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Bonnie
BonnieCurious
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Calls in AdvanceJournal Entry
  2. Manvi Pursuing ACCA
    This answer was edited.

    Journal Entry for Calls in Advance  Calls in advance mean excess money received by the company than what has been called up. Calls in advance are treated as Current Liability and shown in the Balance Sheet on the liability side. Journal Entry will be : Here we will "Debit" Bank A/c as it will increaRead more

    Journal Entry for Calls in Advance 

    Calls in advance mean excess money received by the company than what has been called up. Calls in advance are treated as Current Liability and shown in the Balance Sheet on the liability side.

    Journal Entry will be :

    Here we will “Debit” Bank A/c as it will increase assets of the company and “Credit” Calls in Advance A/c because it will increase the company’s current liabilties.

    For Example:

    Mr.Z shareholder of ABC Ltd was allotted 2,000 equity shares of Rs.10 each. He paid call money at the time of allotment.

    On Application Rs 5
    On Allotment Rs 2
    On First and final call Rs 3

     

    Journal Entry is as follows:

    Here, the company received an excess amount of Rs.6,000 (2,000*3) from a shareholder Mr.Z who paid the call money in advance. ABC Ltd will record this under Calls in Advance A/c. While passing journal entry ABC Ltd will debit its Bank A/c by Rs.6,000 and credit calls in advance account by Rs.6,000.

    When share calls are called up, calls received in advance are adjusted. The company will hold only the required amount which will make allotted shares fully paid.

    Once the amount is transferred to relevant call accounts, calls in advance account will be written off.

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Aadil
AadilCurious
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  2. ShreyaSharma none
    This answer was edited.

    Drawings of goods The drawings of the goods, in a business, take place when the owner/partner of a business withdraws goods for their personal use. It's hence called drawings as it reduces the capital invested by the owner(s). It's also called the withdrawal account. The drawings are generally madeRead more

    Drawings of goods

    The drawings of the goods, in a business, take place when the owner/partner of a business withdraws goods for their personal use. It’s hence called drawings as it reduces the capital invested by the owner(s). It’s also called the withdrawal account.

    The drawings are generally made for cash or stock by the owner/partner and the relevant account is thus reduced causing the adjustment done on the owner/partner’s capital at the cost price.

     

    Journal entry

    The journal entry for the goods withdrawn for personal use will be as follows:

     

    Explanation via rules

    The drawings account is debited because it decreases the balance of the capital account. Whereas, the purchases account is credited as it causes a reduction in the purchases account.

    As per the modern rules of accounting, we credit the decrease in assets, thus, the purchases account is credited. Whereas, the withdrawal account when increased is debited. Therefore, the drawing account is debited here.

    As per the golden rules of accounting, “debit what comes in and credit what goes out.” Hence, the purchase account is credited. And, “if any expense or loss is incurred for the business, the expense or loss account shall be debited“. Thus, the drawing account is debited.

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Vijay
VijayCurious
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  2. Radha M.Com, NET
    This answer was edited.

    The entry for a loan (taken for any purpose) and a car loan are quite different. When you take a bank loan, you'll receive the money from the bank and subsequently, you'll start paying interest on it. In the case of a car loan, you don't receive the money from the bank. Once the car has been purchasRead more

    The entry for a loan (taken for any purpose) and a car loan are quite different. When you take a bank loan, you’ll receive the money from the bank and subsequently, you’ll start paying interest on it.

    In the case of a car loan, you don’t receive the money from the bank. Once the car has been purchased you’ll make the down payment and the remaining amount will be paid by the bank on your behalf. This car loan should then be paid to the bank in installments.

    The following journal entry is posted to record the car loan taken for office use:

    Car A/c is debited as there is an increase in the asset. Bank A/c is credited as the down payment for the car is made which reduces the assets. Car Loan A/c is credited as it increases liability.

    The following entry is recorded for the repayment of the loan (first installment) to the bank.

    Let me explain this with an example,

    Kumar purchased a car for 25,00,000 for his office use. He made a down payment of 2,00,000 and took a car loan from HDFC Bank for 23,00,000. The following entry will be made to record this transaction.

    Car A/c  25,00,000
       To Bank A/c    2,00,000
       To Car Loan A/c  23,00,000
    (Being car purchased through a loan from HDFC bank)

     

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Aadil
AadilCurious
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  2. Ayushi Curious Pursuing CA

    When it is said that furniture is purchased for office use, it means it is an asset for the business and the journal entry for this event will be the following: Furniture A/c Dr. Amt To Cash/Bank / Vendor A/c Cr. Amt (Being furniture purchased for office use) Explanation of the journal as per the goRead more

    When it is said that furniture is purchased for office use, it means it is an asset for the business and the journal entry for this event will be the following:

    Furniture A/c Dr. Amt
    To Cash/Bank / Vendor A/c Cr. Amt
    (Being furniture purchased for office use)

    Explanation of the journal as per the golden rules of accounting

    The furniture account is a real account because it represents a material asset and the golden rule for real accounts is “Debit what comes in, credit what goes out”. Hence, the furniture account is debited as it is increased. The cash and bank are also real accounts and they are debited because there is an outflow from cash or bank.

    If the furniture is purchased on credit then the vendor account is credited. A vendor account represents a person and the golden rule for personal accounts is, “Debit the receiver, credit the giver”. It is credited as the furniture is given by the vendor.

    Explanation of journal as per modern rules of accounting

    The furniture account is an asset account hence it is debited as asset accounts are debited on increase. Cash and bank accounts are also assets accounts and they are credited as they are decreased on the purchase of furniture.

    A vendor account is a liability account as there is an obligation to pay the vendor. It is credited as it is increased. Liability accounts are credited on the increase and vice versa.

    When furniture is purchased for personal use

    If the furniture is purchased for personal use and the payment is made or is to be made out of business, then the asset will not be recognised as an asset for the business and it will be recorded as a drawing. It will be deducted out of capital. The journal entry will be the following:

    Capital  A/c Dr. Amt
    To Drawings A/c Cr. Amt
    (Being furniture purchased for personal use)

     

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Simerpreet
SimerpreetHelpful
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  2. Radha M.Com, NET
    This answer was edited.

    The journal entry for the closing stock is passed at the year-end as closing stock is the inventory held by a business at the end of its accounting period. However, the entry for recording closing stock depends on how it is treated in the books of accounts. The two types of the accounting treatmentRead more

    The journal entry for the closing stock is passed at the year-end as closing stock is the inventory held by a business at the end of its accounting period. However, the entry for recording closing stock depends on how it is treated in the books of accounts.

    The two types of the accounting treatment of closing stock are as follows:

    • Closing stock is not shown in the Trial Balance.
    • Closing stock is shown in the Trial Balance.

     

    Closing stock is not shown in the Trial Balance:

    As per this treatment, the closing stock is not shown in the Trial Balance because it is already a part of the purchases of the business. Showing it in the Trial Balance would lead to a double effect. This will not give us accurate profit/loss at the end of the year.

    The closing stock is transferred to Trading A/c by passing a closing entry.

    Closing stock is an asset. It is debited because there is an increase in the assets. Trading A/c is credited because of the Matching concept as the value of the closing stock is adjusted against the cost of goods sold.

    At the end of the year, it is shown on the Asset side of the Balance Sheet, under the head Current Assets and sub-head Inventory.

    For example,

    ABC Ltd. at the beginning of the year had an opening inventory of 20,000. During the year, purchases worth 5,000 were made and goods worth 10,000 were sold. At the end of the year, the value of the closing stock will be 15,000 (20,000 + 5,000 – 10,000).

    Now the closing stock worth 15,000 will be recorded through this journal entry:

    Closing Stock A/c  15,000
       To Trading A/c  15,000
    (Being closing stock worth 15,000 transferred to Trading A/c)

    Closing stock is shown in the Trial Balance:

    This scenario is possible only when the closing stock is adjusted against purchases. By adjusting against purchases, the double effect of showing both purchases and closing stock in Trial Balance is eliminated.

    The following entry is recorded to adjust closing stock against purchases.

    Closing Stock is debited as there is an increase in the asset. Purchase A/c is credited because of the Matching concept.

    After recording the adjustment entry, the closing stock is shown on the debit column of the Trial Balance. It is not shown in the Trading A/c as it is already adjusted against purchases. In the Balance Sheet, it is shown as a Current Asset.

     

     

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Bonnie
BonnieCurious
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  2. Akash Kumar AK
    This answer was edited.

    Debts are of two types one is Good Debt, and another one is Bad debt. Bad Debts The amount which is not recoverable from the debtors is called Bad debt.  It is an uncollectable amount from the organization's customers due to the customer's inability to pay the amount of money taken on credit.  Read more

    Debts are of two types one is Good Debt, and another one is Bad debt.

    Bad Debts

    The amount which is not recoverable from the debtors is called Bad debt.  It is an uncollectable amount from the organization’s customers due to the customer’s inability to pay the amount of money taken on credit.

     

    Example 1

    Mr A borrowed $100 from Mr B for his college fee and agrees to pay in 2 months. After the time period is complete Mr A failed to repay the borrowed amount. This is a  Bad Debt for Mr B.

    Example 2

    XYZ Co. had made a credit sale of $50,000. A debtor who has to pay $1000 has been bankrupted. XYZ co. cannot recover the amount from the Debtor, so it records the irrecoverable amount as a bad debt.

     

    Journal Entry

    In this entry, “Bad debts are written off of Rs. 2000.”

    Bad debt is the amount not recoverable from debtors, which is a loss for the organization.

    Modern Rule

    The Modern rules of accounting for Expenses are “Debit the increase in expenses and Credit the decrease in expenses.”

     

    Golden Rule

    The Golden rules of accounting for expenses and losses are “Debit all expenses and losses, Credit all incomes and gains.”

    Bad Debts A/c Dr. 2,000

    To Debtor’s A/c 2000

     

    Bad debt is treated as a loss for the organization. As per the rule, this should be debited to the profit and loss account.

    Profit and Loss A/c Dr. – 2000

    To Bad Debts A/c – 2000

     

    Instead of passing two separate entries for writing off, we can combine the entries and pass one entry.

    Profit and Loss A/c Dr. 2000

    To Debtor’s A/c 2000

     

    Recovery of Bad debts

    Recovery of Bad debt is the amount received for a debt that was written off in the past. It was considered uncollectable.

    When we write off bad debt, it is recorded as a loss, but the recovery of bad debts is treated as an income for the business.

    It is treated as an income and the recovery of bad debt is shown on the credit side of the Income statement.

     

     

     

    Journal Entry for Recovery of Bad debts

    Bank/Cash A/c Dr. – Amount

    To Bad Debts Recovered A/c – Amount

    Rules applied in the Journal entry are as per the Golden rules of accounting,

    “Cash/Bank A/C” is a real account therefore debit what comes in and credit what goes out.

    “Bad Debts Recovered A/C” is a nominal account therefore debit all expenses and losses, and credit all incomes and gains.

     

    Treatment of “Bad Debt written off of Rs.2ooo.”

    In Trial Balance: No effect

    In Income Statement: It is shown on the debit side as Rs.2000 (loss)

    In Balance Sheet: Rs.2000 shall be deducted from the sundry debtor account.

     

     

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Manvi
Manvi
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  2. Karan B.com and Pursuing ACCA
    This answer was edited.

    Bad Debt is the amount that is irrecoverable from the debtors. It is the portion of the receivables. It includes two accounts “Bad Debts A/c” and “Debtors A/c or Accounts Receivable A/c”. The amount cannot be recovered by the debtor for reasons like the debtor is no longer in the position to pay offRead more

    Bad Debt is the amount that is irrecoverable from the debtors. It is the portion of the receivables. It includes two accounts “Bad Debts A/c” and “Debtors A/c or Accounts Receivable A/c”.

    The amount cannot be recovered by the debtor for reasons like the debtor is no longer in the position to pay off the debt or has become insolvent.

    There are two methods to write off bad debts:

    1. Direct Method
    2. Allowance for Doubtful Debts

     

    1. Direct Method: In this method, the amount of bad debts is directly deducted from the total receivables and the second effect is transferred to the debit side of Profit and Loss A/c as an expense.

    The journal entry for bad debts as per modern rules of accounting is as follows:

    Bad Debts A/c Debit Increase in expenses
          To Accounts Receivable A/c Credit Decrease in assets
    (Being bad debts written off )

     

    Journal entry for transferring bad debts to profit and loss account:

    Profit and Loss A/c Debit
          To Bad Debts A/c Credit
    (Being bad debts transferred to profit and loss a/c )

     

    For example, A Ltd had a total receivable of Rs.2,50,000 and bad debts for the period amounted to Rs.10,000.

    Here, the journal entries will be:

    Bad Debts A/c Debit 10,000
          To Accounts Receivable A/c Credit 10,000
    (Being bad debts written off )

     

    Profit and Loss A/c Debit 10,000
          To Bad Debts A/c Credit 10,000
    (Being bad debts transferred to profit and loss a/c )

     

     2. Allowance for Doubtful Debts:  In this method allowance is the estimation of the debts which is doubtful to be paid. The company creates a reserve for such debts which are uncollectible.

    Firstly, the company will create a reserve which will be based on the accounts receivable. The journal entry will be:

    Bad Debts A/c Debit
          To Allowance for Doubtful Debts A/c Credit
    (Being allowance for doubtful debts created)

     

    When a specific receivable is uncollectible it will be charged as an expense, and Allowance for Doubtful Debts will be “Debited” and Accounts Receivable will be “Credited”.

    Allowance for Doubtful Debts A/c Debit
                  To Accounts Receivable A/c Credit
    (Being bad debts written off)

    For example, Mr.B sold goods worth Rs.15,000 to Mr.D. He creates an allowance of Rs.15,000 in case Mr.D fails to pay the amount. At the end of the period, Mr.D defaults and does not pay the debt.

    In this case, Mr.B will first record the journal entry for allowance and then will write off Mr.D’s account.

    Bad Debts A/c 15,000
          To Allowance for Doubtful Debts A/c 15,000
    (Being allowance of Rs.10,000 created for doubtful debts)

     

    Allowance for Doubtful Debts A/c 15,000
                  To Mr.D’s A/c 15,000
    (Being Mr.D’s account written off)
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Jayesh Gupta
Jayesh GuptaCurious
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  2. AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS)
    This answer was edited.

    The journal entry for the dividend collected by the bank is as follows: Bank A/c                                                                Dr. Amt To Dividend Received A/c Amt Here, Bank Account is debited and the Dividend Received Account is credited. This treatment is explained below. The logRead more

    The journal entry for the dividend collected by the bank is as follows:

    Bank A/c                                                                Dr. Amt
    To Dividend Received A/c Amt

    Here, Bank Account is debited and the Dividend Received Account is credited. This treatment is explained below.

    The logic behind the journal entry

    This can be explained through the following rules of accounting:

    • Golden rules of accounting
    • Modern rules of accounting

    Golden rules of accounting

    A bank account is a real account and the golden rule of accounting for the real account is, “Debit what comes in and credit what goes out”

    Hence, the bank account is debited as the money is coming into the bank.

    Dividend is an income hence dividend received is a nominal account. The golden rule of accounting for a nominal account is “Debit all expenses and losses and credit all income and gains”

    Hence, the dividend received account is credited as income.

    Modern rules of accounting

    As per modern rules of accounting, a bank account is an asset account.

    The asset account is debited when increased and credited when decreased.

    Hence, the Bank account is debited here as it is increased.

    A dividend received account is an income account.

    The income account is credited when increase and debited when decreased.

    Hence, the dividend received account is credited here as it is increased.

    Treatment in the financial statements

    Since the dividend received is an income; it is shown on the credit side of the Statement of profit and loss.

    The bank account is an asset so it will be shown on the balance sheet.

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Radha
Radha
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  2. Simerpreet Helpful CMA Inter qualified
    This answer was edited.

    The journal entry for asset purchase is- Particulars Amount Amount Asset A/c                                                             Dr $$$      To  Bank A/c $$$ According to the Modern Approach for Assets Account: When there is an increase in the Asset, it is ‘Debited’. When there is a decreaseRead more

    The journal entry for asset purchase is-

    Particulars Amount Amount
    Asset A/c                                                             Dr $$$
         To  Bank A/c $$$

    According to the Modern Approach for Assets Account:

    • When there is an increase in the Asset, it is ‘Debited’.
    • When there is a decrease in the Asset, it is ‘Credited’.

     

    So the journal entry here is about the purchase of an asset and since there is an increase in Asset, the assets account will be debited as per the modern rule and due to the decrease of cash in the bank account, it will be credited.

    For Example, Richard purchased furniture worth Rs 6,000 for his business.

    I will try to explain it with the help of steps.

    Step 1: To identify the account heads.

    In this transaction, two accounts are involved, i.e. Furniture A/c and Bank A/c as Richard has acquired the furniture paying a certain amount.

    Step 2: To Classify the account heads.

    According to the modern approach: Furniture A/c is an Asset account and Bank A/c is also an Asset account.

    According to the traditional approach: Furniture A/c is a Real account and Bank A/c is also a Real account.

    Step 3: Application of Rules for Debit and Credit:

    According to the modern approach: As asset increases because Furniture has been bought, ‘Furniture A/c’ will be debited. (Rule – increase in Asset is debited).

    Bank account is also an Asset account. As the asset is in the form of cash decreases because the amount has been paid by cash or cheque, Bank account will be credited. (Rule – decrease in Asset is credited).

    According to the traditional approach: Furniture A/c is a Real account and Bank is also a Real account, for which the rule to be applied is ‘Debit what comes in and Credit what goes out’. Furniture being asset comes in the business, so Furniture A/c will be debited and as cash goes out Bank A/c will be credited.

    So from the above explanation, the Journal Entry will be-

    Particulars Amount Amount
    Furniture A/c                                                      Dr 6,000
         To  Bank A/c 6,000

     

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Bonnie
BonnieCurious
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  2. A_Team (MBA - Finance Student) ISB College
    This answer was edited.

    Here are 10 examples of accounting entries: A company purchases $500 worth of office supplies on credit from a supplier. Office supplies expense account would be debited Accounts payable would be credited   A firm receives $1,000 in cash from a customer for services rendered. In this case, CashRead more

    Here are 10 examples of accounting entries:

    • A company purchases $500 worth of office supplies on credit from a supplier.
      • Office supplies expense account would be debited
      • Accounts payable would be credited

     

    • A firm receives $1,000 in cash from a customer for services rendered. In this case,
      • Cash account would be debited
      • Service revenue account would be credited

     

    • A business pays $250 in salaries to its employees.
      • A debit would be made to the salaries expense account
      • A credit would be made to the cash account

     

    • A business borrows $5,000 from a bank and receives the funds as a loan. The entry would be,
      • A debit to the bank account
      • A credit to the loan payable account

     

    • A company sells $800 worth of inventory to a customer for cash.
      • The entry would be a debit to the cash account
      • A credit to the sales revenue account

     

    • A firm purchases $3,000 worth of equipment on credit from a supplier.
      • The entry would be a debit to the equipment account
      • A credit to the supplier’s account

     

    • A company incurs $500 in advertising expenses for a new marketing campaign (cash).
      • The entry would be a debit to the advertising expense account
      • A credit to the cash account

     

    • A firm collects $1,200 from a customer. The entry would be,
      • A debit to the cash account
      • A credit to the customer’s account

     

    • A business pays $700 in rent for its office space. The entry would be,
      • A debit to the rent expense account
      • A credit to the cash account

     

    • An organization pays off a $2,000 loan to the bank. The entry would be,
      • A debit to the loan payable account
      • A credit the cash account

     

    I also found a long list of example journal entries and a free PDF to download here.

     

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