Recording a Transaction in the Journal - Journalising - Illustration

Notes 15

Illustration - Problem

Journalise the following transactions (Or) Record the following transactions in a Journal

1. 15th June : Ibrahim a sole proprietor Commenced business with a capital of 2,00,000.
2. 17th June : Bought Furniture for cash 20,000.
3. 17th June : Paid Rent to the shop owner Mr. Murugan 5,000.
4. 18th June : Paid cash into bank 1,50,000
5. 18th June : Bought Goods for cash 10,000 from M/s Shamir Jain & Co.,
6. 18th June : Bought Goods on credit from M/s Ramdas & Bros. for 10,000.
7. 19th June : Sold goods for cash 12,000 to Mr. Naryan Tiwari
8. 20th June : Bought Machinery from M/s Boolani Machinery and paid by cheque 25,000.
9. 21st June : Sold goods on credit to Mr. Natekar for 8,000
10. 21st June : Paid weekly wages to workers 5,000
11. 24th June : Paid M/s Ramdas and Brothers by cheque 5,000
12. 24th June : Received from Mr. Natekar 2,000
13. 24th June : Received commission from M/s Orion Traders for giving a trade lead 500.

Working Notes in problem solving

Wherever we need to build certain notes which would help in the process of deriving the ultimate solution, they should be appropriately included as a part of the solution by marking the workings distinctly as working notes.

This can be done even in examination conditions. Sometimes it would be needed of the student to include the working notes compulsorily in the solution (say when the question says "Working notes should form part of the solution/answer").

In this problem, transaction analysis would form part of working notes.

Solution - Transaction Analysis

In the initial stages of learning students are advised to work out some problems with analysis so that they would get accustomed to analysing the transaction for deriving the journal entry.

  1. Commenced business with a capital of 2,00,000.

    Capital a/c
    ↓
    Person
    ↓
    Personal a/c
    ↓
    Giving benefit
    ↓
    Credit
    [Credit the benefit giver]
    Cash a/c
    ↓
    Tangible Aspect (Asset)
    ↓
    Real a/c
    ↓
    Coming in
    ↓
    Debit
    [Debit what comes in]

  2. Bought Furniture for cash 20,000.

    Furniture a/c
    ↓
    Tangible Aspect (Asset)
    ↓
    Real a/c
    ↓
    Coming in
    ↓
    Debit
    [Debit what comes in]
    Cash a/c
    ↓
    Tangible Aspect (Asset)
    ↓
    Real a/c
    ↓
    Going out
    ↓
    Credit
    [Credit what goes out]

  3. Paid Rent to the shop owner Mr. Murugan 5,000.

    Rent Paid a/c
    ↓
    Expenditure
    ↓
    Nominal a/c
    ↓
    Expense
    ↓
    Debit
    [Debit all expenses/losses]
    Cash a/c
    ↓
    Tangible Aspect (Asset)
    ↓
    Real a/c
    ↓
    Going out
    ↓
    Credit
    [Credit what goes out]

  1. Paid cash into bank 1,50,000

    Bank a/c
    ↓
    Organisation
    ↓
    Personal a/c
    ↓
    Receiving
    ↓
    Debit
    [Debit the benefit receiver]
    Cash a/c
    ↓
    Tangible Aspect (Asset)
    ↓
    Real a/c
    ↓
    Going out
    ↓
    Credit
    [Credit what goes out]

  2. Bought Goods for cash 10,000 from M/s Shamir Jain & Co.,

    Goods/Stock a/c
    ↓
    Tangible Aspect (Asset)
    ↓
    Real a/c
    ↓
    Coming in
    ↓
    Debit
    [Debit what comes in]
    Cash a/c
    ↓
    Tangible Aspect (Asset)
    ↓
    Real a/c
    ↓
    Going out
    ↓
    Credit
    [Credit what goes out]

  3. Bought Goods on credit from M/s Ramdas & Bros. for 10,000.

    M/s Ramdas & Bros. a/c
    ↓
    Organisation
    ↓
    Personal a/c
    ↓
    Giving
    ↓
    Credit
    [Credit the benefit giver]
    Goods/Stock a/c
    ↓
    Tangible Aspect (Asset)
    ↓
    Real a/c
    ↓
    Coming in
    ↓
    Debit
    [Debit what comes in]

  4. Sold goods for cash 12,000 to Mr. Naryan Tiwari.

    Cash a/c
    ↓
    Tangible Aspect (Asset)
    ↓
    Real a/c
    ↓
    Coming in
    ↓
    Debit
    [Debit what comes in]
    Goods/Stock a/c
    ↓
    Tangible Aspect (Asset)
    ↓
    Real a/c
    ↓
    Going out
    ↓
    Credit
    [Credit what goes out]

  5. Bought Machinery from M/s Boolani Machinery and paid by cheque 25,000.

    Bank a/c
    ↓
    Organisation
    ↓
    Personal a/c
    ↓
    Giving
    ↓
    Credit
    [Credit the benefit giver]
    Machinery a/c
    ↓
    Tangible Aspect (Asset)
    ↓
    Real a/c
    ↓
    Coming in
    ↓
    Debit
    [Debit what comes in]

  6. Sold goods on credit to Mr. Natekar for 8,000.

    Mr. Natekar a/c
    ↓
    Person
    ↓
    Personal a/c
    ↓
    Receiver
    ↓
    Debit
    [Debit the benefit receiver]
    Goods/Stock a/c
    ↓
    Tangible Aspect (Asset)
    ↓
    Real a/c
    ↓
    Going out
    ↓
    Credit
    [Credit what goes out]

  7. Paid weekly wages to workers 5,000

    Wages Paid a/c
    ↓
    Expenditure
    ↓
    Nominal a/c
    ↓
    Expense
    ↓
    Debit
    [Debit all expenses/losses]
    Cash a/c
    ↓
    Tangible Aspect (Asset)
    ↓
    Real a/c
    ↓
    Going out
    ↓
    Credit
    [Credit what goes out]

  8. Paid M/s Ramdas and Brothers by cheque 5,000.

    Mr. Natekar a/c
    ↓
    Person
    ↓
    Personal a/c
    ↓
    Receiver
    ↓
    Debit
    [Debit the benefit receiver]
    Bank a/c
    ↓
    Organisation
    ↓
    Personal a/c
    ↓
    Giving
    ↓
    Credit
    [Credit the benefit giver]

  9. Received from Mr. Natekar 2,000

    Mr. Natekar a/c
    ↓
    Person
    ↓
    Personal a/c
    ↓
    Giver
    ↓
    Credit
    [Credit the benefit giver]
    Cash a/c
    ↓
    Tangible Aspect (Asset)
    ↓
    Real a/c
    ↓
    Coming in
    ↓
    Debit
    [Debit what comes in]

  10. Received commission from M/s Orion Traders for giving a trade lead 500.

    Cash a/c
    ↓
    Tangible Aspect (Asset)
    ↓
    Real a/c
    ↓
    Coming in
    ↓
    Debit
    [Debit what comes in]
    Commission Received a/c
    ↓
    Income
    ↓
    Nominal a/c
    ↓
    Income
    ↓
    Credit
    [Credit all incomes/gains]

Illustration - Solution

Journal in the books of __ for the period from __ to __
Date V/R
No. 		Particulars L/F Amount
(Dr) 		Amount
(Cr)
June 15th – Cash a/c
To Capital a/c
Dr
 –
–
 2,00,000
2,00,000
[Being the amount received from Mr. Ibrahim, the proprietor as his capital contribution]
17th – Furniture a/c
To Cash a/c
Dr
 –
–
 20,000
20,000
[Being the amount paid towards Furniture purchased]
17th – Rent Paid a/c
To Cash a/c
Dr
 –
–
 5,000
5,000
[For the amount paid towards rent for the shop for the month of May]
18th – Bank a/c
To Cash a/c
Dr
 –
–
 1,50,000
1,50,000
[For the amount of cash paid into bank]
18th – Goods/Stock a/c
To Cash a/c
Dr
 –
–
 10,000
10,000
[Being the value of stock purchased for cash]
18th – Goods/Stock a/c
To M/s Ramdas & Bros a/c
Dr
 –
–
 10,000
10,000
[Being the value of stock purchased from M/s Ramdas & Brothers, on credit]
19th – Cash a/c
To Goods/Stock a/c
Dr
 –
–
 12,000
12,000
[Being the value of stock sold for cash]
20th – Machinery a/c
To Bank a/c
Dr
 –
–
 25,000
25,000
[Being the amount paid by cheque towards purchase of machinery]
21st – Mr. Natekar a/c
To Goods/Stock a/c
Dr
 –
–
 8,000
8,000
[Being the value of stock sold on credit to Mr. Natekar]
21st – Wages paid a/c
To Cash a/c
Dr
 –
–
 5,000
5,000
[For the amount paid towards weekly wages for the workers]
24th – M/s Ramdas & Bros a/c
To Bank a/c
Dr
 –
–
 5,000
5,000
[For the amount paid by cheque to M/s Ramdas & Brothers, on account]
24th – Cash a/c
To Mr. Natekar a/c
Dr
 –
–
 2,000
2,000
[For the amount received in cash from Mr. Natekar on account]
24th – Cash a/c
To commission Received a/c
Dr
 –
–
 500
500
[For the amount received in cash from Mr. Natekar on account]

Note:

The narration written above is to give an idea of how it would appear in books in practice. The details relating to the invoice/bill no's and their dates can be eliminated in solving problems.

There is no set rule for writing the narration. Its purpose is to give an understanding on why the journal entry is being recorded. Any sentence that sounds meaningful and which serves the purpose would be acceptable.

Author : The Edifier
Notes 17