AccountingQA Latest Questions

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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Bonnie
BonnieCurious
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  2. Spriha Sparsh
    This answer was edited.

    Journal Entry Prepaid Rent A/c Dr. To Cash A/C (Being rent paid in advance) "Prepaid Account" is treated as an asset and as per the modern rules debit the increase in the asset. "Cash Account" is an asset and as per the accounting rules credit the decrease in the asset.   Adjustment entry: TheRead more

    Journal Entry

    Prepaid Rent A/c Dr.

    To Cash A/C

    (Being rent paid in advance)

    “Prepaid Account” is treated as an asset and as per the modern rules debit the increase in the asset.

    “Cash Account” is an asset and as per the accounting rules credit the decrease in the asset.

     

    Adjustment entry: The prepaid rent entry has an adjustment entry when the rent expense account is due. The journal entry for that is

    Rent Expense A/c

    To Prepaid Rent A/c

    (Being the rent expense due and adjusted from the prepaid expense)

     

    Example:  ABC.Ltd signs a one-year lease on an office floor for Rs 10,000 a month. The landlord requires that the Company pays the annual amount Rs 120,000 at the beginning of the year.

    The journal entry for Company would be as follows:

    At the beginning

    Prepaid Rent A/c – 1,20,000

    To Cash A/c – 1,20,000

    (Being rent paid in advance for the year)

     

    At the time rent was due (Month 1)

    Rent Expense A/c – 10,000

    To Prepaid Rent A/c – 10,000

    (Being the rent expense due and adjusted from the prepaid expense)

     

    The same entry done in month 1 will be repeated in the next 11 months.

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Anushka Lalwani
Anushka Lalwani
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  2. GautamSaxena Curious .
    This answer was edited.

    Journal entry for commission earned but not received Commission earned but not received is called accrued income. As we know there are two types of accounting, cash basis of accounting, in which the transaction is recorded only when cash is received or paid, and accrual basis of accounting, in whichRead more

    Journal entry for commission earned but not received

    Commission earned but not received is called accrued income. As we know there are two types of accounting, cash basis of accounting, in which the transaction is recorded only when cash is received or paid, and accrual basis of accounting, in which even if money is yet to be accepted or paid, the transactions are still recorded.

    E.g of accrual income- rent earned but not collected, interest on the investment earned but not received, etc.

    Journal entry

    • The commission that is to be received is debited, indicating the increase in assets whereas, the commission account (which will be giving you the commission) is credited.
      • Later on, upon receiving the cash an entry is passed crediting the commission receivable as shown below:

     

    • These are adjusted while making the final accounts for the business.

    Simplifying with an example

    If the rent earned was $1,000 and it’s yet to be received, we’ll be passing this entry-

    When it’s received, this entry is passed

     

     

     

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Karan
Karan
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  2. prashant06 B.com, CMA pursuing
    This answer was edited.

    The journal entry for a loan to an employee is as follows: Loans to employee A/c                                            …..Dr xxx             To Bank/Cash A/c xxx (Being loan given to employee) From the above journal entry, we see that there are two accounts-first one is "Loan to employee accounRead more

    The journal entry for a loan to an employee is as follows:

    Loans to employee A/c                                            …..Dr xxx
                To Bank/Cash A/c xxx
    (Being loan given to employee)

    From the above journal entry, we see that there are two accounts-first one is “Loan to employee account” and the second one is “Bank/cash account“. Both are assets for the company.

    Loan to employees is considered an asset because they are expected to be returned by the employee within the stipulated time period. If the loan is repaid within one year it will be shown under the current asset and if it is not expected to be collected within a year or in short might be repaid after a year then it will be shown under long-term assets.

    Also, we all know Bank/cash is an asset for the company.

    Why loan to employee A/c is debited and Bank/cash A/c is credited?

    As per the modern rule:

    ASSETS
    Increase Debit
    Decrease Credit

    Connecting the above-stated entry with the modern rule “loan to an employee” is debited as money comes back into the business hence there is an increase in an asset therefore debited. While in the second case “bank/cash account” is credited as the money goes out of the business, there is a decrease in assets of the company therefore credited.

    Loan to employee The inflow of cash in a future date Increase in an asset Debit
    Bank/ cash The outflow of cash Decrease in an asset Credit

    We notice that in this entry there is an increase in one asset while a decrease of another asset. Therefore the impact on the balance sheet is Nil.

    Let me give you a simple illustration of the above entry

    Mr. Ross was an employee of Maxwell Pvt ltd. Mr. Ross was lent Rs 2,00,000 by the company for some emergency purpose. So as per modern rules the accounting entry in the books of the company will be as follows:

    Loans to Mr. Ross A/c                                            …..Dr 2,00,000
                To Bank/Cash A/c 2,00,000
    (Being loan given to Mr. Ross)
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Manvi
Manvi
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  2. Ayushi Curious Pursuing CA
    This answer was edited.

    The journal entry for commission received is as presented below: Cash A/c / Bank A/c  / A Personal A/c    Dr.    -   ₹                     To Commission received A/c          -        ₹         (Being ₹ commission received)   The commission received means an amount received by a person or entity forRead more

    The journal entry for commission received is as presented below:

    Cash A/c / Bank A/c  / A Personal A/c    Dr.    –   ₹

                        To Commission received A/c          –        ₹        

    (Being ₹ commission received)

      The commission received means an amount received by a person or entity for the provision of a service. For example, a firm sold goods worth ₹10,000 of a manufacturer and was paid an amount of ₹1000 in cash as commission. So, the entry in the books of accounts of the firm will be as follows:

    Cash A/c       Dr.       ₹1000

    To Commission received A/c    ₹1000

    Now, let’s understand the logic behind the journal entry through the modern rules of accounting.

    Cash account, bank account and personal account are asset accounts. Hence, they are debited when assets are increased.

    While the commission received account is an income account. Hence, when income increases, it is credited.

    As per the traditional rules i.e. the golden rules of accounting, these are the explanations:

    Commission can be received in cash or bank. Hence the Cash or Bank account is debited as they are real accounts.

    “Debit what comes in, credit what goes out”

    Also, when it is not received but accrued, then a personal account is debited (the person or entity who has received the service but has not paid for it yet).  The following rule applies to the personal account.

    “Debit the receiver, credit the giver”

     Commission received is an income, thus it is a nominal account. It will be credited because of the following rule of nominal accounts:-

    “Debit all expense and losses, credit all income and gains”

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Simerpreet
SimerpreetHelpful
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  2. AbhishekBatabyal Helpful Pursuing CA, BCOM (HONS)
    This answer was edited.

    Introduction   Furniture is treated as a fixed asset of an enterprise unless it deals in the manufacturing or the trade of furniture. As stock in trade, it will be treated as current assets. In both cases, they are real accounts. Hence, the golden rule of accounting will be the same. But, when it coRead more

    Introduction

     

    Furniture is treated as a fixed asset of an enterprise unless it deals in the manufacturing or the trade of furniture. As stock in trade, it will be treated as current assets.

    In both cases, they are real accounts. Hence, the golden rule of accounting will be the same.

    But, when it comes to journal entries, Furniture A/c will appear only when it is treated as a fixed asset.

    No journal entries are passed in the stock-in-trade account except for some balance transferring entries.

    Journal Entries on taking Furniture as a fixed asset

    Taking furniture as a fixed asset, we can pass various entries related to it. Since furniture is an asset, any increase is debited and the decrease is credited.

    Also, furniture is a real account which means the golden rule of accounting  applicable is, “Debit what comes in and credit what goes out”.

    Following are the basic entries related to furniture.

    Purchase of furniture

    The most common entry related to furniture is the purchase of furniture:

    Furniture A/c                                            Dr. Amt
    To Cash / Bank A/c Amt

    Here Furniture A/c is increased, hence debited.
    Cash or Bank being reduced is credited.

    Sale of furniture

     

    Cash / Bank A/c                                       Dr. Amt
    Profit and Loss A/c *                               Dr. Amt
    To Furniture A/c Amt
    To Profit and Loss A/c  ** Amt

     *In case of loss

    **In case of profit

     On the sale of furniture, its balance gets reduced, hence credited.
    Cash or Bank is debited as cash comes in hand or into the bank.

    Also, profit or loss may arise due to the difference in sale value and the carrying amount of the furniture A/c.

    The difference is debited to Profit and Loss A/c in case of loss and credited in case of profit.

     

    Depreciation on Furniture

    Depreciation A/c                                         Dr. Amt
    To Furniture A/c Amt

    Here, furniture is credited as it is decreased by the amount of depreciation.

    Depreciation being a non-cash expense, is debited.

    Journal Entries on taking Furniture as stock in trade

    When furniture is stock of trade of a business, the journal entries will be like normal purchase and sales entries as below:

     

    Purchase A/c                                               Dr. Amt
    To Cash / Bank A/c Amt

     

     

    Cash / Bank A/c                                          Dr. Amt
    To Sales A/c Amt

    There will be no furniture account.

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prashant06
prashant06
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  2. Karan B.com and Pursuing ACCA
    This answer was edited.

    The journal entry for the opening stock will be: Particulars Amt Amt Trading A/c INR              To Opening Stock A/c INR (Being opening stock transferred to Trading A/c) Opening stock is the value of inventory that is available with the company for sale at the beginning of the accounting period. ORead more

    The journal entry for the opening stock will be:

    Particulars Amt Amt
    Trading A/c INR
                 To Opening Stock A/c INR
    (Being opening stock transferred to Trading A/c)

    Opening stock is the value of inventory that is available with the company for sale at the beginning of the accounting period. Opening stock may include stock of raw material, semi-finished goods, and finished goods. It is a part of the cost of sales.

    Closing stock is the value of unsold inventory left with the company at the end of the year. The previous year’s closing stock is the current year’s opening stock.

    Trading Account is a nominal account. According to the golden rules of accounting, the nominal account is the account where “Debit” all expenses and losses, and “Credit” all income and gains.

    In the above journal entry, the opening stock account is credited because it is the balance that is carried forward from the previous year and carried forward with the aim of selling it and gaining profit from it. The trading account here is debited as opening stock is carried forward to the next year from the trading account only.

    According to modern rules of accounting, “Debit entry” increases assets and expenses, and decreases liability and revenue, a “Credit entry” increases liability and revenues, and decreases assets and expenses.

    Here, Trading A/c is debited because an expense is incurred while bringing stock into the business. Opening Stock A/c is credited because indirectly it is creating a source of income for the business.

    The formula for calculating opening stock is as follows:

    Opening Stock = Cost of Goods Sold + Closing Stock – Purchases

    For example, AB Ltd. started a new accounting period for dairy products and introduced opening stock worth Rs.1,00,000 in the business.

    Here, the journal entry will be,

    Particulars Amt Amt
    Trading A/c 1,00,000
                 To Opening Stock A/c 1,00,000
    (Being opening stock transferred to Trading A/c)
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SidharthBadlani
SidharthBadlani
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  2. Ishika Pandey Curious ca aspirant
    This answer was edited.

    Definition Journal Entry is an entry made in the journal is called journal entry. And the process of recording a transaction in a journal is called journalizing. Broadly journal entries are of two types : 1. Simple entry 2. Compound entry Otherwise, they are categorized into seven types which are asRead more

    Definition

    Journal Entry is an entry made in the journal is called journal entry. And the process of recording a transaction in a journal is called journalizing.

    Broadly journal entries are of two types :

    1. Simple entry
    2. Compound entry

    Otherwise, they are categorized into seven types which are as follows :

    1. Opening entries
    2. Closing entries
    3. Rectification entries
    4. Transfer entries
    5. Adjusting entries
    6. Entries on dishonor of bills
    7. Miscellaneous entries

    Explanation

    Now let me explain to you the above types of entries mentioned which are as follows ;

    Simple entry
    • Is a journal entry in which one account is debited and another account is credited with an equal amount.
    • For example, the purchase of goods of Rs 5000 cash. It will affect two accounts,i.e., purchase A/C and cash A/C with the amount of Rs 5000.

    Compound entry
    • Is a journal entry in which one or more accounts are debited and/or one or more accounts credited or vice versa.
    • For example the sale of goods to Sati for Rs 5000, Rs 2000 is received in cash, and the balance is to be received later.
    • This transaction of the sale has an effect on three accounts i.e cash or bank A/C, Sati A/C, and sales A/C.

    Opening entries
    • Are defined as when books are started for the new year, the opening balance of assets and liabilities are journalized. For example bills payable, short-term loans, etc.

    Closing entries
    • At the end of the year, the profit and loss account has to be prepared. For this purpose, the nominal accounts are transferred to this account. This is done through journal entries called closing entries.

    Rectification entries
    • If an error has been committed, it is rectification through a journal entry.

    Transfer entries
    • If some amount is to be transferred from one account to another, the transfer will be made through a journal entry.

    Adjusting entries
    • At the end of the year, the number of expenses or income may have to be adjusted for amounts received in advance or for amounts not yet settled in cash.
    • Such an adjustment is also made through journal entries. Usually, the entries pertain to the following :

    Outstanding expenses,i.e., expenses incurred but not yet paid;

    Prepared expenses,i.e., expenses paid in advance for some period in the future ;

    Interest on capital is the interest proprietor’s investment in the business entity investment; and

    Depreciation fall in the value of assets used on account of wear and tear. For all these, journal entries are necessary.

    Entries on dishonor of bills
    • If someone who accepts a promissory note ( or bill) is not able to pay in on the due date, a journal entry will be necessary to record the non–payment or dishonor.

    Miscellaneous entries
    The following entries will also require journalizing
    • Credit purchase of things other than goods dealt in or materials required for the production of goods e.g. Credit purchase of furniture or machinery will be journalized.
    • An allowance to be given to the customers or a charge to be made to them after the issue of the invoice.
    • Receipt of promissory notes or issue to them if separate bills books have not been maintained.
    • On an amount becoming irrecoverable, say, because, of the customer becoming insolvent.
    • Effects of accidents such as loss of property by fire.
    • Transfer of net profit to capital account.

    Here are some examples of journal entries showing the above types :

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