When in a single transaction two or more accounts are involved, such kinds of transactions are termed as Compound entries. Example 1, Johnson Co. purchased goods worth 5,000, and half of the amount was paid in cash and the other half by cheque. So here three accounts are involved: Purchase account-Read more
When in a single transaction two or more accounts are involved, such kinds of transactions are termed as Compound entries.
Example 1, Johnson Co. purchased goods worth 5,000, and half of the amount was paid in cash and the other half by cheque.
So here three accounts are involved:
Purchase account- That is to be debited.
Cash account- That is to be credited.
Bank account- That is to be credited.
Journal entry:
Now posting the above journal entry in a ledger account.
In the Journal, the Purchase account has been debited. So in the ledger, the purchase account will also be debited. Since the purchase account is debited in the ledger, the corresponding two credit accounts of this entry i.e. the cash and the bank will be written on the debit side in the particulars column. So while posting, the amount to be considered would be the amount individually paid in cash and bank as shown in the journal entry.
Cash a/c is credited with the purchase account. In the ledger, purchase a/c will be posted on the credit side. So while posting, the amount to be considered would be the amount individually paid in cash.
Bank a/c is credited with the purchase account. In the ledger, purchase a/c will be posted on the credit side. So while posting, the amount to be considered would be the amount individually paid in Bank a/c.
Example 2, Johnson Co purchased goods and made payment in cash 2,000. Along with it, it also paid commission and interest of 1,000 and 500 respectively.
So here four accounts are involved:
Purchase account- That is to be debited.
The commission allowed account- That is to be debited.
Interest allowed account- That is to be debited.
Cash account- That is to be credited.
Journal Entry:
Now posting the above journal entry in a ledger account.
In the journal entry, the cash account has been credited. So in the ledger, the cash account will also be credited. Since the cash account is credited in the ledger, the corresponding three accounts will also be credited in the particulars column. As in the journal entry the three debit accounts viz. Purchase, the commission allowed, and interest allowed, the amounts written against them shall be entered in the respective accounts in the amount column on the credit side of the cash account.
Purchase a/c is debited with a cash account. In the ledger, Cash a/c will be posted on the debit side. So while posting, the amount to be considered would be the amount individually paid in the Purchase account.
The commission allowed a/c is debited with a cash account. In the ledger, cash a/c will be posted on the debit side. So while posting, the amount to be considered would be the amount individually paid in Commission allowed a/c.
Interest allowed a/c is debited with a cash account. In the ledger, cash a/c will be posted on the debit side. So while posting, the amount to be considered would be the amount individually paid in Interest allowed a/c.
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Accrual Accrual expense means the transaction that takes place in a particular period must be accounted for in that period only irrespective of the fact when such amount has been paid. An accrual of the expenditure which is not paid will be listed in the books of accounts. These accruals can be furtRead more
Accrual
Accrual expense means the transaction that takes place in a particular period must be accounted for in that period only irrespective of the fact when such amount has been paid.
An accrual of the expenditure which is not paid will be listed in the books of accounts. These accruals can be further divided into two parts
Accrual Expense-
Accrual Expense means any transaction that takes place in a particular period but the amount for it will be paid on a later period.
For example- If rent of 10,000 for the month of March was paid in April month then this rent will be accounted for in the books in March
For example- Interest of 1,000 for the month of March of the loan amount of 10,000 paid in April then will be accounted for in the books in March
These are the following accrued expense
Accrual Revenue-
Accrual Revenue means any transaction that takes place in a particular period but the amount for it will be received in the later period.
For example- If interest of 10,000 on bonds for the period of March is received in April months then this amount will be accounted for in March. These are the following accrued revenue
For example- Rent of 10,000 for the month of March received in April month then this rent will be accounted for in the books in March
- Accrual Income- Acrrual expense means the amount for any income received on a later period than the period when it pertains to be received
- Accrual Rent– Accrual rent means the amount for using the land of the entity by the other party is received at a later period than the period when it is put into use.
- Accrued Interest– Accrued interest means the amount of interest received on a later period than the period when it pertains to receive
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