Journal Entries and Ledger Accounts: Long Question and Solution 11

Arjun EP

Published on: October 8, 2020

How to make journal entries and ledger accounts?

Step 1, Prepare journal entries of entire question as well as additional information,

Step 2, Transfer entire journal entries into related ledger accounts,

Step 3, Close ledger accounts; some may have debit balance, some credit balance and some may be equal.

Long answer question of journal entries and ledger accounts is the exam based problems and solution

Journal entries and ledger accounts long question and answer.

It is exam based comprehensive question and solution.

It covers large topic of the chapter.

PROBLEM: 11

A sole proprietor commenced a new business named EP Traders. Firm does not show profit at the time of goods selling; it has following summarised financial information:

(A) Business commenced with capital Rs 635,000; out of this amount bank balance was Rs 485,000.

(B) Goods purchased from SG Suppliers of Rs 250,000 and paid 25% as partial payment.

(D) Goods sold for cash Rs 115,000 and supplied goods on account to SK Traders for Rs 300,000.

(E) Purchase equity shares of City Bank Ltd of Rs 50,000.

(F) Cheque issued to SG Suppliers for Rs 142,500 after 5% discount.

(G) Cheque received from SK Traders of Rs 237,500 in full settlement of Rs 250,000.

(H) Cash withdrew from bank Rs 25,000 for office use and Rs 50,000 for personal use.

(I) Office expenses Rs 60,000 paid by cheque and rent Rs 80,000 paid in cash.

(J) Dividend received Rs 15,000 on investment.

Additional information:

1. Unpaid office expenses were Rs 25,000.

2. Office rent included Rs 8,000 as unexpired.

3. Charge depreciation on equipment @ 10%.

4. Unsold stock valued Rs 28,000.

Required: (a) Journal entries for the above financial transactions; (b) Cash book with necessary columns;

SOLUTION

[Answer: (b) Cash 147,000; Bank 290,000; (c) Purchase 250,000; (d) Sales 415,000;

(e) Debtor 50,000; (f) Creditor 37,500; (g) Equipment 108,000;

Journal Entries

In the book of EP Traders

Date	Particulars		LF	Dr Amount	Cr Amount
A	Cash account	Dr		150,000
	Bank account	Dr		485,000
	To Capital account				635,000
	(Being- business commenced with cash and bank)

B	Purchase account	Dr		250,000
	To Cash account				62,500
	To SG Suppliers account				187,500
	(Being- goods purchased in cash and on credit)

C	Equipment account	Dr		120,000
	To Bank account				120,000
	(Being- equipment purchased by cheque)

D	Cash account	Dr		115,000
	SK Traders	Dr		300,000
	To Sales account				415,000
	(Being: goods sold in cash and on credit)

E	Investment in equity shares account	Dr		50,000
	To Bank account				50,000
	(Being: equity shares purchased of City Bank Ltd)

F	SG Suppliers account	Dr		150,000
	To Bank account				142,500
	To Discount received account				7,500
	(Being: cash paid and discount received;
	142,500 x 100/95)

G	Bank account	Dr		237,500
	Discount allowed account	Dr		12,500
	To SK Traders account				250,000
	(Being:

H1	Cash account	Dr		25,000
	To Bank account				25,000
	(Being: cash withdrew from bank for office use)

H2	Drawings account	Dr		50,000
	To Bank account				50,000
	(Being: cash withdrew from bank for personal use)

I1	Office expenses account	Dr		85,000
	To Bank account				60,000
	To Office expenses payable				25,000
	(Being: office expenses paid by cheque)

I2	Rent account	Dr		72,000
	Advance rent account	Dr		8,000
	To Cash account				80,000
	(Being: rent paid and paid in advance)

J	Bank account	Dr		15,000
	To Dividend received account				15,000
	(Being: dividend received on investment)

Adj 3	Depreciation on equipment account	Dr		12,000
	To Equipment account				12,000
	(Being: depreciation charged 120,000@10%)

Adj 4	Closing stock account	Dr		28,000
	To Income statement account				28,000
	(Being: unsold stock recorded)

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Click on link for YouTube videos topic wise :
Accounting Equation	http://tiny.cc/c89jkz
Basic Journal Entries in Nepali	http://tiny.cc/uaakkz
Basic Journal Entries	http://tiny.cc/8aakkz
Journal Entry and Ledger	http://tiny.cc/caakkz
Ledger Account	http://tiny.cc/haakkz
Subsidiary Book	http://tiny.cc/399jkz
Cash Book	http://tiny.cc/889jkz
Trial Balance and Adjusted Trial Balance	http://tiny.cc/c59jkz
Bank Reconciliation Statement (BRS)	http://tiny.cc/q59jkz
Depreciation	http://tiny.cc/ugakkz
Click on link for YouTube videos chapter wise:
Financial Accounting and Analysis (All videos)	http://tiny.cc/jlersz
Accounting Process	http://tiny.cc/mlersz
Accounting for Long Lived Assets	http://tiny.cc/plersz
Analysis of Financial Statement	http://tiny.cc/slersz

Triple Column Cash Book

Date	Particulars	LF	Cash	Bank	Dis	Date	Particulars	LF	Cash	Bank	Dis
A1	To Capital		150,000	485,000	–	B	By Purchase		62,500	–	–
D	To Sales		115,000	–	–	C	By Equipment		–	120,000	–
G	To SK Traders		–	237,500	12,500	E	By Investment		–	50,000	–
H1	To Bank	C	25,000	–	–	F	By SG Supplies		–	142,500	7,500
J	To Dividend		–	15,000	–	H1	By Cash	C	–	25,000	–
					–	H2	By Drawings		–	50,000	–
						I1	By Office exp.		–	60,000	–
						I2	By Rent		72,000	–	–
						I2	By Advance rent		8,000	–	–
							By Balance c/d		147,500	290,000	–
			290,000	897,500	12,500				290,000	897,500	7,500

Purchase Account

Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
B	To Cash		62,500		By Balance c/d		250,000
B	To SG Suppliers		187,500
			250,000				250,000
	To Balance b/d		250,000

Equipment Account

Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
C	To Bank		120,000	Adj 3	By Depreciation		12,000
					By Balance c/d		108,000

			120,000				120,000
	To Balance b/d		108,000

Sales Account

Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
	To Balance c/d		415,000	D	By Cash		115,000
				D	By SK Traders		300,000
			415,000				415,000
					By Balance b/d		415,000

Debtors Account (SK Traders)

Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
D	To Sales		300,000		By Bank		237,500
					By Discount allowed		12,500
					By Balance c/d		50,000
			300,000				300,000
	To Balance b/d		50,000

Creditor Account (SG Suppliers)

Date	Particulars	LF	Amount	Date	Particulars	LF	Amount
F	To Bank		142,500	B	By Purchase		187,500
F	To Discount received		7,500
	To Balance c/d		37,500
			187,500				187,500
					By Balance c/d		37,500