CHAPTER 9: BOOK OF ORIGINAL ENTRY: SPECIFIC ENTRIES, ASSIGNMENT # 11

LEARNING OUTCOMES:

Recording of Transactions with Specific Entries:

After going through this lesson, you shall be able to understand the concept related to 
'Entries for some specific transactions'.
Some Specific Entries


Bad Debts:
 If any amount that was recoverable is not realised or is partially realised, then the amount not realised is a loss to the business and is regarded as Bad Debts. It is recorded as follows.

(1)  When the full amount is not recovered

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Bad Debts A/c	Dr.		xxx
	To Debtor’s A/c				xxx
	(Amount not recovered written off as bad debts)

(2) When part of debt is not recovered

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Cash A/c	Dr.		xxx
	Bad Debts A/c	Dr.		xxx
	To Debtor’s A/c				xxx
	(Amount recovered and balance written off as bad debts)

Example : Amit who owed us Rs 10,000 has become insolvent. He pays a compensation of 70 paisa in a rupee.

Solution

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Cash A/c	Dr.		7,000
	Bad Debts A/c			3,000
	To Amit’s A/c				10,000
	(Amount recovered and balance written off as bad debts)

Bad Debts Recovered: 
Sometimes, bad debts previously written off are subsequently recovered. In such cases, the amount so received is a gain to the business as it was written off as loss earlier. 
The entry for this is:

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Cash or Bank A/c	Dr.		xxx
	To Bad Debts Recovered A/c				xxx
	(Amount recovered previously written off as bad debts)

Example : Received cash against bad debts written off last year Rs 8,000.

Solution

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Cash A/c	Dr.		8,000
	To Bad Debts Recovered A/c				8,000
	(Amount recovered previously written off as bad debts)

TASK# 3

WATCH THE VIDEO BELOW FOR CLARITY OF BAD DEBTS AND BAD DEBTS RECOVERED

LINK FOR THE VIDEO OF BAD DEBTS AND BAD DEBTS RECOVERED

Outstanding expenses:

 The expenses which should have been paid during the current year but have not been paid due to some reasons are termed as outstanding expenses.

For example, if an employee is paid salary at the rate of Rs 1,000 per month and during the year payment for only 11 months has been done then the salary for remaining one month will be termed as outstanding salary and it will be recorded as follows.

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Salaries A/c	Dr.		1,000
	To Outstanding Salaries A/c				1,000
	(Salaries remained unpaid)

In the above entry, Outstanding Salaries Account is a liability. And since they are increasing, they have been credited. Salaries Account is an expense for the current period. 
It is immaterial whether it has been paid or not and as it is increasing, it will be debited.


Prepaid expenses:  

These expenses are related to the next year but have been paid during the current year in advance. The benefit of these expenses will be received during the next accounting period.

For example,
 insurance premium amounting to Rs 6,000 has been paid on July 01, 2013 for one year and the books are closed on Dec. 31 every year. 
This means premium for six months relates to next accounting period or insurance premium for 6 months is prepaid i.e. Rs 3,000. 
The entry for recording such expense is:

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Prepaid Insurance A/c	Dr.		3,000
	To Insurance A/c				3,000
	(Insurance paid in advance)

In the above entry, insurance premium relating to next year has been paid in advance in the current year the benefits of which will be received in the next year.

 So, it is an asset for the firm. As increase in the assets is debited, Prepaid Insurance Account has been debited with the respective amount. 
On the other hand, insurance being an expense for the firm if separated from prepaid insurance will decrease and as decrease in expenses is credited, Insurance Account will be credited.


Accrued Income or Income Earned but not Received:

 Income which is earned but not received is called accrued income. It is different from outstanding income.
For example,
 Mr. A receives his salary after every two months. This means if he works for two months say, November and December, then he will receive salary of these two months on 1^st January. 
So, in this case salary for the month of November is regarded as accrued income on December 01. 
It is because although it has been earned but it is still not due for payment.
 It is recorded with the help of following Journal Entry.

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Accrued Income A/c	Dr.
	To Income A/c
	(Income earned but not yet due)

Income Received in Advance or Unearned Income:
 Income received but not earned during the accounting period is called income received in advance or unearned income.

For example:
 If we recover Rs 2,50,000 on account of rent against a let out building with rent of Rs 20,000 per month, then Rs 10,000 (i.e. 2,50,000 − 2,40,000) is income received in advance.
 It is recorded with the help of following Journal Entry.

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Income A/c	Dr.
	To Income Received in Advance  A/c
	(Income earned but not yet due)

TASK #4

DO THE ASSIGNMENT # 11

Following transactions are based on compound entry, opening entry, trade discount and cash discount, as discussed in the previous class.

1.Received ₹1250 from Raman in full settlement of his account for ₹ 1300.

2. Paid ₹ 370 to Ram in full settlement of his account for ₹ 400.

3..Cheque received from Shyam ₹1120 in full settlement of ₹1200. Cheque is deposited on the same date.

4. The following balances existed in the books of Shyam traders as on 1st April, 2019. Pass the opening entry.
Assets: Cash ₹100000, Debtors ₹40000 (Amit ₹ 12000, Shyam, ₹ 17000, Kapil ₹ 11000), Furniture ₹ 20,000, Plant and machinery ₹ 70000
Liabilities: Creditors ₹ 55000, Bank Loan ₹ 30000.

5. Sold goods to Pankaj at a list price of ₹ 50000 less 20% trade discount.

6. Pankaj returned goods of the list price of ₹ 4,000.

7. Received from Pankaj the amount due from him under a cash discount of 5%.

8. Bought goods for cash of the list price ₹100000 at 20% trade discount and 5% cash discount.

9. Sold goods for cash of the list price ₹ 20000 at 10% trade discount and 3% cash discount.

10. Bought goods from Nupur for ₹ 200000 at 5% cash discount and 10% trade discount. Half the amount paid by cheque at the time of purchase.

11. Sold goods to Anuradha for ₹ 100000 on terms 10% trade discount and 5% cash discount if the payment is received within 15 days. 80% payment is received within the time frame by cheque.

12. Purchased goods costing ₹ 100000 from Sahil & Co. Paid 60% immediately by cheque to avail 5% discount.