Journal Entry for Accrued Income or Income Due
An income that has been earned but not yet received in the current financial year is called Accrued Income.
Journal Entry:
Example 1: Commission earned but not yet received ₹1,000.
Solution:
Example 2: Dividend ₹2,000 has not been received yet.
Solution:
Journal Entry for Income Received in Advance or Unearned Income
Sometimes, businesses receive money relating to the coming month or year which has not been earned yet. Such an income that has not been earned yet but has been received in advance is called Unearned Income. Unearned Income is considered to be a liability by the business.
Ex- If the Commission for the month of July is received in the month of June, that commission will be termed as Unearned Commission.
Journal Entry:
Example: Commission received in advance ₹2,000.
Solution:
Next year, unearned commission will be adjusted as:
Journal Entry:
Example: (On the basis of the above example)
Solution:
Journal Entry for Discount Allowed and Received
A discount is a concession in the selling price of a product offered by a seller to its customers. According to nature, there are two types of discount:
A. Discount Allowed
B. Discount Received
A. Discount Allowed: When at the time of sales or receiving cash, any concession is given to the customers, it is called discount allowed.
Journal Entry:
Example:
Goods sold ₹50,000 for cash, discount allowed @ 10%.
Cash received from Rishabh worth ₹19,500 and discount allowed to him ₹500.
Solution:
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B. Discount Received: When at the time of purchase or paying cash, any concession is received from the seller, it is called discount received.
Journal Entry:
Example:
Goods purchased for cash ₹20,000, discount received @ 20%.
Cash paid to Vishal ₹14,750 and discount received from him ₹250.
Solution:
According to the business point of view, there are two types of Discount:
A. Trade Discount
B. Cash Discount
A. Trade Discount: The discount provided by the seller to its customers at a fixed percentage on the listed price, mostly on bulk purchases, is called a trade discount. Trade discount is not shown separately in the journal entry.
Journal Entry:
Example:
Goods purchased from Hardik ₹20,000, at less 10% Trade Discount.
Goods sold to Abhinav for ₹10,000 and offered him a Trade Discount of @5%.
Solution:
Example: If goods purchased or sold at a trade discount are returned: (Based on the above example)
Goods purchased from Hardik worth ₹2,000 were returned.
Abhinav returned goods worth ₹1,000.
Solution:
B. Cash Discount: A Cash discount is offered to those types of customers who make quick payments or payment is made by them within a fixed period.
Journal Entry:
Example:
Goods purchased from Sahil ₹10,000 for cash, at less 10% Trade Discount and 5% cash discount.
Goods sold to Kashish for ₹20,000 for cash and offered him a Trade Discount @5% and a cash discount @2.5%.
Solution:
Notes to Accounts:
Working Note 1:
Working Note 2:
Journal Entry for Full/Final Settlement
A business may allow or receive a discount at the time of full and final settlement of the accounts of debtors or creditors.
Journal Entry:
Example:
01 April 2022: Purchased goods from Sayeba at the list price of ₹10,000 at a 10% Trade Discount.
05 April 2022: Returned goods to Sayeba for the list price of ₹1,000.
10 April 2022: Paid cash to Sayeba ₹7,500 in full & final settlement of her account.
Solution:
Example:
01 May 2022: Sold goods to Nisha at the list price of ₹50,000 at a 2% Trade Discount.
05 May 2022: Nisha returned the goods worth ₹5,000.
10 May 2022: Cash received from Nisha ₹43,000 in full & final settlement of her account.
Solution:
Journal Entry for Interest on Capital
The proprietor can charge interest on the amount invested by him/her in the business as capital, which is shown as Interest on Capital.
Journal Entry:
Example 1: Interest is charged ₹800 on capital.
Solution:
Example 2:
Started business with Cash ₹1,00,000.
Charged Interest on Capital @6% per annum.
Solution:
Journal Entry for Cash and Credit Transactions
Transactions related to the purchase and sale of goods can be of two types, Cash or Credit.
A. Cash Transactions: Cash transactions are those transactions in which payment is made or received in cash at the time of purchase or sale of goods. Cash transactions can be identified by:
When the Name of the Party and Cash both are given in the transaction;
When only Cash is given in the transaction;
When the Name of the Party and Cash both are not given.
Journal Entry:
Example:
Goods purchased from Bijay for Cash ₹5,000; or
Goods purchased for cash ₹5,000; or
Goods Purchased for ₹5,000.
Solution: For all these three cases, a common journal entry will be passed:
Example:
Goods sold to Gaurav for Cash ₹10,000; or
Goods sold for cash ₹10,000; or
Goods sold for ₹10,000.
Solution: For all these three cases, a common journal entry will be passed:
B. Credit Transactions: Credit transactions are those transactions in which payment is not made or received at the time of purchase or sale of goods. Credit transactions can be identified by:
When only the Name of the Party is given in the transaction.
Journal Entry:
Example: Goods purchased from Akanksha ₹7,000.
Solution:
Example: Goods sold to Sabya ₹11,000.
Solution:
Corporate actions.
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Private Equity-03 https://youtu.be/Wip9pwV7fZU
Derivatives https://youtu.be/iV2p9a-TUFU
Cash Recon https://youtu.be/F6H-wgwuDa8
Cash Dividend https://youtu.be/F6H-wgwuDa8
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