Accounting Problems- Journal and

Ledger
 Transactions
1. ‘A’ started business with cash
Cash A/c Dr
Capital
2. A withdrew the cash from Company
Drawings
Cash
3. Borrowed money from B
Cash A/c Dr
To B’s Account
4. Purchased furniture for Rs. 1 lakh
Furniture A/c Dr
To cash
5. Purchased stationary for cash

6. Purchased goods for cash

7. Sold goods for cash
8. Sold goods to Mr. Jhone for a credit
 Some examples
Sl Name of Nature of Entry rule Journal entry
No accounts account
1 Cash Real Debit Cash A/c Dr
A’s capital a/c Personal Credit To A’s A/c
2 Cash loan Real Debit Cash A/c Dr
B’s account Personal Credit To B’s A/c
3 Furniture Real Debit Furniture A/c Dr
Cash Real Credit To Cash A/c
4 Stationary Real Debit
Cash Real Credit
5 Purchase Nominal Debit
Cash Real Credit
6 Cash Real Debit
Sale Nominal Credit
7 Jhone’s Personal Debit
Sale Nominal Credit
 • Paid rent on building
• Received commission on service
• Received interest on bank deposit

Sl Name of Nature of account Entry rule Journal entry

No accounts
1 Rent Nominal Debit
Cash Real Credit
2 Cash Real Debit
Commission Nominal Credit
3 Cash/Bank Real Debit
Interest Nominal Credit
Cash related transactions- Debit and
credit
 Purchase and Sale of goods
Goods purchased for Cash
Purchase account
Cash Account
Sold goods
Cash account
Sales account
Why goods is not mentioning
Purchased goods Rs. 10,000 - Goods is =10,000
Sold goods Rs. 12,000 - Goods is = 12,000

In goods transactions Credit is more than Debit. Hence made it as purchase and sale.

Sales and purchase account can be real account as well as nominal account. Most of
the books tell it is a nominal account.

Goods means:- Items which have physical existence and that are for resale in normal
business activities
 5. Matching Concept
• This concept requires the revenue for a
particular period to be matched with its
corresponding expenditure so as to show the
true profit for the period.
• Eg:- Purchased furniture Rs. 50,000

• For every revenue, there will be an

expenditure
 Journal entries & Journal book
• Journal entries :- Recording the transactions in
a particular language.

• Journal Account:- Original entry of the

transactions (Primary book).

• Journalizing:- The process of recording the

transactions in a particular language and
making credit and debit entries.
• Identifying the transactions
• Recording –Journal (Journalizing)
• Classifying- Leger (Posting)
 Narration
• Record narration (i.e. a brief explanation of the
transaction) within brackets in the following line
in ‘Particulars Column’.
• Usually starting with ‘Being’
Eg:-
• Started business with Rs. XXX
• Narration:- (Being business is started with capital)
• Or Being commencement of the business.
 More Clarification
• Purchase and Sales – Nominal and Real. Most of the text book
referred it as Nominal Account.

• Bank- Always is personal Account.

• Instead of ‘cash’, if ‘Bank’ is mentioned, may be considered as
real account, where bank means Cash is transferred to ‘Bank
account’ as it is ‘cash at bank’. It varies depend on text book

• Eg:- Received interest on bank deposit

• Basically, in account transactions, debit and credit account

should be identified properly
 More exercises/ illustrations
1. Ramesh started his business with cash- 1 lakh
2. Withdrew cash for personal use –
3. Purchased furniture from Mohan on credit
4. Purchased goods from Ram on credit
5. Sold goods to Hari on credit
6. Deposited into bank
7. Withdrew from bank for office use
8. Withdrew from the bank and purchased
furniture for the company
 More exercises/ illustrations

1. Received cash from a customer, Shyam

2. Paid salary by cheque
3. Received donation in cash
4. Goods withdrawn for personal use
5. Paid interest on loan (Cash -Cr, Interest- Dr)
6. Interest allowed by bank (Cash/Bank-Dr,
Interest-Cr)
Sl Name of Some
Nature ofexamples
Entry rule Journal entry
No accounts account

1 Cash Real Debit Cash a/c Dr

Capital Personal Credit To Capital
2 Drawings Personal
Cash Real
3 Furniture Real
Mohan Personal
4 Purchase Real/Nomi Debit
Ram Personal
5 Hari Personal
Sale Real/Nomi
6 Bank Person
Cash Real
7 Cash Real
Bank Person
 Journal Book
Date Particulars LF Debit Credit
1st April Cash A/c Dr 1,00,000
2021 To Capital A/c 1,00,000
(Being commencement of the
business for Rs. 1,00,000)
5,000
5,000
15,000
15,000

1,20,000 1,20,000
Sl Name of Nature of Entry rule Journal entry
No accounts account
8 Cash
Shayam
9 Salary Nominal
Bank A/c Personal
10 Cash
Donation
11 Drawings a/c Personal
Cash Real/Nom
12 Interest
Cash
13 Cash
Interest
14
 Ledger
• It is a secondary Book
• It is a classified summary of all the transactions
recorded in the original book.
• Ledger is a set of accounts. It includes all accounts
of the business enterprise whether Real, Nominal
or Personal.
• Posting :- It is the process of transferring debits
and credits transactions from the journal and
other books of original entry to their respective
accounts in the form of ledger.
Specimen of Ledger
 Ledger format

Date Particulars J.F. Amount

(Rs.) Date Particular J.F. Amount
(Rs.)

2006 2006
Jan.1 To Balance b/d 8,000 Jan.1 By Purchase A/c 3,800

Jan.4 To Vijay 1,980 Jan. 8 By Plant A/c 300

Jan.15 To Rahim 300 Jan.20 By Salary A/c 2,000

Jan.18 To Sales A/c 1,000 Jan.21 By Anand 4,800

Jan. 26 To Interest A/c 200 Jan. 28 By Interest on loan 500

A/c
Jan. 31 To Balance 500 Jan. 31 By Balance c/d 580

11,980 11,980

Feb. 1 To Balance b/d 580

 Difference between Journal and Ledger
Comparison of Basics               Journal               Ledger
When the transaction is After journalize the entry entries
Meaning recorded in the original are posted as per head name is
book is called Journal called ledger.
Known as Known as original entry Known as secondary entry

Process The recording process This recording process named

named ‘journalizing; ‘posting’
How are transactions
recorded? As a sequence As accounts head wise

Debit and credit Column wise In a separate head of accounts

Balancing No need to be balanced Must be balanced as per head.
1-Date, 2-Particulars, 3-LF, 4-
Columns Debit and 5-Credit, 6- 1-Date, 2-Particular, 3-JF, 4-
Amount
Narration
 Balancing the Account
• This technique of finding out the net balance of an
account, after considering the totals of both debits and
credits appearing in the account.

• The balance is put on the side of the account which is

smaller and a reference is given that it has been carried
forward or carried down (c/f or c/d) to the next
period.

• Opening balance has been brought forward or

brought down (b/f or b/d) from the previous period.
 Illustrations
Prepare the journal and Ledger accounts for April month based on below
business transactions
1st April 2019- Ramesh started his business with cash Rs. 5000
2nd Borrowed from Nikhil Rs. 1000
4th Purchased furniture from Mohan on credit Rs.1500
Furniture, Mohan
8th Purchased goods from Ram on credit Rs. 2000
14th Sold goods to Hari on credit Rs. 500
18th Deposited into bank Rs.1000
25th Withdrew from bank for Office use Rs. 500
Cash A/c Dr
To Bank A/c
Date Particulars LF Dr amount Cr amount
1st
April
Cash A/c
To Capital A/c Journal Book
Dr
5000
5000
2019 (Being commencement of the business)
2nd Cash A/c Dr 1000
April To Nikhil A/c 1000
(Being loan was received from Nikhil)
4th Furniture A/c Dr
April To Mohan
(Being purchased furniture from
Mohan)
8th Purchase A/c
April To Ram
(Being purchased goods from Ram)
14th Hari A/c Dr
April To Sales A/c
(Being ……………………..)
18th Bank A/c Dr 1000
To Cash 1000
(Deposited into bank)
25th Cash A/c 500
To Bank A/c 500
Date Particulars LF Dr amount Cr amount
1st
April
Cash A/c Dr
To bank Journal Book
2019
1st
April
2019
4th
April
8th
April
14th
April
18th
25th
 Ledger Accounts in above journal
entries
1. Cash
2. Capital
3. Nikhil
4. Furniture
5. Mohan
6. Purchase
7. Ram
8. Hari
9. Sales
10.Bank
 Ledger Book/Accounts
Cash Account
Dr Cr
Date Particulars JF Amount Date Particulars J F Amount
1st To Capital 1 5,000 18th April By Bank 1000
April
2nd To Nikhil 2 1000 30th April By Balance c/d 5500
April
25th To Bank 500
April
6500 6500
1st To Balance b/d 5500
May
 Capital Account
Dr Cr
Date Particulars JF Amount Date Particulars J F Amount
30th To Balance c/d 5000 1st April By Cash 5,000
April
5000 5000
1st May By Balance b/d 5000
 Illustration
On 1st April 2019 Started business with cash in hand Rs. 8,000 and Cash at Bank 25,000.

On 2nd April purchased goods worth Rs. 5,000 less 20% trade discount and 5% cash
discount.

• On 3rd April- Bought Rs. 100 shares of Bharat Ltd @ Rs. 15 per share, brokerage paid
Rs. 30.

• On 6th April- Withdraw from bank for private use Rs. 1,000.
• Subsequently on 8th April withdraw from bank for business purpose Rs. 5,000.

• On 11th April Paid to Ram Rs. 2000 and discount allowed by him Rs. 20.

• On 15th April Cash received from Aravind Rs. 3500 and discount allowed to him Rs. 40
• On 25th April
• Paid for: Stationary 200
Rent 1000
Salary 2500
Journalise the transactions and post them in the Ledger and balance the accounts for
April 2019.
 1-Identifying
Sl No Name of accounts Nature of account Entry rule

1 Cash A/c Real 8,000 De

Bank A/c Real 25,000
To Capital A/c Personal 33,000
2 Purchase A/c Nominal
To Discount A/c Nominal
To Cash A/c Real
3 Investment
Brokerage
Cash
4 Drawings A/c
To Bank
5 Cash A/c
To Bank
 Purchased furniture on credit
Furniture A/c Dr
To Gopi A/c

6 Ram A/c 20000

Discount 20
Cash A/c 1980
7 Cash A/c 3460
Discount A/c 40
To Aravind 3500
8 Stationary
Rent
Salary
To Cash 3700
 Trade Discount

• A trade discount is the amount allowed by the seller

on large quantity of purchase.
• Trade discounts are usually given to wholesalers that
order large quantities of a product as well as retailers
with good relationships with the manufacturer.
• It is deducted in the invoice on total amount purchased,
but it is not recorded in the books of account.
• Sales or purchase will be recorded on ‘net amount’.
• It is allowed on both cash sales/purchase as well as
credit sales/purchase.
 Cash Discount
• Cash discount is calculated only after
deducting the trade discount from the invoice
price.
• It is always calculated on net amount of sale.
• This will be recorded in the books of
account.
 Purchase and Sales
• Purchasing by paying cash
– Purchased goods (usually won’t mention)
– Purchased goods for Cash

• Purchasing from person on credit

– Purchased goods from Rohit
– Purchased goods from Rohit on credit

• Purchasing on credit (person is unknown or not important)

• Purchased goods on credit

Purchase A/c
To Creditors account
Or
Purchase A/c
To payable A/c
Sold Goods on credit
Debtors A/c
 Debtor and Creditor
• Company sold goods to A on credit
• A is the debtor of company

• Company purchased goods from A on credit

• A is the Creditor of a company

• Creditor = Current Liability (Payable Amount)

• Debtor = Current Asset (Receivable Amount)
• Purchase by paying the full cash
– Cash
– Cheque
• Purchase by partially on credit and cash.
– Cheque
– Cash
2019 Rs. 2019 Rs.
Dec. 1 Started 50,000 Dec. 15 Purchased goods 4,000
business with a from Ram
capital
Dec. 6 Paid into bank 20,000 Dec. 18 Paid wages to 300
workers
Dec. 8 Purchased 4,000 Dec. 20 Recieved. from 1,000
goods for cash Pankaj

Dec. 9 Paid to Ram 1,980 Allowed him

discount Rs. 50

Dec. 9 Discount 20 Dec. 22 Withdrawn from 3,000

allowed by him bank
Dec. 10 Cash sales 3,000 Dec. 25 Paid Ram by cheque 500

Dec. 12 Sold to Hari for 2,000 Dec. 31 Withdrawn for 200

cash personal use
 Illustration
• Journalise the following transactions, post them in the Ledger and
balance the accounts for march 2020.
• 1st March-Ram started business with a capital of Rs. 10,000.
• 3rd March-Purchased goods from Mohan on credit Rs. 2,000.
• 5th March- Paid cash to Mohan Rs. 1,000.
• 11th March-Sold goods to Suresh Rs. 2,000.
• 12th March-Received cash from Suresh Rs. 3,000.
• 16th March-Purchased goods from Mohan Rs. 2,000.
• 20th March-Paid cash to Mohan Rs. 1,000 on purchase.
• 21st March-Sold goods to Suresh Rs. 2,000.
• 25th March-Received cash from Suresh Rs. 1,000 on sale.