Journal Entries with Reasons
Bad Debts
Entry:
Bad Debts A/c Dr.
To Debtor's A/c
Reason: The debtor has not paid the amount, and it is not recoverable. It is a loss for the business.
Entry:
Cash/Bank A/c Dr.
Bad Debts A/c Dr.
To Debtor's A/c
Reason: Partial payment is received, remaining amount is loss. Loss and cash are debited, debtor is credited.
Bad Debts Recovered
Entry:
Cash/Bank A/c Dr.
To Bad Debts Recovered A/c
Reason: Amount recovered that was earlier written off is now a gain.
Banking Transactions
Entry:
Bank A/c Dr.
To Cash A/c
Reason: Cash deposited in bank.
Entry:
Cash A/c Dr.
To Bank A/c
Reason: Cash withdrawn from bank.
Entry:
Drawings A/c Dr.
To Bank A/c
Reason: Cash withdrawn for personal use.
Entry:
Creditor's A/c Dr.
To Bank A/c
Reason: Paid creditor by cheque.
Entry:
Bank A/c Dr.
To Debtor's A/c
Reason: Received cheque and deposited the same day.
Entry:
Cheques in Hand A/c Dr.
To Debtor's A/c
Reason: Received cheque but not deposited.
Entry:
Bank A/c Dr.
To Cheques in Hand A/c
Reason: Deposited cheque in bank.
Entry:
Debtor's A/c Dr.
To Bank A/c
Reason: Cheque dishonoured.
Entry:
Bank Charges A/c Dr.
To Bank A/c
Reason: Bank charges deducted.
Entry:
Interest A/c Dr.
To Bank A/c
Reason: Interest charged by bank.
Entry:
Bank A/c Dr.
To Interest Received A/c
Reason: Interest allowed by bank.
Entry:
Insurance Exp. A/c Dr.
To Bank A/c
Reason: Bank pays insurance on our behalf.
Entry:
Bank A/c Dr.
To Income A/c
Reason: Bank collects income for us.
Entry:
Bank Loan A/c Dr.
To Cash/Bank A/c
Reason: Repaid bank loan.
Entry:
Bank (PNB) A/c Dr.
To Bank (SBI) A/c
Reason: Transfer between banks.
Goods Given as Charity
Entry:
Charity A/c Dr.
To Purchases A/c
Reason: Goods given as charity are expenses, not sales.
Goods Given as Samples
Entry:
Advertisement A/c Dr.
To Purchases A/c
Reason: Samples are given for advertisement, not sales.
Loss of Stock by Theft/Fire
Entry:
Loss by Fire A/c Dr.
To Purchases A/c
Reason: Goods lost, considered as expense.
Entry:
Insurance Co. A/c Dr.
To Loss by Fire A/c
Reason: Insurance claim lodged.
Entry:
Bank A/c Dr.
To Insurance Co. A/c
Reason: Full claim received.
Entry:
Bank A/c Dr.
P&L A/c Dr.
To Insurance Co. A/c
Reason: Partial claim received.
Drawings
Entry:
Drawings A/c Dr.
To Cash A/c
Reason: Cash drawings.
Entry:
Drawings A/c Dr.
To Purchases A/c
Reason: Goods drawings.
Fixed Assets
Entry:
Fixed Asset A/c Dr.
To Cash/Bank/Supplier A/c
Reason: Purchase of asset.
Entry:
Cash/Bank A/c Dr.
Loss on Sale A/c Dr.
To Fixed Asset A/c
Reason: Sale at loss.
Entry:
Cash/Bank A/c Dr.
To Fixed Asset A/c
To Profit on Sale A/c
Reason: Sale at profit.
Capital Expenditure
Entry:
Machinery/Building A/c Dr.
To Cash A/c
Reason: Installation or construction cost capitalized.
Miscellaneous Expenses
Entry:
Sundry Expenses A/c Dr.
To Cash A/c
Reason: Miscellaneous expenses paid.
Adjustment Entries
Entry:
Closing Stock A/c Dr.
To Trading A/c
Reason: Stock left added to trading account.
Entry:
Expense A/c Dr.
To Outstanding Expense A/c
Reason: Unpaid expenses are liabilities.
Entry:
Prepaid Expense A/c Dr.
To Expense A/c
Reason: Advance paid is an asset.
Entry:
Accrued Income A/c Dr.
To Income A/c
Reason: Income earned but not yet received.
Entry:
Income A/c Dr.
To Income Received in Advance A/c
Reason: Income received in advance.
Entry:
Depreciation A/c Dr.
To Asset A/c
Reason: Depreciation on assets.
Entry:
Amortisation A/c Dr.
To Intangible Asset A/c
Reason: Amortisation of intangible assets.
Interest on Capital and Drawings
Entry:
Interest on Capital A/c Dr.
To Capital A/c
Reason: Interest allowed on capital.
Entry:
Capital A/c Dr.
To Interest on Drawings A/c
Reason: Interest charged on drawings.
Opening Entry
Entry:
All Assets A/c Dr.
To Liabilities A/c
To Capital A/c
Reason: To record opening balances.
