PREPARATION OF JOURNAL, LEDGER AND TRIAL BALANCE

Illustration – 1: Journalize the following transactions for the month of June 2022:

(1) Purchased goods for cash from Arvind worth ₹ 10,000.

(2) Bought goods from Arvind worth ₹ 10,000 on credit.
(3) Return Outward (Purchase Return):
Out of the goods purchased on credit, goods worth ₹ 4000 returned to Mr. Arvind:
(4) Sold goods worth ₹ 16,000 for cash to Anil.
(5) Sold goods to Anil worth ₹ 20,000 on 2 months credit period.
(6) Anil returned goods worth ₹ 6,000 out of goods of ₹ 20,000 purchased by him.
(7) Goods worth ₹ 1,000 withdrawn for personal use.
(8) Goods worth ₹ 1, 000 distributed as free sample.
(9) Goods worth ₹ 1,000 destroyed by Fire/Accident. Goods were uninsured.
(10) Goods worth ₹ 1,000 destroyed by Fire/Accident. Insurance Co. accepted claim up to ₹ 500.
(11) Goods worth ₹ 1,000 destroyed by Fire/Accident. Insurance Co. accepted claim fully.
(12) Sold goods of Rs. 75000, in consideration received Machinery of ₹ 75,000
(13) Goods ₹ 1,000 pilfered/lost by theft/ stolen.

Illustration 2: Journalize the following transactions in the books of business (Practice/Do Yourself):

1. June 1, 2022 Ajit started business with Cash ₹ 40,000.

2. June 3, 2022 Cash deposited into the Bank ₹ 2,000.
3. June 12, 2022 Sold goods to Arvind ₹ 4,000.
4. June 14, 2022 Purchased goods from Amrit ₹ 10,000.
5. June 16, 2022 Received from Arvind ₹ 3,960 in full settlement.
6. June 20, 2022 Withdrew cash from business for personal use ₹ 2,000.
7. June 24, 2022 Paid telephone charges ₹ 1,000 by cheque
8. June 26, 2022 Cash paid to Amrit in full settlement ₹ 9,900.
9. June 30, 2022 Paid for stationery ₹ 200, rent ₹ 500 and salaries to staff ₹ 2000.

Illustration 3: Journalize the following transactions:

Trade discount is offered on the list price or the catalog price that the buyer sees at the time of purchase. The
list price gets reduced by a certain percentage depending on the quantity purchased. Cash discount is offered
to the buyer on the invoice or billed price of the goods and services, for prompt payments. Trade discount not
recorded SEPARATELY, subtracted from sales. Record cash disc. As an expense/income.

2022 April 1 Rahul started his business with own cash ₹ 81,000, Building ₹ 100,000 and also
borrowed from Satish ₹ 25,000 by cheque.
7 Credit purchases from Sohail ₹ 15,000 less 4% trade discount.
11 Credit sales to Virendra₹ 3000 less trade discount2%.
16 Paid Postage ₹ 100 and electricity bill ₹ 600.
19 Sent Telegram of ₹ 30 to Shinde to supply goods of ₹ 7,500.
21 Purchased Computer & Printer of ₹ 25,000 from HasmukChand in part

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PREPARATION OF JOURNAL, LEDGER AND TRIAL BALANCE

payment gave him cash ₹ 15,000.

28 Paid life insurance premium of life of Rahul of ₹ 3,000.
29 Paid Telephone Deposit for new telephone connection by cheque ₹ 2,000.
30 Paid for travelling expenses ₹ 3,000 in cash.
30 Salary of the employees to be paid for the month of April 2022 Rs. 5000

Illustration 4: Write the following in the Journal of M/s Prabhakar (Practice/Do Yourself):

1. Given ₹ 300 as a gift to a friend on the occasion of his marriage.

2. Withdrawn from Bank ₹ 8,000 and out of the withdrawals ₹ 2,000 were utilized for personal use.
3. Cash stolen by a thief from office ₹ 700. The thief was arrested but only ₹ 500 could be realized from
him.
4. Purchased goods for cash from Mukesh the value of ₹ 6,000 at 3% cash discount.
5. Sent an order to Ram for goods worth₹ 4,000.
6. Received goods worth ₹ 3,000 from Ram as was ordered for.

Illustration 5: Journalize the following transactions in the books of M/s Hitesh:

Debit balance as on 1st April 2022

Cash ₹ 75, 000; Sunny (Debtors) ₹ 11, 000; Stock ₹ 25, 000; Land & Building ₹ 175, 000 ; Bank balance 1,00,000

Credit balance as on 1st April 2022

Sundar (Creditor) ₹ 15,000 Bank Loan ₹ 25,000

April 1 Purchased goods from Mohan worth ₹ 20,000 at 10% trade discount and 5 % cash discount,
paid ¼ amount in cash and ¼ amount by cheque.

April 2 Purchased 100 shares of HDFC Ltd. ₹ 10,000 and ₹ 100 paid as brokerage.

April 6 Sold goods to Sunita worth ₹ 30,000 at 10% trade discount and 5% cash discount. Received 1/3
amount in cash and 1/3 amount by cheque, 5% cash discount allowed.

April 21 Received cash gift ₹ 11,000 from a relative with which purchased shares of Tata Steel for the
business.

April 22 Received an amount of ₹ 2,000 from Vijay which was previously written off as bad debts.

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PREPARATION OF JOURNAL, LEDGER AND TRIAL BALANCE

April 25 Repayment of bank loan with interest ₹ 5,000 (Interest 1,000).

April 29 Paid house rent ₹ 1,000, telephone bill of proprietor’s house ₹ 500 and personal income tax

₹ 5,000.

April 30 Purchased office furniture ₹ 20,000 paid by cheque and also paid carriage ₹ 200 on office
furniture in cash.

April 30 Transferred ₹ 15,000 from private bank of proprietor to business Bank of India Account.

April 30 Purchased Machinery for cash ₹ 20,000 and paid ₹ 1,000 wages for the installation of
Machinery.

Illustration – 6:

Journalize the following transactions, prepare necessary ledger accounts in the books of M/s Mahavir &
Sons and balance them: (Practice/Do yourself)

April 1 Started business with Cash ₹ 10,000 and Machinery ₹ 20,000.

5 Cash Purchases ₹ 3,000 at 5% Trade Discount.

8 Cash Sales ₹ 6,000.

12 Paid wages ₹ 700

15 Purchased goods on credit from Sanjay Traders ₹ 4,000.

25 Paid to Sanjay Traders ₹ 3,200.

28 Withdrew Cash for personal use ₹ 1,000.

30 Opened Bank A/c with Bank of Maharashtra by depositing ₹ 7,000.

Illustration – 7 (Practice/Do yourself): Prepare ledger accounts for Cash, Bank, Capital, Sales, Purchases,
Investment and Bank Loan & prepare Trial Balance on the basis of transactions given in Illustration 5.

llustration – 8: Journalize the following transactions in the books of Lalit & co. Also prepare ledgers and Trial
Balance.

2022 June 1 Commenced business with Cash ₹ 50000 and Furniture ₹ 20,000
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PREPARATION OF JOURNAL, LEDGER AND TRIAL BALANCE

2 Opened a current account in Allahabad Bank ₹ 40,000

2 Bought goods ₹ 16000 from Sunil at 5% Trade discount.

16 Sold half the goods purchased from Sunil to Vinod at 20% profit on cost.

17 Sold remaining goods purchased from Sunil to Waman at 20% profit on sales.

21 Purchased printer for₹ 9000 from HP Ltd paying half the amount in cash.

22 Paid ₹ 2000 to Birla College for his daughter’s fees.

29 Waman became insolvent and could pay only 50 paise in a rupee.

30 Uninsured goods worth ₹ 500 destroyed by fire.

Illustration – 9: [Preparation of Trial Balance]

From the following ledger balances prepare Trial Balance of M/s. Arun & Sons as on 31 st March, 2022

Particulars Amount (x₹ ) Particulars Amount (₹ )

Capital 115,000 Sales 84,500

Wages 8,500 Purchase Return 2,150
Salary 4,000 R.D.D. 2,500
Commission Paid 1,500 Advertisement 3,500
Purchases 30,000 Cash in Bank 4,250
Sales Return 2,500 Bank Loan 25,000
Printing & Stationery 1,950 Insurance premium 5,000
Furniture 60,000 Bad Debts 4,000
Investment 18,000 Plant & Machinery 25,000
Land & Building 20,000 Mobile Charges 2,800
Carriage Outward 500 Opening Stock 15,500
Drawings 7,000 Interest Received 3,000
Commission received 850 Rent Rates & Taxes 1,000
Debtors 46,000 Creditors 28,000

Illustration 10:
From the following ledger Balances prepare Trial Balance of M/s XYZ as on 31st March, 2022. JUST
DISCUSS DR/CR. GIVE HW
Particulars Amount (₹ )
Stock (01-04-21) 50,000
Purchases 150,000
Capital 300,000
Machinery 100,000
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Sundry Debtors 50,000

Building 50,000
Postage & Telegrams 2,500
Cash at Bank 10,550
Salaries 75,000
Goodwill 180,000
Sales Return 20,000
Purchase Return 7,250
General Expenses 1,250
Sales 200,000
Carriage Outward 1,750
Outstanding Exp 35,000
Rent 2,500
Wages 20,000
Drawings 10,000
Advance to Supplier 15,000
Bank Loan 125,000
Sundry Creditors 75,000
Bad Debts 2,500
Interest Received 1,800
Commission Received 2,000
Audit Fees 5,000
Illustration – 11: From the following Cash Book of Shreeji Traders for the month of June 2022, prepare Trial
Balance as on 30th June, 2022.

Dr Bank Book Cr
Date Particulars R.No. J.F Amount(₹ ) Date Particulars V.No. J.F Amount(₹ )
2022 2022

1-Jun To Balance b/d 2,000 1-Jun By Purchases A/c 3,400

2 To Sales A/c 3,000 4 By Rent A/c 600

5 To Ramesh A/c 1,000 15 By Purchases A/c 2,500

10 To Sales A/c 1,500 20 By Budhani A/c 1,500

To Commission A/c
15 700 30 By Balance c/d 2,000

20 To Sales A/c 1,600

30 To Commission A/c 200

10,000 10,000

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PREPARATION OF JOURNAL, LEDGER AND TRIAL BALANCE

Opening balances of all accounts as on 1stJune, 2022 are as follows:

Sales A/c 25,000

Ramesh A/c Dr 1,500
Commission Cr 1,000
Purchases 14,500
Rent A/c Dr Nil
Budhani A/c Cr 1,500
Furniture 10,000
Machinery 15,000
Building 20,000
Drawings 4,500
Capital 40,000

Illustration – 12 Pass the required journal entries for following transactions in the books of Jethmalani & Co
for the month of July 2022.

1. Debit balance as on 1St July 2022 Cash ₹ 35,000, Bank Balance ₹ 25,000, Stock ₹ 40,000 and Credit
balance as on 1st July 2022 Bank Loan ₹ 40,000.
2. Paid to Mr Shinde ₹ 10,000 in June 2022 towards Repair & Maintenance contract in advance for repairs
to be carried out in July. Repairs were done as agreed.
3. Purchased Machinery from Star Wars & Co for ₹ 40,000 and transportation expenses of ₹ 1,000 were
borne by Star Wars & Co.
4. Bank loan repaid ₹ 15,000 (including interest of 5,000)
5. Goods withdrawn from business costing ₹ 10,000. Half of them were distributed as free samples to
customers and remaining were given to a friend on occasion of his marriage.
6. Payment made towards health Insurance of Mr. Jethmalani ₹ 3,500.
7. Purchased goods for ₹ 15,000 from Sheetal & Co. and then received a trade discount of 10%. One third
of the amount was outstanding while 2/3 was paid. Out of the amount paid 1/3 was paid in cash and
2/3 by cheque. Cash discount applicable is 10%.
8. Paid Rs. 15,000 towards cost of Banners and posters to Astha & Co. Banners and posters displayed
features of the product offered by Jethmalani & Co.
9. Investments were purchased through cheque for ₹ 20,000 however the market value of the
investments on the same day was ₹ 20,500.
10. Applied for telephone connection and paid ₹ 1,000 as deposit money.

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Illustration – 13 Pass the required journal entries for following transactions in the business books of Shristi
Electronics for the Financial Year 2021-22. (DO IT YOURSELF)

1. Purchased goods worth ₹ 40,000 at 10% Trade discount from Mohit Enterprises.
2. On obtaining delivery of goods, it was found that half of the goods were defective and therefore
returned to Mohit Enterprises.
3. Out of the goods purchased costing ₹ 18,000, the company sold 60% of the goods to Mayank at a profit
of 20% on selling price.
4. Goods costing ₹ 7,200 were sold to Kanishka & Co. at 25% on cost.
5. Mayank became insolvent and could pay only 50 paisa in a Rupee
6. Repaid Bank of Maharashtra loan ₹ 10,000 and interest of ₹ 1,000
7. As asset with a book value of ₹ 50,000 was destroyed by fire. Insurance company accepted a claim of ₹
30,000.
8. Received an advance payment of ₹ 10,000 from a customer. The goods were to be delivered to him
only next month.
9. Salary paid for the month amounted to ₹ 25,000 out of which ₹ 5,000 was in nature of advance to one
of the employees Ms. Babita.
10. Purchased 2 acres of land @ ₹ 60,000 per acre and paid registration charges @ 10%.

Illustration – 14

Pass the required journal entries for following transactions in the business books of Bharat Electronics for the
month of July 2022. Mr. Bharat is the proprietor of the business.

July 23 Cheque of Rs 15000 received from Mr. Kumar last month was recorded as receipt in June 2022.
However cheque was dishonored in July. Bank charged Rs. 50 as charges to Bharat Electronics. ( Rs.50 was to
be recovered from Kumar, not to be recovered from Kumar)

July 27 Payment made towards health Insurance of Mr. Bharat ₹ 3,500.

July 31 Paid interest on loan at 12 % p.a. which was unpaid from April 2022. Loan amount outstanding on
01/04/2022 was Rs 500,000.

Illustration – 15

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PREPARATION OF JOURNAL, LEDGER AND TRIAL BALANCE

Manik started a business named Manik & Co in the year 2019. Manik & Co has adopted following accounting
policies in preparation of financial accounts. As an accountant, please journalize (narration compulsory) the
following transactions for the month of March 2022, in light of the below mentioned accounting policies. AIso
identify the accounting concept or convention involved in each of the below transactions and briefly explain the
same.

Accounting Policies of Business

Tangible Assets:
All individual items, where the actual cost does not exceed Rs. 8,000 each is recorded as an expense in the
year of acquisition.

Investments:
Long term investments are stated at cost and short term Investments at cost or market value whichever is
lower.

Inventories:
Raw material, work-in-progress and finished goods are valued at cost or net realizable value whichever is
lower

Revenue Recognition:

Revenue from sale of goods is recognized when significant risks and rewards of ownership of goods are
transferred to the buyer, which ordinarily coincides with dispatch of goods to customers.

March 1, Manik introduced personal furniture valued at Rs. 25,000 into the business.

March 2, Office equipment was purchased at a cost of ₹ 5,000 . Amount was paid immediately by cheque to
M/s Amar & Co.

March 3, Manik ordered goods worth ₹ 35,000 from his friend Rahul. However, goods were sent by Rahul on
March 10, 2018 which were duly received by Manik on same day. Rahul gave his friend a trade
discount of 10%.

March 5, Mr. Kattapa was a key managerial personnel and had helped the firm to grow substantially in last three
years. He left the organization and it was a big loss for the business.

March 31, Shares of HDFC Bank Ltd. were purchased in December 2017 for Rs. 30,000 with intention to sell
within next six months. However, market value of the same fell down to Rs. 22,000 on 31st March.

Important points
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 If name of the person is given, we always assume credit transaction until and unless specified.
 All the transactions given in question pertains to business, until and unless specified otherwise
 Narration is compulsory

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