CHAPTER 9: BOOK OF ORIGINAL ENTRY: MISCELLANEOUS ENTRIES , ANSWER TO ASSIGNMENT # 12, ASSIGNMENT #13

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'.
Miscellaneous Entries

TASK # 2

TODAY WE WILL FIRST CHECK OUR ANSWERS TO THE ASSIGNMENT # 12

FOLLOWING TRANSACTIONS ARE BASED ON:

BAD DEBTS, BAD DEBTS RECOVERED, OUTSTANDING EXPENSES, PREPAID EXPENSES, ACCRUED INCOME (UNEARNED INCOME), INCOME RECEIVED IN ADVANCE AND SOME OTHER PRACTICE ENTRIES AS DISCUSSED IN THE PREVIOUS CLASS.

Journalise the following transactions in the books of Journal.

1.Z became insolvent and 40 paise in a rupee could be received for ₹ 8000 due, from his estate by cheque which is deposited into Bank.

2.Received ₹20000 from Subhash which was written off as bad debts in the previous year.

3. Salaries due to clerks ₹ 50000.

4. Out of the rent paid this year, ₹10,000 is related to next year.

5. ₹10,000 due from Rohan are now bad debts.

6. Interest due but not received ₹ 2400.

7. Commission received in advance ₹ 700.

8. The following balances existed in the books of Shyam traders as on 1st April 2019 cash ₹85000 bank ₹40000 debtors ₹80000 furniture₹ 45000 liabilities creditors ₹55000 bills payable₹ 20000

9. Sold goods costing ₹60000 to Shalini, at a profit of 20% on sales less 10% trade discount. Paid cartage of ₹ 500 to be charged from Shalini.

10. Goods sold to Manish costing rupees 30000 at trade discount of 10% and paid cartage ₹ 300 (not to be charged from the customer)

11. Received an order of goods of 7000 from Jaidev

12. Paid cash ₹ 5000 to Ankit on behalf of Kamal

DATE	PARTICULARS	LF	DEBIT (Rs.)	CREDIT (Rs.)
1	Bank A/C…Dr  Bad debts a/c...Dr To Z's lA/C (Being amount received and bad debts written off)		3200   4800	8000
2	Cash A/C…Dr To Bad debts recovered A/C (Being cash received from Subhash, previously written off as bad debts)		20000	20000
3	Salaries A/C…Dr To Salary outstanding A/C (Being salaries due to clerks)		50,000	50,000
4	Prepaid rent A/C…Dr To Rent A/C (Being rent paid in advance)		10,000	10,000
5	Bad debts A/C…Dr To Rohan's  A/C (Being amount due from Rohan written off as bad debt)		10,000	10,000
6	Interest accrued A/C…Dr To  Interest  A/C (Being accrued interest brought into books)		2,400	2,400
7	Commission A/C…Dr To Unearned Commission A/C (Being Commission received in advance)		700	700
8	Cash…Dr Bank A/C ...Dr Debtors A/C...Dr Furniture A/C...Dr To Creditors A/C To Bills Payable A/C To Capital A/C (Being opening entry passed)		85,000 40,000 80,000 45,000	55000  20000 145000
9	Shalini's  A/C…Dr To Sales A/c To Cartage A/c (Being goods sold to Shalini and cartage to be charged from Shalini )		68,000	67,500       500
10	Manish's  A/C…Dr To SalesA/C (Being goods sold to Manish) Cartage A/C...Dr To Cash A/C account (Being cartage paid)		27,000      300	27,000    300
11	NO ENTRY
12	Kamal's A/C…Dr To Cash A/C (Being cash paid to Ankit on behalf of Kamal)		5,000	5,000

TASK # 3

DO THE GIVEN ASSIGNMENT # 13

1. Goods of ₹ 2,000 lost in transit.

2. Goods costing ₹ 3000 destroyed by fire. They were not insured.

3. Goods of ₹ 4000 were destroyed by fire and Insurance company accepted and paid the full claim.

4. Goods damaged by fire ₹1000 and Insurance company accepted and paid claim of rupees 800.

5. Charge interest on drawings ₹ 2,000

6.Receive the cheque of ₹ 9500 from Mahesh in full settlement of ₹ 9650 and deposited into Bank

7. Cheque received from Mahesh dishonoured. Bank charged ₹ 150

8.Cheque received from Raja ₹11,000.

9.. Raja's cheque was endorsed to Shyam in full settlement of ₹ 11,800.

10.Raja's cheque returned dishonoured.


TASK # 4

Some Miscellaneous Transactions

Depreciation:
 It is permanent and continuing decrease in the value of an asset on account of wear and tear and passage of time.
 It is a loss for the business and we know that increase in expenses and losses are debited, so Depreciation Account will be debited while the asset being depreciated gets reduced, so it will be credited (decrease in assets is credited).

For Example, Provide 10% depreciation on furniture costing Rs 30,000. It will be recorded as follows.

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Depreciation A/c	Dr.		3,000
	To Furniture A/c				3,000
	(Depreciation provided on furniture)

Here, depreciation being loss for business is increasing, so is debited while furniture being asset for the business is decreasing and accordingly it is credited (decrease in assets is credited)



Distribution of goods as free samples:

 Goods may be distributed as free samples as a tool for advertising just to increase the sales. Samples Account is of the same nature as that of Advertisement Account.
And it is recorded by passing the following Journal Entry.

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Advertisement A/c or Samples A/c	Dr.		xxx
	To Purchases A/c				xxx
	(Goods distributed as free samples)

Here, distribution of goods for free is an expense for the business and as the expenses are increasing, this account will be debited and on the other side distribution of goods reduces our stock.
 So, it will be proper to credit Purchases Account.


Goods used to make an Asset:

 When goods are used to make/construct an asset, value of the asset increases.
 Therefore, Asset Account is debited. The entry for this is:

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Asset A/c	Dr.		xxx
	To Purchases A/c				xxx
	(Goods used to make an asset)

Treatment of Goods withdrawn for personal use:

We already know that the entity of a business is separate from its owners so any goods withdrawn by the owner for his/her personal use is debited to an account by the name of drawings.
 If need be, the businesses providing interest on capital may as well charge interest on drawings which constitutes an income for the business.
For e.g.: Ramesh owns Elegant enterprises which purchases clothes for sale so if he withdraws clothes for his family then it will be considered as drawings by him.
The accounting treatment for drawings is as follows.

Date	Particulars		L.F.	Debit Amount (Rs.)	Credit Amount (Rs.)
	Drawings A/c    To Purchases A/c (Being goods withdrawn for personal use)	Dr.

​

Expenditure on the Installation of Machinery and on the Construction of Building:

Machinery and Building are the fixed assets of a business.
 Any expenditure incurred on the carriage and installation of machinery like freight, wages etc. is treated as ‘Capital Expenditure’ and therefore, increases the cost of the asset and is debited to the Particular Asset Account and not to the Particular Expense Account.
Like, expenditure incurred for the construction of building such as purchase of building material and payment of wages are also capital expenditures and debited to Building Account.

The entry for recording these expenses is:

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Related Asset A/c	Dr.		xxx
	To Cash / Bank A/c				xxx
	(Expenses incurred on related asset)

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Bank A/c	Dr.		xxx
	To Insurance Co. or Insurance Claim A/c				xxx
	(Insurance Claim received)

Income Tax: 

The profits of business in case of sole proprietorship and partnership firm are subject to income tax which is to be paid by the proprietor. 
So, the payment of income tax is recorded by debiting the Capital Account. 

The Journal Entry for the same is:

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Drawing A/c	Dr.
	To Cash/Bank A/c
	(Income tax paid)

And in case refund is received due to excess tax paid to income tax department, this increases the cash balance and the capital balance simultaneously. 

So, this will be recorded as follows:

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Cash A/c	Dr.
	To Capital A/c
	(Refund of Income tax)

Note: The same will be the treatment in case any interest is received on advance payment of income tax as it will increase the cash as well as capital balance.


Treatment of Value Paid Parcel (VPP): 

VPP is same as purchase of goods, difference lies in the method of sale. Seller sends the goods through Post Office. 
Buyer pays the value of goods to the Post Office and gets the delivery of goods. In this case too, Purchases Account will be debited as we do in case of purchase of goods. Suppose, MN Ltd. received a VPP for goods worth Rs 570 and sent an employee with Rs 600 for the collection of goods. 
The employee paid Rs 15 for the conveyance and returned the balance.

Solution:

Receiving VPP means purchasing goods, so Purchases A/c will be debited for the purchases. Conveyance charges, being a part of cartage, are expenses so it will be debited.

Date	Particulars		L.F.	Debit Amount (Rs)	Credit Amount (Rs)
	Purchases A/c	Dr.		570
	Cartage A/c	Dr.		15
	To Cash/Bank A/c				585
	(VPP collected)