Explain the dual effect of following transactions. (1) Purchased furniture of ` 1,000 (2) Goods of ` 6,000 sold to Hitendra. (3) ` 5,000 paid to Manhar.
Answers
(1)furniture a/c dr 1000
to cash a/c 1000
(being furniture purchased)
(2) hitendre a/c dr 6000
to sales a/c 6000
(being sold goods to hitendra)
(3) cash a/c dr 5000
to manhar a/c 5000
(being cash paid to manhar)
Journal Entries
1. Purchase A/C DR 1,000
To Cash A/C 1,000
( Being furniture purchased for cash )
A dual effect in this transaction is that one asset is increasing, i.e. furniture, and another is decreasing, i.e. cash.
2. Hitendra A/C DR 6,000
To Sales A/C 6,000
( Being goods sold to Hitendra)
As in this transaction, our stock which is our asset is decreasing and our debtor is increasing.
3. Manhar A/C DR 5,000
To Cash A/C 5,000
( Being creditor paid )
As Manhar is our creditor because we own his money so our cash will be reduced as well as the creditor.