Chapter - 4

 
Journalizing – Books of Original Entries
Topic Videos 28-46 are mandatory part of this module

MGT 101
Financial Accounting
By
Mian Ahmad Farhan, FCA
 Contents
Sr. No Course Outline Topic
1Journalizing Transactions
2Journal entry - Practice
3Compound entry - Practice
4General Journal - Practice
5Discounts
6Journalizing settlement discounts
7General Journal - Practice with complex accounting entries
8General Journal - Practice with complex accounting entries
9Subdivision of Journal
10Sales Journal
11Purchase Journal
12Sales Return Journal
13Purchase Return Journal
14Comprehensive practice - subdivision of journal
15Cash Book
16Single Column Cash Book
17Two Column Cash Book
18Three Column Cash Book
19Petty Cash Book
Journal – Books of Original Entries

Journalizing
Transactions
 Recapitulation – Analyzing Dr & Cr

Main Heads Nature Increase Decrease

Assets Dr Dr Cr
Expenses Dr Dr Cr
Owners’ Equity Cr Cr Dr
Liabilities Cr Cr Dr
Incomes Cr Cr Dr
Recapitulation – Books of Accounts
Journal

• First book in accounting

cycle
• Maintained chronologically
• Prepared systematically
• For small entities, a general-
purpose journal is quite
sufficient

Source of images: Google

Journal Entry

Information recorded in general

journal is known as journal
entry or accounting entry or
entry.
Parts of a Journal Entry

There are six parts of an entry

in Accounting language:
1) Date
2) Particulars
3) Post reference
4) Debit amount
5) Credit amount
6) Narration
 Format of Journal & Journal Entry

Sample Transaction
1st Jan 20X9, Cash paid for staff salaries Rs.50,000

1 2 3 4 5
Date Particulars/Description Post Debit Credit
20X9 Ref. (Rs) (Rs)
Jan. 1 Salaries Account (Debit) 39 50,000  
Cash Account (Credit) 10 50,000
(Staff salaries paid in cash)

Source of images: Google

Important Tips To Remember - ITTR

1. Journal is a book of
original / primary
entry
2. Journal is
maintained in
chronological
sequence
3. Narration is an
integral part of
Journal entry
Journal – Books of Original Entries

Practice
Journal Entry
Practice 4.1

Pass journal entries for the

following transactions:
20X9
Jan. 2 Goods bought for cash
Rs.20,000.

Jan. 5 Goods sold for cash

Rs.35,000.

Jan. 7 Loan taken from friend

in cash Rs.50,000.

Source of images: Google

 Practice 4.1 – Answer
Date Particulars/Description Post Debit Credit
20X9 Ref. (Rs) (Rs)
Jan. 2 Purchases Account (Debit) ? 20,000  
Cash Account (Credit) ? 20,000
(Bought goods for cash)
Jan. 5 Cash Account (Debit) ? 35,000  
Sales Account (Credit) ? 35,000
(Sold goods for cash)
Jan. 7 Cash Account (Debit) ? 50,000  
Loan from friend (Credit) ? 50,000
(Loan taken in cash from friend)
Important Tips To Remember - ITTR
1. Debit account comes
first and its amount is
written in the left
column
2. Credit account is
written under the debit
account by indenting
few space and its
amount is written in
the right side column
3. Don’t put “To” as a
prefix to the credit
accounting head
Journal – Books of Original Entries

Compound Entry
Compound Entry

The single journal entry,

which combines multiple
journal entries in which
same accounting head is
repeating
 Example – Compound Entry
5 Jan 20X9:
Cash Rs.7,000 was paid for salaries and

Cash Rs.1,000 was paid for purchase of stationery

Date Particulars/Description Post Debit Credit

20X9 Ref. (Rs) (Rs)
Jan. 5 Salaries account ? 7,000  
Cash account ? 7,000
(Salaries paid in cash)

Jan. 5 Stationery account ? 1,000  

Cash account ? 1,000
(Stationery purchased for cash.)

Source of images: Google

 Example – Compound Entry
5 Jan 20X9:
Cash Rs.7,000 was paid for salaries and

Cash Rs.1,000 was paid for purchase of stationery.

Date Particulars/Description Post Debit Credit

20X9 Ref. (Rs) (Rs)

Jan. 5 Salaries account ? 7,000  

Stationery account ? 1,000
Cash account ? 8,000

(Salaries paid & Stationery purchased

for cash)

Source of images: Google

Important Tips To Remember - ITTR

1. Compound entry
combines two
journal entries in
which one
accounting head is
common
2. Sum of Dr. should
always remain equal
to sum of Cr.
3. Narration should be
simple and
understandable
Journal – Books of Original Entries

Practice
General Journal
 Practice 4.2
Prepare a journal for the following transactions

Jan 1: Capital introduced in the business Rs.10,000 in cash and Rs.20,000 as

machinery.
Jan 2: Purchase land for cash Rs.4,000.
Jan 3: Purchase goods for cash Rs.2,000 and on credit from Giant Store Rs.7,000.
Jan 4: Sold goods for cash Rs.3,000.
Jan 5: Rent paid in cash Rs.2,000.
Jan 6: Owner withdrew cash for personal use Rs.500 OR Paid Rs.500 to owner
for his personal use.
Jan 7: Salaries paid in cash Rs.200.
Jan 8 Bought goods from Moon Light on credit Rs.6,000.
Jan 9 Sold goods on credit to Falcon for Rs.8,000 and for cash Rs.4,000.
Jan10: Received cash from Falcons 2,500 on his account.
 Practice 4.2 – Answer
Date Particulars Post Debit Credit
20X9 Ref. (Rs) (Rs)
Jan. 1 Cash Account ? 10,000  
Machinery Account ? 20,000 30,000
Capital Account
(Cash & machinery introduced as capital)
Jan. 2 Land Account ? 4,000  
Cash Account ? 4,000
(Purchased land for cash)
Jan. 3 Purchases Account ? 9,000  
Cash Account ? 2,000
Creditor (Giant Store) 7,000
(Goods purchased for cash & on credit from Giant Store)

Jan. 4 Cash Account ? 3,000  

Sales Account ? 3,000
(Sold goods for cash)
Jan. 5 Rent Account ? 2,000  
Cash Account ? 2,000
(Rent paid in cash)
 Practice 4.2 – Answer
Date Particulars Post Debit Credit
20X9 Ref. (Rs) (Rs)
Jan. 6 Drawings Account ? 500  
Cash Account ? 500
(Cash withdrew by the owner for personal use).

Jan. 7 Salaries Account ? 200  

Cash Account ? 200
(Salaries paid in cash).

Jan. 8 Purchased Account ? 6,000  

Creditors (Moon Light) Account ? 6,000
(Purchase goods on credit from Moon Light).

Jan. 9 Debtors (Falcon) Account ? 8,000  

Cash Account ? 4,000  
Sales Account ? 12,000
(Sold goods on credit to Falcons and goods sold for
cash)
Jan. 10 Cash Account ? 2,500  
Debtors (Falcons) Account ? 2,500
(Received cash from Falcons on account).
Important Tips To Remember - ITTR
1. It is not compulsory
to write “Account”
or along with the
accounting head
appearing in journal
entry
2. “Account” can be
abbreviated as “a/c”
or “A/C”
3. Identify the name of
debtor and creditor
in journal entry
Journal – Books of Original Entries

Discounts
Discounts

A trader often allows its

customers two types of
discounts
1. Trade discount
2. Settlement discount

Source of images: Google

Trade Discount

Offered by a seller to its

customers before entering into
transaction based on some
policy
Examples – Trade Discount

1. Bulk purchase discounts

2. Regular customer discounts
3. Season end discounts
Trade discounts are never
recorded in the books of either
party (Seller or Buyer)
Working – Trade Discount
List price of a product is Rs.220
and retail seller offers 10%
discount to its customers.
220 – (220 x 10%)
220 – 22
Rs.198

Rs. Rs.
Purchases Account 198
Cash Account 198
Settlement Discount

Offered by a seller to its

customers based on cash
settlement terms for early
payment of the invoice.
Also known as cash
discount.
Working – Settlement Discount

Invoice Rs.2,000
Terms 5/10, n/30

Settlement discount
(2,000 x 5%) = Rs.100

• it is recorded in the
books of Seller and
Buyer
• for seller it is “discount
allowed”
• for buyer it is “discount
received”

 
Important Tips To Remember - ITTR

1. Trade discount is
never recorded in
journal entry
2. Settlement discount
is recorded as
“discount allowed” or
“discount received”
3. Settlement discount
reflects settlement
terms
Journal – Books of Original Entries

Journalizing
Settlement Discounts
 Scenario – Settlement discount
Scenario (i)
Cash received from debtor Rs.114 in full settlement of his account
of Rs.120.
Rs. Rs.
Cash Account 114
Debtor Account 114
Discount Allowed 6
Debtor Account 6

Combining the two entries

Cash account 114

Discount Allowed 6
Debtors Account 120
 Scenario – Settlement discount
Scenario (ii)
Cash paid to creditors Rs.95 after deducting a discount of Rs.5.
Rs. Rs.
Creditor Account 95
Cash Account 95
Creditor Account 5
Discount Received 5

Combining the two entries

Creditor’s Account 95
Cash Account 90
Discount Received 5
Settlement terms – Sample invoice
Invoice # Business Name and Address
123456 John Smith Traders
Date:  
19/12/ 20X9 Customer’s Name and Address
Star Traders
Rate Amount
Description Qty
Rs. Rs.
1. Fans 5 2,000 10,000
2. Air conditioner 2 25,000 50,000
3. Room Coolers 3 10,000 30,000
    ________
Sub Total   90,000
Trade discount 10%   (9,000)
Net amount of invoice 81,000
   
Settlement term: 2/10, n/30
 Accounting entries – Sample invoice
In the Books of Seller (John Smith Traders)
Rs. Rs.
Dec. 19 Debtors A/c. 81,000
Sales A/c. 81,000

If settled before
Dec. 29 Cash A/c. 79,380
Discount allowed A/c. 1,620
Debtors A/c. 81,000
If settled after
Dec. 29 Cash A/c. 81,000
Debtors A/c. 81,000
 Accounting entries – Sample invoice
In the Books of Buyer/Customer (Star Traders)
  Rs. Rs.
Dec. 19 Purchases A/c. 81,000
Creditors A/c. 81,000

If settled before
Dec. 29 Creditors A/c. 81,000
Cash A/c. 79,380
Discount received A/c. 1,620
If settled after
Dec. 29 Creditors A/c. 81,000
Cash A/c. 81,000
Important Tips To Remember - ITTR

1. Discount allowed is
expense
2. Discount received is
income
3. Amount in front of
“cash account”
should always be
net of discount
Journal – Books of Original Entries

Practice
Journalizing
Complex Transactions
 Practice 4.4 – Journalizing
P Dr. Cr.
Particulars R Rs. Rs.
000 000
Dec 1: Business started with cash 1 Cash Account ? 100  
Furniture Account ? 35  
Rs.100,000 and furniture Capital Account ? 135
worth Rs.35,000 as capital (Cash and Furniture
introduced as capital)
Dec 2: Machinery purchased from 2 Machinery Account ? 20  
Jordan on credit Rs.20,000 Creditors ? 20
Dec 4: Loan taken from bank (Jordan)Account
(Machinery purchased on
Rs.200,000 credit from Jordan)
4 Bank Account ? 200  
Bank Loan Account ? 200
(Loan taken from Bank)
 Practice 4.4
P Dr. Cr.
Particulars R Rs. Rs.
000 000
Dec 6: Machinery returned to 1 Creditors (Jordan) ? 20  
Machinery Account ? 20
Jordan Rs.20,000 (Machinery returned to
Dec 8: Bought goods on credit Jordan).
2 Purchase Account ? 60  
from Pearl Traders Creditors (Pearl Traders)
Rs.60,000 Account ? 60
Dec 10: Bought goods on credit (Bought goods on credit
from Pearl Traders)
from Giant Store for 4 Purchases Account ? 95  
Rs.100,000 subject to a 5% Creditors (Giant Store)
Account ? 95
trade discount. (Goods purchased on trade
discount of 5%)
(100,000 X 95%)
 Practice 4.4
P Dr. Cr.
Particulars R Rs. Rs.
000 000
Dec 11: Goods sold for Rs.20,000 to 11 Debtor (Falcon) Account  
Sales Account ? 20
Falcon on settlement terms (Goods sold on credit on ? 20
5/10, n/30. settlement term 5/10, n/30)
12 Debtors (John Smith)  
Dec 12: Sold goods on credit to John Account ? 80
Smith for Rs.80,000. Sales Account ? 80
Dec 16: Goods returned to Pearl (Goods sold on credit)
16 Creditors (Pearl Traders)  
Traders Rs.10,000. Account ? 10
Purchases Return
Account ? 10
(Goods returned to Pearl
Traders).
 Practice 4.4
P Dr. Cr.
Particulars R Rs. Rs.
000 000
Dec 17: Falcon settled his account 17 Cash Account ? 19  
Discount Account ? 1
in full. Debtor (Falcon) 20
Dec 18: Cash paid to Pearl Traders Account
(Cash received & discount
Rs.48,000 in full settlement allowed 5%)
of his account. 18 Creditor (Pearl Trader) ? 50  
Dec 20: Goods returned by John Account
Cash Account ? 48
smithRs.20,000. Discount Received ? 2
(Final settlement to Pearl
Trader 60-10=50
16 Sales return Account ? 20  
Debtors (John Smith)
Account ? 20
(Goods returned by John
Smith).
 Practice 4.4
P Dr. Cr.
Particulars R Rs. Rs.
000 000
Dec 22: Charity paid in cash 22 Charity Account ? 2  
Cash Account 2
Rs.2,000. (Charity paid in cash).
Dec 23: Goods worth Rs.5,000, 23 Drawings Account ? 15  
Cash Account ? 10
Cash Rs.10,000 were taken Purchases Account ? 5
away by the proprietor for (Owner withdrew cash &
personal use. goods for personal use).
26 Free Sample Account ? 13  
Dec 26: Goods distributed as free Charity Account 2
sample Rs.13,000 and Purchases Account ? 15
(Goods distributed as free
given away as charity sampling & given away as
worth Rs.2,000. charity).
Important Tips To Remember - ITTR
1. Discount to Debtor is
always “Expense”. It
doesn’t mean cash
payment
2. Discount from
Creditor is always
“Income”. It doesn’t
mean cash received
3. Practice this exercise
at least three times
Journal – Books of Original Entries

Practice
Journalizing
Complex Transactions
 Practice 4.5 – Journalizing
Dec 2: Machinery purchased from Jordan on credit Rs.40,000
Dec 4: Machinery lost in fire accident Rs.20,000

PR Dr. Cr.
Particulars Rs. Rs.
2 Machinery Account ? 40,000  
Creditors (Jordan)Account 40,000
(Machinery purchased on credit from
Jordan).
4 Loss by Fire Account ? 20,000  
Machinery Account ? 20,000
(Machinery lost in fire)
 Practice 4.5 – Journalizing
Dec 8: Cash withdrawal from bank Rs.5,000 for office use
Dec 10: Cash stolen from Business Rs.3,000

PR Dr. Cr.
Particulars Rs. Rs.
2 Cash Account ? 5,000  
Bank Account 5,000
(Cash withdrawn from bank).
23 Loss by theft Account ? 3,000  
Cash Account
(cash stolen) ? 3,000
 Practice 4.5 – Journalizing
Dec 11: Owner sold his saving bonds of value Rs.30,000 and invested
that money in business
Dec 12: Profit earned on Bank Deposits Rs.12,000

PR Dr. Cr.
Particulars Rs. Rs.
11 Cash Account ? 30,000  
Capital Account 30,000
(Fresh capital introduced by owner)

12 Bank Account ? 12,000  

Profit on bank Account
(Profit earned on bank deposits) ? 12,000
 Practice 4.5 – Journalizing
Dec 16: Received commission from a client Rs.10,000
Dec 17: Rent paid to Jamal by cheque Rs.20,000
PR Dr. Cr.
Particulars Rs. Rs.
2 Cash Account ? 10,000  
Commission Account 10,000
(Commission received)
23 Rent Account ? 20,000  
Bank Account ? 20,000
(Rent paid by cheque)
 Important Tips To Remember - ITTR
While analyzing ”Expenses” & “Incomes” for Dr or Cr, never use “personal
account” like name of the person to whom expense is being paid or from
whom income is being received. Use “nominal accounts” as Dr. account or Cr.
account.
For example:
1. Salaries paid to John, Steve and Zara; here personal account “the names”
shall not be debited rather salaries as an expense account will be debited.
2. Received commission from David, Nasar, and Rajab; here personal
account “the names” shall not be credited rather commission as an income
account will be credited.
Important Tips To Remember - ITTR
1. Any event of loss
belongs to
“Expense”
2. Profits and gains
belong to “Income”
3. Consider the
difference between
“withdrawal for
office use” and
“withdrawal for
personal use”
4. Dealing in cheque
affects “Bank a/c”
Journal – Books of Original Entries

Subdivision of Journal
Subdivision of Journal

Journal is sub-divided
because of large size of
business.
Subdivision of journal is
required because:
• frequent cash transactions
• large number of credit
purchases and credit sales
are creating numerous
Debtors and Creditors
Types of Journal

1. Sales journal
2. Purchase journal
3. Sale return journal
4. purchase return journal
5. Cash book or cash
journal or cash register
6. General journal
Important Tips To Remember - ITTR
1. Journal is also termed
as “Day Book”
2. Broadly speaking
there are three types
of Journal or Day
Book
a) for credit
transactions
b) for cash
transactions
c) for other events and
conditions
Journal – Books of Original Entries

Sales Journal
Sales Journal

• Need for Sales Journal

• Recording transactions
in Sales Journal
 Practice 4.5
Record following transactions in a Sales Journal.
Feb 1: Credit sales to Nelson Rs.3,875
Feb 3: Credit sales to John Smith Rs.1,667
Feb 6: Credit sales to Moon Light Rs.1,285
Feb 10: Credit sales to Super Mart Rs.550
Feb 17: Credit sales to Moon Light Rs.9,280
Feb 19: Credit sales to Popular Traders Rs.2,880
Feb 27: Credit sales to Pearl Traders Rs.8,250
Feb 28: Credit sales to Royal Club Rs.4,244
Date Name of Debtors Invoice Post Amount
20X9 no. Ref. Rs.
Feb 1 Nelson     3,875
Feb 3 John Smith     1,667
Feb 6 Moon Light     1,285
Feb 10 Super Mart     550
Feb 17 Moon Light     9,280
Feb 19 Popular traders     2,880
Feb 27 Pearl Traders     8,250
Feb 28 Royal club     4,244
Feb 28 Total     32,031
Important Tips To Remember - ITTR
1. Only and only credit
transactions for sales
are recorded in sales
journal
2. Single effect is
recorded in sales
journal
3. Sales journal is
totaled after a regular
interval
Journal – Books of Original Entries

Purchase Journal
Purchase Journal

• Need for Purchase

Journal
• Recording transactions
in Purchase Journal
 Practice 4.6
Record following transactions in a Purchase Journal.
Feb 1: Credit Purchase from Shahla Rs.2,875
Feb 3: Credit Purchase from Samrana Rs.667
Feb 6: Credit Purchase from Amara Rs.285
Feb 10: Credit Purchase from Fareeha Rs.550
Feb 17: Credit Purchase from Saima Rs.8,280
Feb 19: Credit Purchase from Arooj Rs.1,880
Feb 27: Credit Purchase from Naila Rs.7,250
Feb 28: Credit Purchase from Shumaila Rs.3,244
Date Name of Creditor Invoice Post Amount
20X9 no. Ref. Rs.
Feb 1 Shahla     2,875
Feb 3 Samrana     667
Feb 6 Amara     285
Feb 10 Fareeha     550
Feb 17 Saima     8,280
Feb 19 Arooj     1,880
Feb 27 Naila     7,250
Feb 28 Shumaila     3,244
Feb 28 Total     25,031
Important Tips To Remember - ITTR
1. Only and only credit
transactions for
purchases are
recorded in purchases
journal
2. Single effect is
recorded in purchase
journal
3. purchase journal is
totaled after a regular
interval
Journal – Books of Original Entries

Sales Return Journal

Sales Return Journal

• Need for Sales Return

Journal
• Recording transactions
in Sales Return Journal
 Practice 4.7
Record following transactions in a Sales Return Journal
Feb. 1: Goods returned by Madinah Stores Rs.200
Feb. 9: Goods returned by John SmithRs.100
Feb. 10: Goods returned by Giant Store Rs.300
Feb. 11: Goods returned by Falcons Rs.400
Feb. 16: Goods returned by Pearl Traders Rs.50
Feb. 19: Goods returned by Nelson Rs.150
Feb. 23: Goods returned by Mega Mart Rs.500
Feb. 28: Return inwards by Giant store Rs.600
Date Name of Debtors Credit Post Amount
20X9 note Ref. Rs.
no.
Feb. 1 Madinah Stores     200
Feb. 9 John Smith     100
Feb. 10 Giant Store     300
Feb. 11 Falcons     400
Feb. 16 Pearl Traders     50
Feb. 19 Nelson     150
Feb. 23 Mega Mart     500
Feb. 28 Giant Store     600
Feb 28 Total     2,300
Important Tips To Remember - ITTR
1. Only and only credit
transactions for sales
return are recorded in
sales return journal
2. Single effect is
recorded in sales
return journal
3. Sales return journal is
totaled after a regular
interval
Journal – Books of Original Entries

Purchase Return
Journal
Purchase Return Journal

• Need for Purchase

Return Journal
• Recording transactions
in Purchase Return
Journal
 Practice 4.8
Record following transactions in a Purchase Return Journal
Feb. 1: Goods returned to Mega Mart Rs.200
Feb. 3: Goods returned to Royal club Rs.600
Feb. 7: Goods returned to Super Mart Rs.120
Feb. 9: Goods returned to Moon Light Rs.300
Feb. 11: Goods returned to Star Gold Rs.500
Feb. 19: Goods returned to Dunhill mart Rs.600
Feb. 23: Return outwards to Falcon Rs.800

Date Name of Creditors Credit Post Amount

20X9 Note Ref. Rs.
No.
Feb. 1 Mega Mart     200
Feb.3 Royal Club     600
Feb. 7 Super Mart     120
Feb. 9 Moon Light     300
Feb. 11 Star Gold     500
Feb. 19 Dunhill mart     600
Feb. 23 Falcon     800
Feb. 28 Total     3,670
Important Tips To Remember - ITTR
1. Only and only credit
transactions for
purchase return are
recorded in purchase
return journal
2. Single effect is
recorded in purchase
return journal
3. Purchase return
journal is totaled after
a regular interval
Journal – Books of Original Entries

Practice
Subdivided Journals
 Practice 4.9
Record transactions in the appropriate journals

Dec 2: Credit sales to Nelson Rs.600, John smithRs.200, Hills Bros.

Rs.500
Dec 4: Credit purchases from Giant store Rs.450, Star Gold Rs.300,
Moon Light Rs.250
Dec 5: Credit sales to Madinah Stores Rs.630, John smithRs.500,
Falcon Rs.420
Dec 6: Credit purchase from Falcon Rs.1,000
Dec 10: Goods returned by Nelson Rs.100, John smithRs.50
Dec 12: Goods returned to Star Gold Rs.80, Giant store Rs.30
Dec 18: Credit sales to Super Mart Rs.650
Dec 24: Return outwards to Falcon Rs.200
Dec 28: Return inwards from Super Mart Rs.150
 Practice 4.9 – Answer
Sales Journal
Date Name of Debtors Invoice Post. Amount
No. Ref. Rs.
Dec 2 Nelson     600
  John Smith     200
  Hills Bros.     500
Dec 5 Madinah stores     630
  John Smith     500
  Falcon     420
Dec 18 Super Mart     650

Sales Return Journal

Date Name of Debtors Credit Post Amount
Note No. Ref. Rs.
Dec. 10 Nelson     100
  John Smith     50
Dec. 28 Super Mart     150
 Practice 4.9 – Answer
Purchase Journal
Date Name of Creditors Invoice Post. Amount
No. Ref. Rs.
Dec 4 Giant Store     450
  Star Gold     300
  Moon Light     250
Dec 6 Falcon     1,000

Purchase Return Journal

Date Name of Creditors Credit Post Amount
Note No. Ref. Rs.
Dec. 12 Star Gold     80
  Giant store     30
Dec. 24 Falcon     200
Important Tips To Remember - ITTR

1. Return outwards is
“purchase return”
2. Return inwards is
“sales return”
Journal – Books of Original Entries

Cash Journal
Cash Book
Cash Book

• Need for Cash Book

• Recording transactions
in Cash Book
• Types of Cash Book
1. Single column cash-book
2. Two column cash-book
3. Three column cash-book
4. Petty cash book
 Cash book - Format
Cash Book (Single Column)
RECEIPTS Post Amount PAYMENTS Post Amount
Date Date
Particulars Ref. Rs. Particulars Ref. Rs.
               
               

Cash Book (Two Column)

RECEIPTS Cash Bank PAYMENTS Cash Bank
Date P/R Date P/R
Particulars Rs. Rs. Particulars Rs. Rs.
                   
                   

Cash Book (Three Column)

RECEIPTS Disc Cash Bank PAYMENTS Disc Cash Bank
Date Date
Particulars allowed Rs. Rs. Particulars Received Rs. Rs.
                   
                   

Cash Book (Petty Expenses)

Date Receipts Particulars Total Enter- Photo Repair Travelling Postage Misc.
Rs. Payments tainment copy Rs. Rs. Rs. Rs.
Rs. Rs. Rs.

                   
                   
Important Tips To Remember - ITTR
1. Only and only cash
transactions are
recorded in cash book
2. Bank is cash
equivalent
3. Discounts are
associated to cash
receipts and cash
payments
Journal – Books of Original Entries

Single Column
Cash Book
 Practice 4.10
Record following transactions in a cash book with single cash column and
find closing balance to carry forward.
Rs.
Mar. 1: Balance brought forward (b/f) 4,000
Mar. 3: Sold goods for cash 40,000
Mar. 7: Sold goods on credit to Alpha 75,000
Mar. 10: Bought goods for cash 28,000
Mar. 15: Bought goods on credit from Beta 42,000
Mar. 18: Received cash from Debtor (Alpha) 75,000
Mar. 19: Made part payment in cash to Creditor (Beta) 15,000
Mar. 20: Paid staff salaries 20,000
Mar. 26: Bought furniture for cash 25,000
Mar. 30 Paid Electricity bill 5,000
 Practice 4.10 - Answer
Cash Book
Date RECEIPTS Post Date PAYMENTS Post
Rs. Rs.
20X9 Particulars Ref. 20X9 Particulars Ref.
Mar.1 Balance b/f   4,000 Mar. 10 Purchases   28,000
3 Sales   40,000 19 Creditor (Beta)   15,000
18 Debtor (Alpha)   75,000 20 Staff salaries   20,000
        26 Furniture   25,000
        30 Electricity bill   5,000
        31 Balance c/f   26,000
      119,000       119,000
Important Tips To Remember - ITTR
1. Cash is “Asset”, its
opening balance will
always be placed in
Dr. side (Receipt
side)
2. Closing balance of
cash is excess of
receipts over
payments
3. Closing balance of
Cash is always placed
in Cr. side to balance
the both sides
Journal – Books of Original Entries

Two Column
Cash Book
 Practice 4.11
Record following transactions into a cash book with cash and bank columns, also find
closing balance for both columns to carry forward.

20X9
Mar. 1 Balances brought forward cash Rs.7,000; bank Rs.25,000
Mar. 2 Sold goods for cash Rs.40,000, the amount was deposited into bank on the same
date.
Mar. 5 Bought stationary for cash Rs.2,000
Mar. 9 Bought furniture, payment made by cheque Rs.10,000
Mar. 15 Received Rs.15,000 in cash from Debtor Sagheer
Mar. 16 Received a cheque of Rs.20,000 from Debtor Kabeer and deposited into bank
Mar. 20 Made payment to a creditor Abeer through cheque Rs.18,000
Mar. 22 Cash withdrawn from bank for office use Rs.25,000
Mar. 25 Cash withdrawn from Bank from owner’s personal use Rs.8,000
Mar. 28 Cash received from sale of old machine Rs.60,000
Mar. 30 Cash deposited into bank Rs.75,000 and paid salaries in cash Rs.20,000
 Practice 4.11 - Answer
Cash Book
Date RECEIPTS P Cash Bank Date PAYMENTS PR Cash Bank
20X9 Particulars R Rs. Rs. 20X9 Particulars Rs. Rs.

Mar. 1 Balance b/f   7,000 25,000 Mar. 05 Stationery   2,000  

2 Sales     40,000 09 Furniture     10,000
15 Debtor - Sagheer   15,000   20 Creditor -     18,000
Abeer
16 Debtor - Kabeer     20,000 22 Cash C   25,000

22 Bank C 25,000   25 Drawings     8,000

28 Machine   60,000   30 Bank C 75,000  
Disposal
30 Cash C   75,000 30 Salaries   20,000  
          31 Balance c/f   10,000 99,000
      107,000 160,000       107,000 160,000
Important Tips To Remember - ITTR

1. In “Contra Entry”,
“cash account”
reciprocates with
“bank account”
2. Contra entries:
a) Cash deposited into
bank
b) Cash withdrawn
from bank for office
use
Journal – Books of Original Entries

Three Column
Cash Book
 Practice 4.12
Record following transactions into three column cash-book; with cash, bank, and discount
columns, also find closing balances to carry forward.
20X9
Mar. 1 Balance brought forward: Cash Rs.3,000; Bank overdraft Rs.10,000
Mar. 5 Cash received from debtor Burhan in full settlement of his account balance
Rs.50,000, after subtracting 8% cash discount.
Mar. 10 Received a cheque of Rs.70,000 from debtor Hanan in full settlement of his account
after subtracting cash discount Rs.5,000.
Mar. 15 Goods sold on credit to debtor Zain worth Rs.80,000 subject to settlement terms
5/10, n/30 and a trade discount of Rs.4,000. (credit transaction – no effect in cash
book)
Mar. 20 Paid Rs.40,000 through cheque to creditor Rehan after subtracting cash discount
Rs.4,000.
Mar. 25 Paid to Bilal his account balance due Rs.25,000 in cash after subtracting cash
discount Rs.2,000.
Mar. 30 Received cheque from debtor Athar against sales made on March 15th and
deposited into bank.
Mar. 31 Cash in excess of Rs.6,000 is to be deposited into bank. (Rs.6,000 should remain in
cash balance c/f)
 Practice 4.12 - Answer
Cash Book
Date Receipts P Cash Bank Disc. Date Payments P Cash Bank Disc.
20X9 Particulars R     Allow 20X9 Particulars R     Rec
Rs. Rs. Rs. Rs. Rs. Rs.
Mar. Balance b/f   3,000     Mar. Balance b/f     10,000  
1 1
5 Debtor -   46,000   4,000 20 Creditor -     40,000 4,000
Burhan Rehan
10 Debtor -     70,000 5,000 25 Creditor -   23,000   2,000
Hanan Bilal
30 Debtor -     76,000   31 Bank C 20,000    
Athar
31 Cash C   20,000   31 Balance c/f   6,000 116,000  
      49,000 166,000 9,000       49,000 166,000 6,000
Important Tips To Remember - ITTR
1. Bank is not always
“Asset”. It is
“Liability” if cash is
overdrawn from bank
upon facility
2. Opening balance of
bank over draft is
placed in the payment
side
Journal – Books of Original Entries

Petty
Cash Book
Petty Cash Book

Accountants separately
recognize cash at bank, cash
in hand and petty cash:
1. Main Cash (significant)
2. Petty Cash (insignificant)
 
Mechanism to maintain
Petty Cash Book
3. Petty Cash System
4. Imprest System
 Petty Cash System
Petty cashier receives a fixed amount at the start of each week to meet
petty expenses during that week.
Example
In the first week of business setup the petty cashier receives Rs.1,000
and spends Rs.970 for different petty expenses and left with a balance
of Rs.30 in petty cash box. In the start of second week; the petty
cashier once again receives Rs.1,000 from the main cash and keeps it
in the petty cash box that increases the balance of petty cash box, on
that day, to Rs.1,030. During the second week the petty cashier spends
Rs.990. Now the balance in petty cash box, at the end of second week,
is Rs.40. In the start of third week the petty cashier once again
receives Rs.1,000 from the main cash book and keeps it in the petty
cash box that increases the balance in petty cash box to Rs.1,040.
 Imprest System
An imprest amount is fixed and provided to petty cashier that is
subsequently topped-up exactly equal to the amount spent during the
previous period for petty expenses.
Example
a petty cashier receives Rs.1,000 at the start of first week to meet petty
expenses during that week on imprest system. The petty cashier spends
Rs.970 for different petty expenses and left with a balance of Rs.30 in
petty cash box. In the start of second week; the petty cashier receives
Rs.970 from the main cash in order to top-up petty cash box balance up to
Rs.1,000. During the second week the petty cashier spends Rs.990. Now
the balance in petty cash box, at the end of second week, is Rs.10 and the
amount for top-up is Rs.990 to make the balance in petty cash box equal to
Rs.1,000.
 Practice 4.13
Record following transactions in petty cash book on imprest system. Imprest limit is
Rs.1,000.

Date Transactions Rs.

Jan 01 Funds transferred from main cash for petty expenses 1,000
Jan 01 Paid for tea bags 150
Jan 02 Paid for cycle repair 200
Jan 03 Paid for photocopies 50
Jan 03 Paid for cycle stand at bank 10
Jan 03 Paid for postage 60
Jan 05 Paid for sugar and tea biscuits 220
Jan 06 Paid for stove repair 180
Jan 07 Paid for stationery 120
 Practice 4.13 - Answer
Petty Cash Book
Date Receipt Particulars Total Enter- Photo Repair Travelling Postage Stationery
  Payment tainment copy        
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Jan 01 1,000 Imprest from              
Main Cash
Jan 01   Tea bags 150 150          
Jan 02   Cycle repair 200     200      
Jan 03   Photocopy 50   50        
Jan 03   Cycle stand 10       10    
Jan 03   Postage 60         60  
Jan 05   Sugar etc. 220 220          
Jan 06   Stove repair 180     180      
Jan 07   Stationery 120           120
                   
    Balance c/f 10            
  1,000 Total 1,000 370 50 380 10 60 120
Jan 08 10 Balance b/f              
Jan 08 990 Imprest from              
Main Cash
Important Tips To Remember - ITTR
1. Petty cash book is
prepared for
insignificant
payments
2. Receipt side has
single column,
payment side is
divided into multiple
columns
3. Imprest is topped up
with actual spending
in the previous period
 Practice 4.14
Choose correct answer
1.Goods purchased from John smith Rs.500 are debited to _____
a) John smith account
b)Goods Account
c) Cash Account
d)Purchases Account 
2.Commission paid to agent Jordan Rs.1,000 will be debited to _____
a)Commission account
b)Cash Account
c) Jordan Account
d)None of above
3.Goods purchased for Rs.5,000 subject to 10% trade discount, amount to be
debited to purchases account will be _____
a) 5,000
b)5,500
c) 4,500
d)None of the above
 Practice 4.14
4.Goods returned from debtors will be recorded in which book of account?
a)Return inward journal
b)Return outward journal
c)Purchase journal
d)General journal 
5.Payment received from Star Brothers Rs.4,800 in full settlement of Rs.5,000
will be debited to _____
a)Cash Account
b)Discount allowed Account
c)Star Brothers Account
d)Both a. and b.
6.Loan repaid to Hassan Brothers will be debited to _____
a)Hassan Brothers
b)Hassan Brothers’ Loan Account
c)Cash Account
d)None of above
 Practice 4.14
7.Goods purchased for cash will be recorded in which book of account?
a) Purchase journal
b) Cash book
c) General journal
d) a and b both
8.Machinery purchased from on credit from Caterpillar will be recorded in which
book of account?
a) Assets journal
b) Purchases journal
c) General journal
d) Machinery journal
 Practice 4.14
9.Stock lost in fire will be credited to _____
a) Stock account
b) Goods Account
c) purchases Account
d) Loss by fire Account
10.Short explanation written below the accounting entry is called _____
a) Explanation
b) Narration
c) Compound entry
d) None of above
 
Answer: (1-d, 2-a, 3-c, 4-a, 5-d, 6-b, 7-b, 8-c, 9-c, 10-b)