Journalising
Prepare Journal from the transactions given below:
| Transaction | ₹ | |
|---|---|---|
| (a) | Cash paid for installation of machine | 500 |
| (b) | Goods given as charity | 2,000 |
| (c) | Interest charge on capital @7% p.a. when total capital were | 70,000 |
| (d) | Received ₹1,200 of a bad debts written-off last year. | |
| (e) | Goods destroyed by fire | 2,000 |
| (f) | Rent outstanding | 1,000 |
| (g) | Interest on drawings | 900 |
| (h) | Sudhir Kumar who owed me ₹3,000 has failed to pay the amount. He pays me a compensation of 45 paise in a rupee. | |
| (i) | Commission received in advance | 7,000 |
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Start your 14-day free trial to unlock the full solution →Nine entries. Installation cost is capitalised to Machinery; charity and fire-loss reduce Purchases; interest on capital ₹4,900; bad debts recovered ₹1,200; Sudhir Kumar's part-recovery (₹1,350) with ₹1,650 written off; commission received in advance is a liability.
Treatment. Installation of a machine is a capital expenditure added to the Machinery cost. Goods given as charity or lost by fire are credited to Purchases (they leave stock) and debited to the respective loss/expense. Interest on capital is charged and credited to Capital. Bad debts recovered is a gain. Interest on drawings is charged to Drawings and credited to income. Commission received in advance is unearned income → a liability.
Journal
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
| (a) | Machinery A/c Dr. | 500 | ||
| To Cash A/c | 500 | |||
| (Installation charges of machine capitalised) | ||||
| (b) | Charity A/c Dr. | 2,000 | ||
| To Purchases A/c | 2,000 | |||
| (Goods given as charity) | ||||
| (c) | Interest on Capital A/c Dr. | 4,900 | ||
| To Capital A/c | 4,900 | |||
| (Interest on capital @7% p.a. on ₹70,000) | ||||
| (d) | Cash A/c Dr. | 1,200 | ||
| To Bad Debts Recovered A/c | 1,200 | |||
| (Bad debts written off last year, now recovered) | ||||
| (e) | Loss by Fire A/c Dr. | 2,000 | ||
| To Purchases A/c | 2,000 | |||
| (Goods destroyed by fire) | ||||
| (f) | Rent A/c Dr. | 1,000 | ||
| To Outstanding Rent A/c | 1,000 | |||
| (Rent outstanding) | ||||
| (g) | Drawings A/c Dr. | 900 | ||
| To Interest on Drawings A/c | 900 | |||
| (Interest charged on drawings) | ||||
| (h) | Cash A/c Dr. | 1,350 | ||
| Bad Debts A/c Dr. | 1,650 |
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