Journal Entry: Long Answer Question (Problem and Solution)

Arjun EP

Published on: September 29, 2020

Journal Entries for Long Answer Question

Journal entries long answer question is the comprehensive question and solution.

It is the summary of entire chapter of the journal entry.

It is designed for deep knowledge.

It is the base for ledger accounts and trial balance.

PROBLEM: 21

EP Trading (P) Ltd has following summarised balance sheet and other financial information:

Firm does not write profit on inventory with journal entry; transactions during the period were:

a	The promoters of the company invested Rs 4,00,000 additional capital by depositing at the bank.
b	Cash withdrew from bank Rs 50,000 for the use of the business.
c	Inventory purchased from SL Suppliers on account Rs 3,00,000.
d	Computer (equipment) purchased of Rs 24,000 from Computer House on account; payment was made after 10 days by deducting 5% discount in cash.
e	Inventory sold to Big Bazaar of Rs 3,40,000 in cash and Rs 560,000 on account.
f	Payment made to SL Suppliers Rs 2,37,500 in cash after deducting 5% discount.
g	Issued a cash receipt slip to Big Bazaar for Rs 336,000 after 4% discount adjusted.
h	Office expenses paid Rs 1,30,000 by online banking and salaries paid Rs 1,25,000 in cash.

Additional information:

1. Firm charged depreciation Rs 80,000 on equipment for the period.

2. Office expenses remained unpaid Rs 12,500.

3. Firm valued ending inventory Rs 50,000.

Required: (a) Journal entries;

SOLUTION

Journal Entries

In the book of EP Trading (P) Ltd

Date	Particulars		LF	Dr Amount	Cr Amount
a	Bank account	Dr		400,000
	To Equity shares capital account				400,000
	(Being- additional capital invested by the)

b	Cash account	Dr		50,000
	To Bank				50,000
	(Being- cash withdrew from bank for office use)

c	Purchase account	Dr		300,000
	To Account payable				300,000
	(Being- inventory purchased SL Suppliers on credit)

d1	Equipment account	Dr		24,000
	To Account payable				24,000
	(Being: computer purchased on credit from
	Computer House

d2	Account payable	Dr		24,000
	To Cash account				22,800
	To Discount received account				1,200
	(Being: cash paid to Computer House and discount
	Received, 24,000@5%;

e	Cash account	Dr		340,000
	Account receivable account	Dr		560,000
	To Sales account				900,000
	(Being: inventory sold in cash and on account to
	Big Bazaar)

f	Account payable account	Dr		250,000
	To Cash account				237,500
	To Discount received				12,500
	(Being: cash paid to SL Suppliers and discount received)

g	Cash account	Dr		336,000
	Discount allowed account	Dr		14,000
	To Account receivable account				350,000
	(Being: cheque received from Big Bazaar and
	Discount allowed)

h1	Office expenses account	Dr		142,500
Adj2	To Bank account				130,000
	To Office expenses payable account				12,500
	(Being: office expenses paid and payable)

h2	Salaries account	Dr		125,000
	To Cash account				125,000
	(Being: salaries paid)

Adj1	Depreciation account	Dr		80,000
	To Equipment account				80,000
	(Being: depreciation charged on equipment)

Adj3	Ending inventory account	Dr		50,000
	To Income statement account				50,000
	(Being: unsold inventory 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