Here is another article for you, in this article you will practically know and practice double entry. It is the basic starting in the accounting journey. Hope you will find it helpful for you and get some new ideas.
In this article, you will be able to know double-entry journal entries, Ledger, and trial balance. So let’s start with 1st problem,
Double entry problem 1
- Naveen started a business with cash 10000.
- Purchase furniture for office use 1000.
- purchase goods for 5000.
- Sold goods for 1000.
- Pay rent 1000 by cash.
Here is a very basic double-entry example.
Requirement: Prepare journal entries
Example of a double-entry journal,
- Cash debit by 10000 and capital credit by 10000.
- Furniture debit 1000 and cash credit 1000.
- Purchase debit 5000 and cash credit 5000.
- cash debit 1000 and sales credit 1000.
- Rent expense debit 1000 and cash credit 1000.
Problem 2
- Naveen invests 10000 cash and 5000 in goods in his business.
- Purchase goods for sale 1000.
- prepaid rent for 1000.
- Paid employee 1000.
- Sold goods for 2000 on credit.
- Sold goods for 1000 in cash.
Requirements: Prepare journal entries and Ledger.
Journal entries,
- Cash 10000 debit, goods 5000 debit, and capital 15000 credit (10000+5000=15000).
- Purchase debit 1000 and cash credit 1000.
- Prepaid rent 1000 debut and cash credit 1000.
- Salary expense 1000 and cash credit 1000.
- A/R debit by 2000 and sales credit by 2000.
- Cash debit 2000 and sales credit 2000.
Ledger
Make the trial balance as well for the above transactions.
FAQS
What is debit?
In accounting, a debit entry shows whether a payment was received or a payment made, a debit entry is recorded on the left side of the account, and on the right side credit entries are recorded.
What is an entry in accounting?
An entry shows an event or transaction that has some value.
Who is the father of the account?
Luca Pacioli is the father of modern accounting
Why is double-entry accounting important
Accounting plays a significant role in today’s modern business. Every business needs accounting because of highly revolutionary technology, people are using digital currency now at this time. Accounting helps business to maintain their records and make financial statements for a business that helps a business to know its status and performance.
Single-entry bookkeeping vs double entry
A single entry records only one transaction while double-entry bookkeeping records two transactions at the same time, double-entry bookkeeping records the debit entry in one account and records the credit entry as well for that particular transaction.
What is the purpose of an account in accounting?
An account shows the balance and the transaction for a particular person and other things in the accounting such as expenses and assets.
Is revenue a credit or debit
A revenue entry is always a credit entry because it increases the profit of the business and profit always increases the capital, a capital transaction is a credit nature transaction.
Is inventory credit or debit?
An inventory is an asset for a business, and it should always be on the debit side.
When an expense account is increased?
When a business does some expenditure related to the business activity, it increases the balance in the expense account.
Which type of account is increased with a debit entry?
Assets and expense account always increase with a debit balance while liability, capital, and revenue account always increase with a credit entry.
Credit increase assets and decrease liabilities, is this statement true or false?
This statement is false because the balance of the asset is increased with the debit entry and the liability balance is increased with the credit entry.
Does expense decrease equity?
Expense is directly related to the profit, when expenses in the business increase the profit will decrease, so increasing expense are related to owner’s equity as well because the standard entry of owner’s equity is credit and the expense is the debit nature account, so yeah expense decreases the owner’s equity.
Do expenses increase with a debit entry?
The expense account balance increases with the debit entry.
Which account is increased by debit entries?
Asset and expense accounts are increased with the debit entry.
Is common stock debit or credit?
Common stock is the capital of the business and capital increases with the credit entry.
Why are expenses increased with a debit entry?
Expense is increased with debit entry because an expense decrease the profit and profit entry is credit nature, so when profit is decreasing it must be debited.
Revenue accounts are increased by credits entries, is this statement true or false?
Yeah, this is a true statement because revenue increases the profit of the business.
Does increase assets debit or credit?
Increasing assets always shows a debit means a positive balance in the business accounts.
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