STEPS TO MAKE GENERAL JOURNAL ENTRIES

Example:

January 1: Mr. Ali started business with cash investment of Rs.100,000.

Solution:
Step # 1: Analyzing the name of accounts:
There are two accounts used in this transaction.
(1) Cash (2) Capital.

Step # 2: Analyzing nature of accounts:
Nature of cash is Asset and nature of capital is Owner's equity.

Step # 3: Analyzing movement of accounts:
Cash (assets) is increasing in the business and Capital (owner's equity) is also increasing in the business.

Step # 4: Following rules of debit and credit:
Increase in asset recorded as debit and increase in owner's equity is recorded as credit.

General Entry:
Based on the above steps, general entry would be:
Cash 100,000 Debit
Capital 100,000 Credit.

Comments

CORRECTION OF ERRORS EXAMPLE WITH SOLUTION

(a) Purchase of supplies was wrongly debited to supplies expense account Rs.5,000. Step # 1: What was the double entry? Office supplies expense 5,000 Dr. and Cash 5,000 Cr. Step # 2: What should the double entry have been? Office supplies 5,000 Dr. and Cash 5,000 Cr. Step # 3: Correcting entry: Office supplies 5,000 Dr. and office supplies expense 5,000 Cr. (b) Purchase of supplies for cash Rs.580 was recorded as Rs.508. Step # 1: What was the double entry? Office supplies 508 Dr. and Cash 508 Cr. Step # 2: What should the double entry have been? Office supplies 580 Dr. and Cash 580 Cr. Step # 3: Correcting entry: Office supplies 72 Dr. and cash 72Cr. (c) Sales of typewriter credited to sales account Rs.800. Step # 1: What was the double entry? Cash 800 Dr. and Sales 800 Cr. Step # 2: What should the double entry have been? Cash 800 Dr. and Office equipment 800 Cr. Step # 3: Correcting entry: Sales 800 Dr. and Office equipment 800 Cr. (d) Repair of equipment was debited to equipment ac...

BANK RECONCILIATION STATEMENT EXAMPLE WITH SOLUTION

(1) Debit Balance of Cash Book: Bank account is an asset for company and asset has normally debit balance. Cash book shows that bank account has a debit balance it means it has a positive balance. (2) Debit Balance of Bank Statement: For banks, customer's account is a liability and liability has a credit balance. Here bank statement shows debit balance which means negative balance. (3) Error by Bank: Company deposited Rs.14,500 into bank account but ban wrongly added in the company's account only Rs.5,100. It means bank added less amount as deposited by the company. For correction, bank will add further amount Rs.9,400. So it will be added in bank statement. (4) Mark - up: Mark - up charged by the bank but not recorded in the company's book so it will be deducted from the cash book as decrease in bank account. (5) Dishonoured Cheque: Cheque returned by the bank so it will be deducted from the cash book. (6) Error by Company: Equipment purchased for Rs.4,000 but wrongly reco...

ADJUSTING ENTRIES

ADJUSTING ENTRY FOR BAD DEBTS EXPENSE The adjusting entry for bad debts expense is: Bad debts expense Dr. Allowance for bad debts Cr. The amount of bad debts is depend on the data given in the question. Example # 1: Trial balance: Allowance for bad debts = No balance. Adjustment data: Allowance for bad debts Rs.3,000. Adjusting entry: Bad debts expense 3,000 Dr. Allowance for bad debts 3,000 Cr. Example # 2: Trial balance: Allowance for bad debts = 2,000 Cr. Adjustment data: Allowance for bad debts Rs.3,000. Adjusting entry: Bad debts expense 1,000 Dr. Allowance for bad debts 1,000 Cr. Example # 3: Trial balance: Allowance for bad debts = Rs.2,000 Dr. Adjustment data: Allowance for bad debts Rs.2,000. Adjusting entry: No entry. Example # 4: Trial balance: Allowance for bad debts = 1,000 Dr. Adjustment data: Allowance for bad debts Rs.2,000. Adjusting entry: Bad debts expense 3,000 Dr. Allowance for bad debts 3,000 Cr. Example # 5: Trial balance: Allowance for bad debts = Rs.4,000 Cr. A...

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