2 - Basic Accounting Entries
-
Upload
jyoti-singh -
Category
Documents
-
view
237 -
download
0
Transcript of 2 - Basic Accounting Entries
-
8/3/2019 2 - Basic Accounting Entries
1/19
Basic Accounting Entries
In this lesson we shall try to make simple journal entries for a business andthen post them to the ledger accounts.
-
8/3/2019 2 - Basic Accounting Entries
2/19
The 3 Golden rules of Accounting:
1. Debit what comes in and Credit what goes out.
2. Debit all expenses and Credit all incomes.
3. Debit the receiver and Credit the giver.
-
8/3/2019 2 - Basic Accounting Entries
3/19
Exercise 1 -
Assets Transaction Entries
1 Cash paid to buy goods worth $2000.2. Purchased machine worth $10,000 in cash.
Liability Transaction Entries
1. Took loan of $5000 from Kabul bank.
2. Purchased goods worth $6000 on credit from Ali & Co.3. Owner contributed capital $10,000
-
8/3/2019 2 - Basic Accounting Entries
4/19
Income Transaction Entries
1 Sales of $5000 in cash.2. Sales of $4000 on credit to Rehmat.
Expense Transaction Entries
1. Paid fuel expenses of $400 in cash.2. Repaid loan of $5000 along with interest expense of $500.
-
8/3/2019 2 - Basic Accounting Entries
5/19
Date Explanation Ref. Debit Credit
Goods a/c Dr.
To Cash a/c(Cash paid to buy goods)
$2000
$2000
Machine a/c Dr.
To Cash a/c(Cash paid to buy machine)
10000
10000
Cash a/c Dr.To Loan a/c
(Took a loan of from Kabul bank)
50005000
Goods a/c Dr.
To Ali & Co. a/c
(purchased goods on credit)
6000
6000
Cash a/c Dr.
To Capital a/c(Capital contributed by the owner)
10000
10000
-
8/3/2019 2 - Basic Accounting Entries
6/19
Date Explanation Ref .
Debit Credit
Cash a/c Dr.
To Sales a/c(Sales of goods for cash)
$ 5000
$ 5000
Rehmat a/c Dr.
To Sales a/c
(Credit sales to Rehmat)
4000
4000
Fuel expenses a/c Dr.
To Cash a/c(Cash paid for fuel expenses)
400
400
Loan a/c Dr.
Interest expense a/c Dr.
To Cash a/c(repaid loan along with the interest expense)
THIS IS AN EXAMPLE OF COMPOUND
JOURNAL ENTRY
5000
500
5500
-
8/3/2019 2 - Basic Accounting Entries
7/19
A journal entry in which more than 2 accounts are affected is called a
COMPOUND JOURNAL ENTRY.
-
8/3/2019 2 - Basic Accounting Entries
8/19
Posting to ledger accounts: Means transfer of entries from the journal tothe appropriate ledger accounts.
Steps to post a transaction from Journal to Ledger account :
1. If an account is getting debited in the journal entry, put the amount on the debit
side of the account while posting. In the particulars column, write To [name ofaccount which is being credited in the journal entry].
2. If an account is getting credited in the journal entry, put the amount on the creditside of the account while posting. In the particulars column, write By [name ofaccount which is being debited in the journal entry].
-
8/3/2019 2 - Basic Accounting Entries
9/19
-
8/3/2019 2 - Basic Accounting Entries
10/19
Date Particulars Amount $ Date Particulars Amount $
To Loan a/c
To capital a/c
To sales a/c
5000
10000
5000
20000
By goods a/c
By machine a/c
By Fuel exp a/c
By Loan a/c
By Interest expense a/c
By balance c/d
2000
10000
400
5000
500
2100
20000
CashAccount
So we can see that the closing balance of the cash account on is$ 2,100
dr. cr.
-
8/3/2019 2 - Basic Accounting Entries
11/19
Important points regarding account balances :
1. Asset accounts and expense accounts usually havedebit balances.
2. Liability accounts and income accounts usually havecredit balances.
These two rules along with the 3 rules of debit and credit
make journalizing andposting very easy for the accountant.
-
8/3/2019 2 - Basic Accounting Entries
12/19
Exercise 2
MAKE JOURNAL ENT
RIES OF
THE FOLLOW
ING ACCOUN
TING EVEN
TSAND THEN POSTTHEM TO THE APPROPRIATE ACCOUNTS:
1. On 04/05/2008, Hamid started business (his factory) with a capital $ 1,00,000.
2. Bought machine for $20,000 on 09/05/2008.
3. He purchased raw-materials worth $ 2,000 on credit of 30 days from Ali & Co.on 11/05/2008.
4. Paid $400 in cash for fuel expenses on 15/05/2008.
5. Salary paid on 01/06/2008 , $ 5,000.
6. Took loan of $30,000 from bank on 07/08/2008.
-
8/3/2019 2 - Basic Accounting Entries
13/19
Date Explanation Ref. Debit Credit
04/05/2008 Cash a/c Dr.
Capital a/cCapital contributed to start thebusiness
12
01
$ 1,00000
$ 1,00000
09/05/2008 Machine a/c Dr.
Cash a/c
Machine purchased
20
12
20,000
20,000
11/05/2008 Raw materials a/c Dr.
Ali & Co.Credit purchase of raw-materials
22
23
2,000
2,000
15/05/2008 Fuel expenses a/c Dr.
Cash a/cFuel expenses paid in cash
25
12
400
400
01/06/2008 Salary a/c Dr.
Cash a/cSalary paid
30
12
5000
5000
-
8/3/2019 2 - Basic Accounting Entries
14/19
Date Explanation Ref. Debit Credit
07/08/2008 Cash a/c Dr.
Loan a/c
Loan taken from bank
30,000
30,000
-
8/3/2019 2 - Basic Accounting Entries
15/19
Date Particulars Amount $ Date Particulars Amount $04/05/08
07/08/08
To capital a/c
To Loan a/c
1,00,000
30,000
1,30,000
09/05/08
15/05/08
01/06/08
07/08/08
By machine a/c
By Fuel exp a/c
By Salary a/c
By balance c/d
20,000
400
5,000
1,04,600
1,30,000
CashAccount
So we can see that the closing balance of the cash account on 07/08/08 is$ 1,04,600.
dr. cr.
-
8/3/2019 2 - Basic Accounting Entries
16/19
Date Particulars Amount $ Date Particulars Amount $04/05/08 To balance c/d 1,00,000
1,00,000
04/05/08 By cash a/c 1,00,000
1,00,000
Dr. capital account Cr.
Date Particulars Amount $ Date Particulars Amount $
09/05/08 To cash a/c 20,000
20,000
09/05/08 By balance c/d 20,000
20,000
Dr. machine account Cr.
-
8/3/2019 2 - Basic Accounting Entries
17/19
Date Particulars Amount $ Date Particulars Amount $11/05/08 To Ali & Co.a/c 2000
2000
11/05/08 By balance c/d 2000
2000
Dr. Raw materials account Cr.
Date Particulars Amount $ Date Particulars Amount $
11/05/08 To balance c/d 2,000
2,000
11/05/08 By raw-materials a/c
2,000
2,000
Dr. Ali & Co. account Cr.
-
8/3/2019 2 - Basic Accounting Entries
18/19
Date Particulars Amount $ Date Particulars Amount $15/05/08 To cash a/c 400
400
15/05/08 By balance c/d 400
400
Dr. Fuel expenses account Cr.
Date Particulars Amount $ Date Particulars Amount $
01/06/08 To cash c/d 5,000
5,000
01/06/08 By balance c/d 5,000
5,000
Dr. Salary account Cr.
-
8/3/2019 2 - Basic Accounting Entries
19/19
Date Particulars Amount $ Date Particulars Amount $
07/08/08 To balance c/d 30,000
30,000
07/08/08 By cash a/c 30,000
30,000
Dr. Loan account Cr.