Basic Accounting Entries
| S.No | Transaction | Accounting Entry | Amount (₹) | Explanation |
|---|---|---|---|---|
| 1 | Capital introduced by owner | Dr Cash/Bank | 1,00,000 | Increase in cash/bank (asset). |
| Cr Capital | 1,00,000 | Recognition of owner's equity. | ||
| 2 | Purchase of goods for cash | Dr Purchases | 50,000 | Expense incurred for buying goods. |
| Cr Cash | 50,000 | Decrease in cash (asset). | ||
| 3 | Sale of goods for cash | Dr Cash | 70,000 | Increase in cash (asset). |
| Cr Sales | 70,000 | Recognition of sales revenue. | ||
| 4 | Purchase of goods on credit | Dr Purchases | 40,000 | Expense incurred for buying goods. |
| Cr Accounts Payable | 40,000 | Recognition of liability to pay. | ||
| 5 | Sale of goods on credit | Dr Accounts Receivable | 60,000 | Recognition of receivable (asset). |
| Cr Sales | 60,000 | Recognition of sales revenue. | ||
| 6 | Payment to supplier | Dr Accounts Payable | 30,000 | Decrease in liability. |
| Cr Cash | 30,000 | Decrease in cash (asset). | ||
| 7 | Receipt from customer | Dr Cash | 50,000 | Increase in cash (asset). |
| Cr Accounts Receivable | 50,000 | Decrease in receivable (asset). | ||
| 8 | Salary paid in cash | Dr Salaries Expense | 20,000 | Recognition of expense. |
| Cr Cash | 20,000 | Decrease in cash (asset). | ||
| 9 | Rent paid in cash | Dr Rent Expense | 10,000 | Recognition of expense. |
| Cr Cash | 10,000 | Decrease in cash (asset). | ||
| 10 | Interest received in cash | Dr Cash | 5,000 | Increase in cash (asset). |
| Cr Interest Income | 5,000 | Recognition of revenue. | ||
| 11 | Loan taken from bank | Dr Bank | 1,50,000 | Increase in cash (asset). |
| Cr Loan Payable | 1,50,000 | Recognition of liability. | ||
| 12 | Payment of bank loan principal | Dr Loan Payable | 50,000 | Decrease in liability. |
| Cr Bank | 50,000 | Decrease in cash (asset). | ||
| 13 | Purchase of machinery for cash | Dr Machinery | 1,20,000 | Increase in asset. |
| Cr Cash | 1,20,000 | Decrease in cash (asset). | ||
| 14 | Depreciation of machinery | Dr Depreciation Expense | 12,000 | Recognition of expense. |
| Cr Accumulated Depreciation | 12,000 | Reduction in asset value. | ||
| 15 | Inventory written off | Dr Inventory Loss | 5,000 | Recognition of expense. |
| Cr Inventory | 5,000 | Reduction in inventory (asset). | ||
| 16 | Goods withdrawn for personal use | Dr Drawings | 10,000 | Recognition of owner's withdrawal. |
| Cr Inventory | 10,000 | Reduction in inventory (asset). | ||
| 17 | Utilities paid in cash | Dr Utilities Expense | 8,000 | Recognition of expense. |
| Cr Cash | 8,000 | Decrease in cash (asset). | ||
| 18 | Insurance premium paid | Dr Prepaid Insurance | 15,000 | Recognition of prepaid expense. |
| Cr Cash | 15,000 | Decrease in cash (asset). | ||
| 19 | Prepaid insurance expense adjusted | Dr Insurance Expense | 5,000 | Recognition of expense. |
| Cr Prepaid Insurance | 5,000 | Utilization of prepaid expense. | ||
| 20 | Dividend paid | Dr Dividend Payable | 20,000 | Recognition of liability. |
| Cr Cash | 20,000 | Decrease in cash (asset). | ||
| 21 | Bad debt written off | Dr Bad Debt Expense | 4,000 | Recognition of expense. |
| Cr Accounts Receivable | 4,000 | Reduction in receivable (asset). | ||
| 22 | Provision for doubtful debts | Dr Bad Debt Expense | 3,000 | Recognition of provision expense. |
| Cr Provision for Doubtful Debts | 3,000 | Recognition of liability. | ||
| 23 | Advertising expense paid in cash | Dr Advertising Expense | 18,000 | Recognition of expense. |
| Cr Cash | 18,000 | Decrease in cash (asset). | ||
| 24 | Office supplies purchased for cash | Dr Office Supplies | 7,000 | Increase in asset. |
| Cr Cash | 7,000 | Decrease in cash (asset). | ||
| 25 | Goods returned by customer | Dr Sales Returns | 2,000 | Reversal of sales revenue. |
| Cr Accounts Receivable | 2,000 | Reduction in receivable (asset). |
| S.No | Transaction | Accounting Entry | Amount (₹) | Explanation |
|---|---|---|---|---|
| 26 | Goods returned to supplier | Dr Accounts Payable | 5,000 | Reduction in liability. |
| Cr Purchase Returns | 5,000 | Reversal of purchase expense. | ||
| 27 | Accrued interest income | Dr Accrued Interest | 6,000 | Increase in receivable (asset). |
| Cr Interest Income | 6,000 | Recognition of revenue. | ||
| 28 | Accrued salary expense | Dr Salaries Expense | 15,000 | Recognition of expense. |
| Cr Salaries Payable | 15,000 | Recognition of liability. | ||
| 29 | Unearned revenue received in advance | Dr Cash | 25,000 | Increase in cash (asset). |
| Cr Unearned Revenue | 25,000 | Recognition of liability. | ||
| 30 | Recognition of earned unearned revenue | Dr Unearned Revenue | 10,000 | Reduction in liability. |
| Cr Revenue | 10,000 | Recognition of revenue. | ||
| 31 | Commission paid | Dr Commission Expense | 12,000 | Recognition of expense. |
| Cr Cash | 12,000 | Decrease in cash (asset). | ||
| 32 | Bank charges deducted | Dr Bank Charges Expense | 1,000 | Recognition of expense. |
| Cr Bank | 1,000 | Decrease in bank balance. | ||
| 33 | Investment purchased in cash | Dr Investment | 50,000 | Increase in asset. |
| Cr Cash | 50,000 | Decrease in cash (asset). | ||
| 34 | Investment sold for cash | Dr Cash | 55,000 | Increase in cash (asset). |
| Cr Investment | 50,000 | Reduction in asset. | ||
| Cr Gain on Sale | 5,000 | Recognition of income. | ||
| 35 | Loss on sale of investment | Dr Loss on Sale | 3,000 | Recognition of expense. |
| Cr Investment | 3,000 | Reduction in asset. | ||
| 36 | Purchase of software | Dr Intangible Asset | 35,000 | Increase in asset. |
| Cr Cash | 35,000 | Decrease in cash (asset). | ||
| 37 | Amortization of software | Dr Amortization Expense | 7,000 | Recognition of expense. |
| Cr Intangible Asset | 7,000 | Reduction in asset value. | ||
| 38 | Tax payable | Dr Tax Expense | 20,000 | Recognition of expense. |
| Cr Tax Payable | 20,000 | Recognition of liability. | ||
| 39 | Tax paid | Dr Tax Payable | 18,000 | Reduction in liability. |
| Cr Cash | 18,000 | Decrease in cash (asset). | ||
| 40 | Cash withdrawal from bank | Dr Cash | 10,000 | Increase in cash (asset). |
| Cr Bank | 10,000 | Decrease in bank balance. | ||
| 41 | Refund of tax received | Dr Bank | 2,000 | Increase in bank balance. |
| Cr Tax Refund | 2,000 | Recognition of refund receivable. | ||
| 42 | Goods given as charity | Dr Charity Expense | 8,000 | Recognition of expense. |
| Cr Inventory | 8,000 | Reduction in inventory (asset). | ||
| 43 | Partner’s share of profit | Dr Profit and Loss Account | 30,000 | Recognition of distribution. |
| Cr Partner’s Capital | 30,000 | Increase in partner's capital. | ||
| 44 | Discount allowed to customer | Dr Discount Allowed | 2,500 | Recognition of expense. |
| Cr Accounts Receivable | 2,500 | Reduction in receivable (asset). | ||
| 45 | Discount received from supplier | Dr Accounts Payable | 1,500 | Reduction in liability. |
| Cr Discount Received | 1,500 | Recognition of income. | ||
| 46 | Foreign exchange gain | Dr Bank | 3,000 | Increase in bank balance. |
| Cr Foreign Exchange Gain | 3,000 | Recognition of income. | ||
| 47 | Foreign exchange loss | Dr Foreign Exchange Loss | 4,000 | Recognition of expense. |
| Cr Bank | 4,000 | Decrease in bank balance. | ||
| 48 | Bank overdraft facility utilized | Dr Cash | 20,000 | Increase in cash (asset). |
| Cr Bank Overdraft | 20,000 | Recognition of liability. | ||
| 49 | Interest on overdraft | Dr Interest Expense | 1,800 | Recognition of expense. |
| Cr Bank | 1,800 | Reduction in bank balance. | ||
| 50 | Dividend declared but unpaid | Dr Retained Earnings | 15,000 | Reduction in equity. |
| Cr Dividend Payable | 15,000 | Recognition of liability. |
Trail Balance
| Account Name | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash/Bank | 4,13,000 | |
| Capital | 1,00,000 | |
| Purchases | 90,000 | |
| Sales | 1,30,000 | |
| Accounts Payable | 56,500 | |
| Accounts Receivable | 63,500 | |
| Salaries Expense | 35,000 | |
| Rent Expense | 10,000 | |
| Interest Income | 11,000 | |
| Loan Payable | 1,00,000 | |
| Machinery | 1,20,000 | |
| Accumulated Depreciation | 12,000 | |
| Depreciation Expense | 12,000 | |
| Inventory Loss | 5,000 | |
| Drawings | 10,000 | |
| Utilities Expense | 8,000 | |
| Prepaid Insurance | 10,000 | |
| Insurance Expense | 5,000 | |
| Dividend Payable | 15,000 | |
| Bad Debt Expense | 7,000 | |
| Provision for Doubtful Debts | 3,000 | |
| Advertising Expense | 18,000 | |
| Office Supplies | 7,000 | |
| Sales Returns | 2,000 | |
| Purchase Returns | 5,000 | |
| Accrued Interest | 6,000 | |
| Salaries Payable | 15,000 | |
| Unearned Revenue | 15,000 | |
| Commission Expense | 12,000 | |
| Bank Charges Expense | 1,000 | |
| Investment | 50,000 | |
| Gain on Sale of Investment | 5,000 | |
| Loss on Sale of Investment | 3,000 | |
| Intangible Asset | 28,000 | |
| Amortization Expense | 7,000 | |
| Tax Expense | 20,000 | |
| Tax Payable | 2,000 | |
| Charity Expense | 8,000 | |
| Partner’s Capital | 30,000 | |
| Discount Allowed | 2,500 | |
| Discount Received | 1,500 | |
| Foreign Exchange Gain | 3,000 | |
| Foreign Exchange Loss | 4,000 | |
| Bank Overdraft | 20,000 | |
| Interest Expense | 1,800 | |
| Retained Earnings | 15,000 | |
| Total | 9,43,800 | 9,43,800 |
Profit and Loss Account
| Particulars | Amount (₹) |
|---|---|
| Revenue | |
| Sales | 1,30,000 |
| Interest Income | 11,000 |
| Gain on Sale of Investment | 5,000 |
| Total Revenue | 1,46,000 |
| Expenses | |
| Purchases | 90,000 |
| Salaries Expense | 35,000 |
| Rent Expense | 10,000 |
| Depreciation Expense | 12,000 |
| Bad Debt Expense | 7,000 |
| Advertising Expense | 18,000 |
| Office Supplies | 7,000 |
| Utilities Expense | 8,000 |
| Commission Expense | 12,000 |
| Bank Charges Expense | 1,000 |
| Loss on Sale of Investment | 3,000 |
| Amortization Expense | 7,000 |
| Tax Expense | 20,000 |
| Charity Expense | 8,000 |
| Discount Allowed | 2,500 |
| Foreign Exchange Loss | 4,000 |
| Interest Expense | 1,800 |
| Total Expenses | 235,300 |
| Net Profit (Loss) | (89,300) |
Balance Sheet
| Liabilities | Amount (₹) | Assets | Amount (₹) |
|---|---|---|---|
| Equity and Liabilities | Non-Current Assets | ||
| Capital | 1,00,000 | Machinery | 1,20,000 |
| Loan Payable | 1,00,000 | Intangible Asset | 28,000 |
| Dividend Payable | 15,000 | Current Assets | |
| Accounts Payable | 56,500 | Cash/Bank | 4,13,000 |
| Salaries Payable | 15,000 | Accounts Receivable | 63,500 |
| Provision for Doubtful Debts | 3,000 | Prepaid Insurance | 10,000 |
| Unearned Revenue | 15,000 | Inventory | 5,000 |
| Tax Payable | 2,000 | Total Assets | 5,43,500 |
| Total Liabilities | 2,36,500 |
The Final Accounts, consisting of the Profit and Loss Account and Balance Sheet, are prepared based on the Trial Balance. The Profit and Loss Account reveals a net loss of ₹89,300 after accounting for total revenue of ₹1,46,000 and total expenses of ₹2,35,300. The Balance Sheet reflects the financial position with total liabilities and equity of ₹2,36,500, and total assets of ₹5,43,500, showing a healthy balance between liabilities and assets, ensuring the accounting equation holds true. The net loss indicates that the business spent more than it earned during the period, affecting the overall equity.
