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Raja has a hotel. The following transactions took place in his business. Journalise th
Jan.
₹
Started business with cash
3,00,000
Purchased goods from Rajiv on credit
1,00,000
3 Cash deposited with the bank
2,00,000
20 Borrowed loan from bank
1,00,000
22 Withdrew from bank for personal use
800
23 Amount paid to Rajiv in full settlement through NEFT
99,000
25 Paid club bill of the proprietor by cheque
200
26 Paid electricity bill of the proprietor's house through debit card 2,000
31 Lunch provided at free of cost to a charity
1,000
31 Bank levied charges for locker rent
1,000
From the following transactions of Shram stationery determinolontic.
Answers
Explanation:
To answer this question we need to remember 2 important rules.
1. Treatment of assets and expenses- an increase in assets/expenses is debited and decrease is always credited.
2. Treatment of liabilities, capital and revenue- increase in liability/capital/revenue is always credited and decrease is debited.
For example let's say we purchased goods from Rajiv on credit.
In this entry, the purchase of goods is an expense (as our asset of cash is decreasing as we used it to buy goods). In this case, the purchase is on credit so cash isn't used but the same logic as a normal transaction applies as later we will need to pay Rajiv back in cash or by cheque.
Purchases will be debited as an increase in expense is debited. Rajiv is a liability for us as he becomes a creditor (someone we owe money to) so our liabilities increase; hence as an increase in liability is credited, Rajiv will be credited.
Combining both transactions we get the entry:
Purchases a/c ...Dr.
To Rajiv a/c
Another example could be goods sold for cash.
In this case we are receiving cash, which is an asset, by selling our goods. Since we are receiving cash and the increase in assets is always debited we will debit cash a/c.
For the company goods are an asset. When goods are sold it is a decrease in asset so it will be credited as according to rule 1 decrease in assets is credited.
Our entry should be:
Cash a/c ...Dr.
To Sales a/c
The same logic applies to all the entries.
Hope this helps :)
