JOURNAL ENTRY ANALYSIs; Double Entry a ; te Compou nd Entsy ‘entry that has one debit and one credit. entry. kage, Moule A debit entry wil, at bas more than one debit or credit etry. ~ increase an asset decrease a liability ~ increase an expense * A credit entry will: ~ decrease an asset increase a liability * increase income BUSINESS VS. OWNE! For 4 common person, business and its owner is the one and same thing but for an accountant, NOT. Though owner is running the business but an accountant has to classify whieh Personal transactions of owner and which are transactions of business eg. if owner drink for customers, it is a busin less transaction but if he pays for a cold-drink for his friend 2t home. is a personal transaction of owner. Owner and Business are separate from each other. An accountant records only business transacticas and not owner's transactin:.., This concept is called Separate Entity Concept. TRANSACTION NO. ‘Mr. Rizwan invests Rs. 100,000 to commence hi business. Analysis ‘Two changes have taken place because of this transaction: 1. Cash is increased in the business by Rs. 100,000 (an asset). 2 Capital or Owner's equity is increased by Rs. 100,000 (an internal liability of the business). He open current account with ABL and deposits Rs. 30,000. Analysis: ‘This transaction has brought two charges: 1. Decrease in Cash balance by Rs. 30,000 (an asset). 2, Increase in Bank balance by Rs. 30,000 (an asset). SACTION NO.3 : ne Rs. 50,000 from Mr. Saleem at 12% interest per annum. itis wansection are ays for a cold- ‘Analysis: 7 arges are: He (we nerease in Cash balance by Rs. $0,000 (an asset). 2. Increase in creditor by Rs. 50,000 (a liability). SACTION NOS 'RANSACTION) ie purchases furniture worth Rs. 20,000 for cash. Analysis: The two changes are: snow , se in furniture by Rs. 20,000 (an asset). 1 petrance in eas balance by Rs. $0,000 (an ass. ot ee Galeble goods) from Mr. Afral for Rs. 25,000 and paid cash Rs 15.0. He pure! There in the business transaction: Thee a pens inches Go) by 25,00 (an cee i balance by RS. 15,000 (an asset a Decrease eater Mr. Afzal by Rs. 10,000 (a liability). a Ce Ene] Scanned with CamScanneree He sells pood for cash Rs. 9000, Analysis: There are two changes: 1, Increase in cash by Rs. 9,000 (an asset). 2. Decrease in goods or lace sales - revenue) by Rs. 9,000 \SACTION NO7 He sells goods for Rs. 5,000 to Mr. Naeem on credit basis. Analysis: ‘There are two changes: J. Increase in debtor Mr. Nacem (an asset) by Rs. 5,000. 2, Decrease in goods or increase in sales (a revenue) by Rs. 5,000 TRANSACTION NOS He purchased stationery for Rs. 3,000. Analysis: ‘There are two change 1. Increase in stationery by Rs. 3,000 (a consumable asset). 2. Decrease in Cash balance by Rs. 3,000 (an asset). TRANSACTION NO.9 He purchased a weighing scale and a safe for Rs. 10,000 and pays by cheque. Analysis: There are two changes: 1. Increase in weighing scale and safe by Rs. 10,000 (an asset). 2. Decrease in bank balance by Rs. 3,000 (an asset). TRANSACTION NO.10 He pays Rs. 6000 to Mr. Afzal on account. Analysis: Mr. Afzal is creditor (a liability) of the business for Rs. 10,000 and now Rs. . him and the balance o Rs. 4000 ssi; payable to him, The wo changes wer on ee OER Paid to 1. Decrease in cash by Rs. 6,000 (an asset). 2. Decrease in creditor Mr. Afzal by Rs. 6,000 (a liability), ‘TRANSACTION NO.11 He returns defective goods Mr. Afzal worth Rs. 1,000. Analysis: sea In this transaction, goods purchased from Mr. Afzal have ; reduction in the amount payable (a liability) to Mr. Afzal by bad {0 him, so there will be a 1, Decrease in goods or increase in purchases returns (Decrease jo v= {© Changes are: 2 Decrease in creditor Mr. Afzal by Rs. 1,000 (a liability), “xpense), by Rs, 1,000, TRANSACTION NO.12 : Goods are returned by Mr. NacemRs. 500 to the business, Analysis: Goods sold to Mr, Naeem have been returned by him to the by reduction inthe amount recivable from Mr. Nacem (a debtor) be 1. Decrease in debtor Mr. Nacem by Rs. 500 (an assey 3. Increase in good or increase in Sales returns (decrease in TRANSACTION NO.13 Fevenue) by Rs, 500, Cash paid to MR AFZAL RS 2800 in fll satisfaction of him ela ° Analysis: '8IM Of Rs 3009, The amount payable to Mr Afzal (A CREDITOR) is Rs: . payment is made to him before the due date and thats why by In this tran, s.200 (a revenue) from Mr. Afzal, in full satisfaction, we 2 eUSineSs is is settled in full (Rs.3000), there are three changes in thig transact, Payi n; usiness Rs, 5 Rs. 500. The 00, so there wi "0 changes ne me 1. Decrease in cash Rs.2800 (an asset) 2, Decrease in creditor Mr. Afzal (a liability) by Rs. a} in discount received by Rs,200 (a revenue) eee Scanned with CamScannerTRANSACTION NO. 14 aa rece ived from Mr. Naeem (a debtor) Rs. 4400 in full satisfaction of his debts of Rs. 4500 alysis: ‘The amount receivable from Mr. Nacem is Rs. 4500. In this transaction itis assumed that Mr. Naeem is paying his debts before the duc date and that is why, business allows him a discount (a concession) ‘of Rs.100 (an expense or loss to the business). In full satisfaction, we mean by receiving Rs.4400 from him, his account is settled in full (Rs.4500), these are three changes in the business transaction: 1 Increase in cash Rs. 4400(an asset) 2. Decrease in debtor Mr. Naeem by Rs. 4500(an asset). 3. __ Increase in discount allowed by Rs.100(an expense or loss). TRANSACTION NO. 15 Cash withdrawn from the bank for business use Rs. 5000. Analysis: ‘The two changes are: 1 Increase in cash balance Rs. 5000 (an asset). 2. Decrease in bank balance Rs.5000 (an asset). TRANSACTION NO. 16 Interest is paid on money borrowed from Mr. Saleem Rs. 500. Analysis: ‘There are two changes: L Increase in interest expense (an expense incurred) by Rs. 500. 2 Decrease in cash balance Rs .500 (an asset). ‘TRANSACTION NO.17 Cash paid to Mr. Saleem Rs. 20,000 (repayment of borrowed money). Analysis: ‘The two changes are: 1. Decrease in cash balance Rs. 20,000 (an asset) 2. Decrease in creditor Mr. Saleem by Rs. 20,000 (a liability). ‘TRANSACTION NO. 18 Cash withdrawn by owner (Mr. Rizwan) Rs. 3000 and goods taken by him Rs.1000 for his personal use. Analysis: There are three changes in the business transaction: 1. Decrease in cash balance Rs. 3000 (an asset). 2, Decrease in goods (purchases) by Rs. 1000 (a decrease in expense). 3. Decrease in capital or owner's equity or increase in drawings of the owner by Rs. 4000 ‘TRANSACTION NO. 19 Cash given away as charity Rs. 500 and goods given away as charity Rs.100. Analysis There are three changes: 1. Decrease in cash balance Rs. $00 (an asset) 2 Deerease in goods (purchases) by Rs. 100 (a decrease in expense). 3, Increase in charity by Rs. 600 (an expense or loss). ‘TRANSACTION NO. 20 Goods distributed as free samples for advertisement purpose Rs. 2000, Analysis: There are two changes: 1. Decrease in goods (purchases) by Rs. 2000. 2. Increase in advertisement expenditure by Rs. 2000 (an expense incurred) TRANSACTION NO. 21 Goods lost by theft worth Rs .1500. Analysis: There are two changes: 1. Decrease in goods (purchases) by Rs. 1500 (a decrease in expense). 2. Increase in loss by theft by Rs. 1500 (an expense or loss), Scanned with CamScanner