Journal Entry: Long Answer Question (Problem and Solution)

Arjun EP

Published on: September 29, 2020

Journal Entries for Long Answer Question

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: 19

KL Traders has following information:

Jan 1: Business started with cash Rs 200,000.

Jan 2: Goods purchased in cash Rs 100,000.

Jan 3: Insurance paid in advance for one year Rs 6,240.

Jan 4: Goods sold for cash Rs 80,000 with the help of sales agent.

Jan 6: Machinery purchased worth Rs 50,000.

Jan 8: Furniture purchase from KN Furniture House Rs 15,000.

Jan 10: Borrow from Raj Rs 50,000.

Jan 12: Bank account opened at City Bank by depositing cash of Rs 80,000.

Jan 14: Commission paid to agent Rs 10,000.

Jan 16: Goods sold to M/s Sharma Bros for Rs 50,000 on account.

Jan 20: Payment made to KN Furniture House by cheque.

Jan 22: Cash received from M/s Sharma Bros Rs 30,000.

Jan 25: Excess furniture sold for Rs 4,000.

Jan 26: Loan given to Mahesh Rs 20,000.

Jan 27: Goods costing Rs 5,000 sold for Rs 7,000.

Jan 28: Damaged goods costing 4,000 sold for Rs 3,500.

Jan 30: Rent paid of Rs 10,200.

Jan 31: Salary payable Rs 22,300.

Required: Journal entries and effect on accounts

SOLUTION:

Journal Entries and Effect on Accounts

Journal Entries						Effect on accounts
Date	Particulars		LF	Amount	Amount	Involved	Nature of	Dr or Cr
				Debit	Credit	Accounts	account
Jan, 1	Cash account	Dr		300,000		Cash	Real	Comes in	Dr
	To KL Trader’s capital account				300,000	Capital	Personal	Giver	Cr
	(Being- business started with cash)
Jan, 2	Purchase account	Dr		100,000		Purchase	Real	Comes in	Dr
	To Cash account				100,000	Cash	Real	Goes out	Cr
	(Being- goods purchase in cash)
Jan, 3	Advance insurance account	Dr		6,240		Prepaid	Real	Assets	Dr
	To Cash account				6,240	Cash	Real	Goes out	Cr
	(Being: insurance paid in advance)
Jan, 4	Cash account	Dr		80,000		Cash	Real	Comes in	Dr
	To Sales account				80,000	Sales	Real	Goes out	Cr
	(Being- goods sold in cash)
Jan, 6	Equipment account	Dr		50,000		Equipment	Real	Comes in	Dr
	To Cash account				50,000	Cash	Real	Goes out	Cr
	(Being- machinery purchased in cash)
Jan, 8	Furniture account	Dr		15,000		Furniture	Real	Comes in	Dr
	To KN Furniture account				15,000	KN Furniture	Personal	Giver	Cr
	(Being- machinery purchased in cash)
Jan, 10	Cash account	Dr		50,000		Cash	Real	Comes in	Dr
	To Loan from Raj account				50,000	Loan from Raj	Personal	Giver	Cr
	(Being- loan taken from Raj)
Jan, 12	City Bank account	Dr		30,000		NB Bank	Personal	Receiver	Dr
	To Cash account				30,000	Cash	Real	Goes out	Cr
	(Being- bank account opened)
Jan, 14	Commission paid account	Dr		10,000		Commission	Nominal	Expenses	Dr Cr
	To Cash account				10,000	Cash	Cash	Goes out	Dr Cr
	(Being- commission paid in cash)
Jan, 16	M/s Sharma Bros account	Dr		50,000		Sharma Bros	Personal	Receiver	Dr
	To Sales account				50,000	Sales	Real	Goes out	Cr
	(Being- goods sold on credit to Sharma Bros)
Jan, 20	KN Furniture account	Dr		10,000		KN Furniture	Personal	Receiver	Dr
	To City Bank account				10,000	NB Bank	Personal	Giver	Cr
	(Being- payment made to KN Furniture)
Jan, 22	Cash account	Dr		30,000		Cash	Real	Comes in	Dr
	To Sharma Bros account				30,000	Sharma Bros	Personal	Giver	Cr
	(Being- cash received from Sharma Bros)
Jan, 25	Cash account	Dr		4,000		Cash	Real	Comes in	Dr
	To Furniture account				4,000	Furniture	Real	Goes out	Cr
	(Being- old furniture sold in cash)
Jan, 26	Loan to Mahesh	Dr		20,000		Loan	Real	Asset	Dr
	To Cash account				20,000	Cash	Real	Goes out	Cr
	(Being: loan given to Mahesh)
Jan, 27	Cash account	Dr		7,000		Cash	Real	Comes in	Dr
	To Sales (stock) account				5,000	Stock	Real	Goes out	Cr
	To P&L (gross profit)				2,000	Profit	Nominal	income	Cr
	(Being- goods sold at profit)
Jan, 28	Cash account	Dr		3,500		Cash	Real	Comes in	Dr
	P&L (gross loss)	Dr		500		Loss	Nominal	loss	Dr
	To Sales (stock) account				4,000	Profit	Real	goes out	Cr
	(Being- goods sold at loss)
Jan, 30	Rent account	Dr		10,200		Rent	Nominal	Expenses	Dr
	To Cash account				10,200	Cash	Real	Goes out	Cr
	(Being- rent paid in cash)
Jan, 31	Salary account	Dr		22,300		Salary	Nominal	Expenses	Dr
	To Salary payable account				22,300	Payable	Real	Liability	Cr
	(Being- salary payable for the month)

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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