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
05/06/_5 To Sundry Accounts – 8,000 30/06/_5 By Balance c/d – 8,000
tl 8,000 tl 8,000
01/07/_5 To Balance b/d – 8,000
Creditors a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
19/06/_5
30/06/_5 		To Cash a/c
To Balance c/d 		–
– 		4,500
10,500 		05/06/_5 By Sundry Accounts – 15,000
tl 15,000 tl 15,000
01/07/_5 By Balance b/d – 10,500
Capital a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
30/06/_5 To Balance c/d – 54,000 05/06/_5
14/06/_5 		By Sundry Accounts
By Car a/c 		–
– 		50,000
4,000
tl 54,000 tl 54,000
01/07/_5 By Balance b/d – 54,000
Bank a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
06/06/_5
08/06/_5 		To Cash a/c
To Sales a/c 		–
– 		5,000
5,000 		25/06/_5
30/06/_5 		By Rent paid a/c
By Balance c/d 		–
– 		2,500
7,500
tl 10,000 tl 10,000
01/07/_5 To Balance b/d – 7,500
Purchases a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
07/06/_5
07/06/_5
16/06/_5 		To Cash a/c
To Usha & Co. a/c
To Cash a/c 		–
–
– 		3,000
3,000
3,000 		30/06/_5 By Balance c/d – 9,000
tl 9,000 tl 9,000
01/07/_5 To Balance b/d – 9,000
Usha & Co. a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
30/06/_5 To Balance c/d – 3,000 07/06/_5 By Purchases a/c – 3,000
tl 3,000 tl 3,000
01/07/_5 By Balance b/d – 3,000
Sales a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
30/06/_5 To Balance c/d – 20,000 08/06/_5
18/06/_5
18/06/_5 		By Bank a/c
By Arial & Co. a/c
By Wheel & Co. a/c 		–
–
– 		5,000
8,000
7,000
tl 20,000 tl 20,000
01/07/_5 By Balance b/d – 20,000
Car a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
14/06/_5
14/06/_5 		To Capital a/c
To Cash a/c 		–
– 		4,000
5,000 		30/06/_5 By Balance c/d – 9,000
tl 9,000 tl 9,000
01/07/_5 To Balance b/d – 9,000
Arial & Co. a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
18/06/_5 To Sales a/c – 8,000 30/06/_5 By Balance c/d – 8,000
tl 8,000 tl 8,000
01/07/_5 To Balance b/d – 8,000
Wheel & Co. a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
18/06/_5 To Sales a/c – 7,000 30/06/_5 By Balance c/d – 7,000
tl 7,000 tl 7,000
01/07/_5 To Balance b/d – 7,000
Rent paid a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
25/06/_5 To Bank a/c – 2,500 30/06/_5 By Balance c/d – 2,500
tl 2,500 tl 2,500
01/07/_5 To Balance b/d – 2,500
Commission Received a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
30/06/_5 To Balance c/d – 3,000 30/06/_5 By Cash a/c – 3,000
tl 3,000 tl 3,000
01/07/_5 By Balance b/d – 3,000

Trial Balance
[Modern Method]

Trial Balance of __ as on 30/06/_
Particulars L/F Amount
(Dr) 		Amount
(Cr)
Goods/Stock a/c
Cash a/c
Furniture a/c
Debtors a/c
Machinery a/c
Creditors a/c
Capital a/c
Bank a/c
Purchases a/c
Usha & Co. a/c
Sales a/c
Car a/c
Arial & Co. a/c
Wheel & Co. a/c
Rent paid a/c
Commission Received a/c		–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–		15,000
12,300
11,000
1,200
8,000
–
–
7,500
9,000
–
–
9,000
8,000
7,000
2,500
–		–
–
–
–
–
10,500
54,000
–
–
3,000
20,000
–
–
–
–
3,000
Total90,50090,500

Deriving greater information

The following two methods will help in deriving greater information in case of recording complex compound journal entries. In both the cases, the postings in the ledger accounts involved in the complex compound entry vary. However, there will not be any change in the ledger account balance.

  • Replacing the complex compound entry with Simple Compound entries

    The transactions involved in the complex compound entry relating to purchase of assets and liabilities of Mr. Max can be interpreted to form two or more simple compound entries to provide clear information as follows :

    Acquired the running business of Max, by taking over the following

    • Assets

      Stock of Goods 15,000
      Cash 25,000
      Furniture 10,000
      Debtors 7,000
      Machinery 8,000

    • Liabilities

      Creditors 15,000

    Journal in the books of __ for the period from __ to __
    V/R
    No.     		Particulars L/F Amount
    (Dr)     		Amount
    (Cr)
    – Goods/Stock a/c
    Furniture a/c
    Debtors a/c
    Machinery a/c
    Cash a/c
    To Capital a/c
    		Dr
    Dr
    Dr
    Dr
    Dr
    		 –
    –
    –
    –
    –
    –
    		 15,000
    10,000
    7,000
    8,000
    25,000




    65000
    [Being the value of assets of Mr. Max taken over by the business.]
    – Capital a/c
    To Creditors a/c
    		Dr
    		 –
    –
    		 15,000
    15,000
    [Being the value of liabilities of Mr. Max taken over by the business.]

    This will result in detailed posting in the Capital account. The single posting by name Sundry Accounts would be replaced by postings indicating all the assets and liabilities taken over.

    Capital a/c
    Dr Cr
    Date Particulars J/F Amount Date Particulars J/F Amount
    05/06/_5
    30/06/_5     		To Creditors a/c
    To Balance c/d     		–
    –     		15,000
    50,000     		05/06/_5
    05/06/_5
    05/06/_5
    05/06/_5
    05/06/_5
    05/06/_5     		By Sundry Accounts
    By Goods/Stock a/c
    By Furniture a/c
    By Debtors a/c
    By Machinery a/c
    By Cash a/c     		–
    –
    –
    –
    –
    –     		50000
    15,000
    10,000
    7,000
    8,000
    25,000
    tl 65,000 tl 65,000
    01/07/_5 By Balance b/d – 50,000

    Capital a/c takes the place of Sundry Accounts in all other accounts reperesenting the assets and liabilities taken over.

    Goods/Stock a/c
    Dr Cr
    Date Particulars J/F Amount Date Particulars J/F Amount
    05/06/_5 To Sundry Accounts
    Capital a/c

    –
    15,000     		30/06/_5 By Balance c/d – 15,000
    tl 15,000 tl 15,000
    01/07/_5 To Balance b/d – 15,000

    Are they being taken over from outsiders or do they belong to the owners? This method would not provide information that gives an answer to such a question.

    Even the owners of the business can bring in assets towards their capital contribution or the organisation may take over some of the owners liabilities thereby reducing their capital.

  • Using additional Ledger Accounts

    The more the information we need the more the accounting heads we need to maintain.

    The transactions involved in the complex compound entry can be recorded using additional ledger accounts to give a clear picture of the happenings.

    Business Purchase a/c is used here.

    Journal in the books of __ for the period from __ to __
    Particulars L/F Amount
    (Dr)     		Amount
    (Cr)
    Goods/Stock a/c
    Furniture a/c
    Debtors a/c
    Machinery a/c
    Cash a/c
    To Business Purchase a/c
    		Dr
    Dr
    Dr
    Dr
    Dr
    		 –
    –
    –
    –
    –
    –
    		 15,000
    10,000
    7,000
    8,000
    25,000




    65,000
    [Being the value of assets of Mr. Max taken over by the business.]
    Business Purchase a/c
    To Creditors a/c
    		Dr
    		 –
    –
    		 15,000
    15,000
    [Being the value of liabilities of Mr. Max taken over by the business.]
    Business Purchase a/c
    To Capital a/c
    		Dr
    		 –
    –
    		 50,000
    50,000
    [Being the value of liabilities of Mr. Max taken over by the business.]

    Business Purchase a/c appears in place of Sundry Accounts in the earlier postings.

    Goods/Stock a/c
    Dr Cr
    Date Particulars J/F Amount Date Particulars J/F Amount
    05/06/_5 To Sundry Accounts
    Business Purchase a/c

    –
    15,000     		30/06/_5 By Balance c/d – 15,000
    tl 15,000 tl 15,000
    01/07/_5 To Balance b/d – 15,000
    Creditors a/c
    Dr Cr
    Date Particulars J/F Amount Date Particulars J/F Amount
    19/06/_5
    30/06/_5     		To Cash a/c
    To Balance c/d     		–
    –     		4,500
    10,500     		05/06/_5 By Sundry Accounts
    Business Purchase a/c

    –
    15,000
    tl 15,000 tl 15,000
    01/07/_5 By Balance b/d – 10,500
    Capital a/c
    Dr Cr
    Date Particulars J/F Amount Date Particulars J/F Amount
    30/06/_5 To Balance c/d – 54,000 05/06/_5

    14/06/_5     		By Sundry Accounts
    Business Purchase a/c
    By Car a/c
    –
    –
    50,000
    4,000
    tl 54,000 tl 54,000
    01/07/_5 By Balance b/d – 54,000

    This will give a clear idea of the postings in the ledger accounts. The following conclusions can be drawn.

    • Assets and liabilities changed on account of assets and liabilities relating to another business taken over.
    • The net value of business purchase has been paid up by allocating capital.

    An additional account appears in the books of accounts.

    Business Purchase a/c
    Dr Cr
    Date Particulars J/F Amount Date Particulars J/F Amount
    05/06/_5
    05/06/_5     		To Creditors a/c
    To Capital a/c     		–
    –     		15,000
    50,000     		05/06/_5
    05/06/_5
    05/06/_5
    05/06/_5
    05/06/_5     		By Goods/Stock a/c
    By Furniture a/c
    By Debtors a/c
    By Machinery a/c
    By Cash a/c     		–
    –
    –
    –
    –     		15,000
    10,000
    7,000
    8,000
    25,000
    tl 65,000 tl 65,000

Problem - 2

Mr. Madhav acquired the business of Mr. Gowrav on 1st April, 20_5. Record the following transactions in the journal and post them into the ledger of Mr. Madhav. Also prepare a trial balance as on that date.

Apr 1st :
Debit Balances on the date of acquisition:

Cash in hand 8,000, Cash at Bank 25,000, Stock of goods 20,000, Furniture 2,000, Buildings 10,000. Sundry Debtors – Vijay 2,000, Anil 1,000 & Madhu 2,000.

Credit Balances on the date of acquisition:

Sundry creditors – Anand 5,000, Loan from Bablu 10,000

Following were further transactions in the month of April, 20_5;

4th : Sold household furniture for 2,000 and paid the money into business cash.
5th : Cash received from Vijay 1,980 in full settlement of his account.
6th : Paid landlord 1,200 for rent. One – third of the premises is occupied by the proprietor for his own residence.
7th : Goods sold to Anil for 3,000 and to Madhu for 5,000
8th : Sold some furniture for 1,300 (proceeds being received as 700 by cheque and balance in cash)
11th : Interest received from Madhu 200.
12th : Paid to Bablu towards interest 500
13th : Sold goods for cash 5,000.
14th : Cash paid to Anand 2,000
15th : Withdrew goods from business for personal use 2,000.

Solution

  • Apr 1st
    Assets taken over:
    Cash
    Bank
    Goods/Stock
    Furniture
    Buildings
    Vijay
    Anil
    Madhu
    - Liabilities taken over:
    Anand
    Loan from Bablu
    Net Assets (capital)
    8,000
    25,000
    20,000
    2,000
    10,000
    2,000
    1,000
    2,000

    5,000
    10,000








    70,000


    15,000
    55,000
  • Apr 5th
    Total due
    - cash received
    Discount     		2,000
    1,980
    20
  • Apr 6th
    Rent
    + one-third for proprietors residence
    attributable to business
    		 1,200

    400
    800
  • Apr 8th
    Sale proceeds of office equipment
    - received by cheque
    received in cash     		1,300
    700
    600
Journal in the books of M/s ___
for the period from April. 1st, 20_5 to April. 15th, 20_5
Date V/R
No. 		Particulars L/F Amount
(Dr) 		Amount
(Cr)
April 1st – Cash a/c
Bank a/c
Goods/Stock a/c
Furniture a/c
Buildings a/c
Vijay a/c
Anil a/c
Madhu a/c
To Anand a/c
To Loan from Bablu a/c
To Capital a/c
Dr
Dr
Dr
Dr
Dr
Dr
Dr
Dr
 –
–
–
–
–
–
–
–
–
–
–
 8,000
25,000
20,000
2,000
10,000
2,000
1,000
2,000







5000
10,000
55,000
[Being the amount of assets and liabilities of Mr. Gowrav's business acquired]
4th – Cash a/c
To Capital a/c
Dr
 –
–
 2,000
2,000
[Being the amount of cash received from selling personal furniture brought into business vide receipt no:___ dated:__]
5th – Cash a/c
Discount Allowed a/c
To Vijay a/c
Dr
Dr
 –
–
–
 1,980
20

2,000
[Being the amount of cash received from Mr. Vijay in full settlement of his due on account vide receipt no:___ dated:__]
6th – Rent a/c
Drawings a/c
To Cash a/c
Dr
Dr
 –
–
–
 800
400

1,200
[Being the amount of cash paid for rent of office and personal premises of the proprietor vide voucher no:___ dated:__]
7th – Anil a/c
Madhu a/c
To Sales a/c
Dr
Dr
 –
–
–
 3,000
5,000

8,000
[Being the value of goods sold on credit to Anil vide invoice No: __ dated:___ and to Madhu vide invoice No:___ dated:____]
8th – Cash a/c
Bank a/c
To Furniture a/c
Dr
Dr
 –
–
–
 600
700

1,300
[Being the amount of equipment sold and part payment was deposited into personal bank a/c vide bill no:___ dated:__]
11th – Cash a/c
To Interest Received a/c
Dr
 –
–
 200
200
[Being the amount of cash received as interest from Mr. Madha vide cash receipt no:___ dated:__]
12th – Interest paid a/c
To Cash a/c
Dr
 –
–
 500
500
[Being the amount of cash paid to Mr. Bablu as interest vide voucher no:___ dated:__]
13th – Cash a/c
To Sales a/c
Dr
 –
–
 5,000
5,000
[Being the value of stock sold for cash vide cash receipt no:___ dated:__]
14th – Anand a/c
To Cash a/c
Dr
 –
–
 2,000
2,000
[Being the amount paid to Anand vide voucher no:___ dated:__]
15th – Drawings a/c
To Purchases a/c
Dr
 –
–
 2,000
2,000
[Being the value of goods taken by the proprietor for personal use vide on:__]

General Ledger
[Books of Mr. Madhav]

Cash a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
01/04/_5
04/04/_5
05/04/_5
08/04/_5
11/04/_5
13/04/_5 		To Sundry Accounts
To Capital a/c
To Vijay a/c
To Furniture a/c
To Interest Received a/c
To Sales a/c 		–
–
–
–
–
– 		8,000
2,000
1,980
600
200
5,000 		06/04/_5
06/04/_5
12/04/_5
14/04/_5
15/04/_5 		By Rent a/c
By Drawings a/c
By Interest paid a/c
By Anand a/c
By Balance c/d 		–
–
–
–
– 		800
400
500
2,000
14,080
tl 17,780 tl 17,780
16/04/_5 To Balance b/d – 14,080
Bank a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
01/04/_5
08/04/_5 		To Sundry Accounts
To Furniture a/c 		–
– 		25,000
700 		15/04/_5 By Balance c/d – 25,700
tl 25,700 tl 25,700
16/04/_5 To Balance b/d – 25,700
Goods/Stock a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
01/04/_5 To Sundry Accounts – 20,000 15/04/_5 By Balance c/d – 20,000
tl 20,000 tl 20,000
16/04/_5 To Balance b/d – 20,000
Furniture a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
01/04/_5 To Sundry Accounts – 2,000 08/04/_5
08/04/_5
15/04/_5 		By Cash a/c
By Bank a/c
By Balance c/d 		–
–
– 		600
700
700
tl 2,000 tl 2,000
16/04/_5 To Balance b/d – 700
Buildings a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
01/04/_5 To Sundry Accounts – 10,000 15/04/_5 By Balance c/d – 10,000
tl 10,000 tl 10,000
16/04/_5 To Balance b/d – 10,000
Vijay a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
01/04/_5 To Sundry Accounts – 2,000 05/04/_5
05/04/_5 		By Cash a/c
By Discount Allowed a/c 		–
– 		1,980
20
tl 2,000 tl 2,000
Anil a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
01/04/_5
07/04/_5 		To Sundry Accounts
To Sales a/c 		–
– 		1,000
3,000 		15/04/_5 By Balance c/d – 4,000
tl 4,000 tl 4,000
16/04/_5 To Balance b/d – 4,000
Madhu a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
01/04/_5
07/04/_5 		To Sundry Accounts
To Sales a/c 		–
– 		2,000
5,000 		15/04/_5 By Balance c/d – 7,000
tl 7,000 tl 7,000
16/04/_5 To Balance b/d – 7,000
Anand a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
14/04/_5
15/04/_5 		To Cash a/c
To Balance c/d 		–
– 		2,000
3,000 		01/04/_5 By Sundry Accounts – 5,000
tl 5,000 tl 5,000
16/04/_5 By Balance b/d – 3,000
Loan from Bablu a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
15/04/_5 To Balance c/d – 10,000 01/04/_5 By Sundry Accounts – 10,000
tl 10,000 tl 10,000
16/04/_5 By Balance b/d – 10,000
Capital a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
15/04/_5 To Balance c/d – 57,000 01/04/_5
04/04/_5 		By Sundry Accounts
By Cash a/c 		–
– 		55,000
2,000
tl 57,000 tl 57,000
16/04/_5 By Balance b/d – 57,000
Discount Allowed a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
05/04/_5 To Vijay a/c – 20 15/04/_5 By Balance c/d – 20
tl 20 tl 20
16/04/_5 To Balance b/d – 20
Rent a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
06/04/_5 To Cash a/c – 800 15/04/_5 By Balance c/d – 800
tl 800 tl 800
16/04/_5 To Balance b/d – 800
Drawings a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
06/04/_5
15/04/_5 		To Cash a/c
To Purchases a/c 		–
– 		400
2,000 		15/04/_5 By Balance c/d – 2,400
tl 2,400 tl 2,400
16/04/_5 To Balance b/d – 2,400
Sales a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
15/04/_5 To Balance c/d – 13,000 07/04/_5
07/04/_5
13/04/_5 		By Anil a/c
By Madhu a/c
By Cash a/c 		–
–
– 		3,000
5,000
5,000
tl 13,000 tl 13,000
16/04/_5 By Balance b/d – 13,000
Interest Received a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
15/04/_5 To Balance c/d – 200 11/04/_5 By Cash a/c – 200
tl 200 tl 200
16/04/_5 By Balance b/d – 200
Interest paid a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
12/04/_5 To Cash a/c – 500 15/04/_5 By Balance c/d – 500
tl 500 tl 500
16/04/_5 To Balance b/d – 500
Purchases a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
15/04/_5 To Balance c/d – 2,000 15/04/_5 By Drawings a/c – 2,000
tl 2,000 tl 2,000
16/04/_5 By Balance b/d – 2,000

Trial Balance
[Modern Method]

Trial Balance of Mr. Madhav as on 15/04/_5
Particulars L/F Amount
(Dr) 		Amount
(Cr)
Cash a/c
Bank a/c
Goods/Stock a/c
Furniture a/c
Buildings a/c
Vijay a/c
Anil a/c
Madhu a/c
Anand a/c
Loan from Bablu a/c
Capital a/c
Discount Allowed a/c
Rent a/c
Drawings a/c
Sales a/c
Interest Received a/c
Interest paid a/c
Purchases a/c		–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–		14,080
25,700
20,000
700
10,000
–
4,000
7,000
–
–
–
20
800
2,400
–
–
500
–		–
–
–
–
–
–
–
–
3,000
10,000
57,000
–
–
–
13,000
200
–
2,000
Total85,20085,200

Deriving greater information

The following two methods will help in deriving greater information in case of recording complex compound journal entries. In both the cases, the postings in the ledger accounts involved in the complex compound entry vary. However, there will not be any change in the ledger account balance.

  • Replacing the complex compound entry with Simple Compound entries

    The transactions involved in the complex compound entry relating to purchase of assets and liabilities of Mr. Gouraw can be interpreted to form two or more simple compound entries to provide clear information as follows :

    Acquired the running business of Gouraw, by taking over the following

    • Assets :
      Cash in hand 8,000,
      Cash at Bank 25,000,
      Stock of goods 20,000,
      Furniture 2,000,
      Buildings 10,000,
      Sundry Debtors -
      Vijay 2,000,
      Anil 1,000 and
      Madhu 2,000
    • Liabilities :
      Sundry creditors -
      Anand 5,000,
      Loan from Bablu 10,000
    Journal in the books of __ for the period from __ to __
    Particulars L/F Amount
    (Dr)     		Amount
    (Cr)
    Cash a/c
    Bank a/c
    Goods/Stock a/c
    Furniture a/c
    Buildings a/c
    Vijay a/c
    Anil a/c
    Madhu a/c
    To Capital a/c
    		Dr
    Dr
    Dr
    Dr
    Dr
    Dr
    Dr
    Dr
    		 –
    –
    –
    –
    –
    –
    –
    –
    –
    		 8,000
    25,000
    20,000
    2,000
    10,000
    2,000
    1,000
    2,000







    70,000
    [Being the value of assets of Mr. Gouraw taken over by the business.]
    Capital a/c
    To Anand a/c
    To Loan from Bablu a/c
    		Dr
    		 –
    –
    –
    		 15,000
    5,000
    10,000
    [Being the value of liabilities of Mr. Gouraw taken over by the business.]

    This will result in detailed posting in the Capital account. The single posting by name Sundry Accounts would be replaced by postings indicating all the assets and liabilities taken over.

    Capital a/c
    Dr Cr
    Date Particulars J/F Amount Date Particulars J/F Amount
    01/04/_5
    01/04/_5
    15/04/_5     		To Anand a/c
    To Loan from Bablu a/c
    To Balance c/d     		–
    –
    –     		5,000
    10,000
    57,000     		01/04/_5
    01/04/_5
    01/04/_5
    01/04/_5
    01/04/_5
    01/04/_5
    01/04/_5
    01/04/_5
    01/04/_5
    04/04/_5     		By Sundry Accounts
    By Cash a/c
    By Bank a/c
    By Goods/Stock a/c
    By Furniture a/c
    By Buildings a/c
    By Vijay a/c
    By Anil a/c
    By Madhu a/c
    By Cash a/c     		–
    –
    –
    –
    –
    –
    –
    –
    –
    –     		55000
    8,000
    25,000
    20,000
    2,000
    10,000
    2,000
    1,000
    2,000
    2,000
    tl 72,000 tl 72,000
    16/04/_5 By Balance b/d – 57,000

    Capital a/c takes the place of Sundry Accounts in all other accounts reperesenting the assets and liabilities taken over.

    Anand a/c
    Dr Cr
    Date Particulars J/F Amount Date Particulars J/F Amount
    14/04/_5
    15/04/_5     		To Cash a/c
    To Balance c/d     		–
    –     		2,000
    3,000     		01/04/_5 By Sundry Accounts
    Capital a/c

    –
    5,000
    tl 5,000 tl 5,000
    16/04/_5 By Balance b/d – 3,000

  • Using additional Ledger Accounts

    The more the information we need the more the accounting heads we need to maintain.

    The transactions involved in the complex compound entry can be recorded using additional ledger accounts to give a clear picture of the happenings.

    Business Purchase a/c is used here.

    Journal in the books of __ for the period from __ to __
    Particulars L/F Amount
    (Dr)     		Amount
    (Cr)
    Cash a/c
    Bank a/c
    Goods/Stock a/c
    Furniture a/c
    Buildings a/c
    Vijay a/c
    Anil a/c
    Madhu a/c
    To Business Purchase a/c
    		Dr
    Dr
    Dr
    Dr
    Dr
    Dr
    Dr
    Dr
    		 –
    –
    –
    –
    –
    –
    –
    –
    –
    		 8,000
    25,000
    20,000
    2,000
    10,000
    2,000
    1,000
    2,000







    70,000
    [Being the value of assets of Mr. Gouraw taken over by the business.]
    Business Purchase a/c
    To Anand a/c
    To Loan from Bablu a/c
    		Dr
    		 –
    –
    –
    		 15,000
    5,000
    10,000
    [Being the value of liabilities of Mr. Gouraw taken over by the business.]
    Business Purchase a/c
    To Capital a/c
    		Dr
    		 –
    –
    		 55,000
    55,000
    [Being the value of liabilities of Mr. Max taken over by the business.]

    Business Purchase a/c appears in place of Sundry Accounts in the earlier postings.

    Bank a/c
    Dr Cr
    Date Particulars J/F Amount Date Particulars J/F Amount
    01/04/_5

    08/04/_5     		To Sundry Accounts
    Business Purchase a/c
    To Furniture a/c
    –
    –
    25,000
    700     		15/04/_5 By Balance c/d – 25,700
    tl 25,700 tl 25,700
    16/04/_5 To Balance b/d – 25,700
    Anand a/c
    Dr Cr
    Date Particulars J/F Amount Date Particulars J/F Amount
    14/04/_5
    15/04/_5     		To Cash a/c
    To Balance c/d     		–
    –     		2,000
    3,000     		01/04/_5 By Sundry Accounts
    Business Purchase a/c

    –     		5,000
    tl 5,000 tl 5,000
    16/04/_5 By Balance b/d – 3,000
    Capital a/c
    Dr Cr
    Date Particulars J/F Amount Date Particulars J/F Amount
    15/04/_5 To Balance c/d – 57,000 01/04/_5

    04/04/_5     		By Sundry Accounts
    Business Purchase a/c
    By Cash a/c
    –
    –
    55,000
    2,000
    tl 57,000 tl 57,000
    16/04/_5 By Balance b/d – 57,000

    This will give a clear idea of the postings in the ledger accounts. The following conclusions can be drawn.

    • Assets and liabilities changed on account of assets and liabilities relating to another business taken over.
    • The net value of business purchase has been paid up by allocating capital.

    An additional account appears in the books of accounts.

    Business Purchase a/c
    Dr Cr
    Date Particulars J/F Amount Date Particulars J/F Amount
    01/04/_5
    01/04/_5
    01/04/_5     		To Anand a/c
    To Loan from Bablu a/c
    To Capital a/c     		–
    –
    –     		5,000
    10,000
    55,000     		01/04/_5
    01/04/_5
    01/04/_5
    01/04/_5
    01/04/_5
    01/04/_5
    01/04/_5
    01/04/_5     		By Cash a/c
    By Bank a/c
    By Goods/Stock a/c
    By Furniture a/c
    By Buildings a/c
    By Vijay a/c
    By Anil a/c
    By Madhu a/c     		–
    –
    –
    –
    –
    –
    –
    –     		8,000
    25,000
    20,000
    2,000
    10,000
    2,000
    1,000
    2,000
    tl 70,000 tl 70,000
Author : The Edifier
Prb 11