Page 70 - DMGT104_FINANCIAL_ACCOUNTING

Financial Accounting

Notes When some amount is brought into to start the business it is called Capital. Therefore, such an
amount is transferred to Capital Account.

5.1.2 Compound Journal Entry

When two or more transactions take place in the business relating to a same account on the same
date, in the place of passing many entries for the same account a single journal entry is pass
which is called a compound journal entry. Compound entry can be of following three types:
(a) Single debit account and more than one credit account

(b) Single credit account and more than one debit accounts
(c) More than one debit account and more than one credit account
For example, if a debtor is allowed cash discount and he makes the payment. Then the accounts
involved are three, i.e., (1) Cash A/c (2) Discount A/c and (3) The Debtors A/c
The following compound entry is to be passed:
Dr. Cr.
Date Particulars L.F. ( ) ( )
Cash A/c Dr.
Discount A/c Dr.
To Debtors A/c
(Debtor paid & was allowed discount.)

Illustration 2: Journalise the following transactions with narration:
2006
Aug 1 Commenced business with cash 40,000 and Goods 20,000,
Aug 3 Purchased goods 'From 'X' and Co. for 10,000 Paid Cash 5,000,

Aug 5 Goods returned to 'X' Co. 200,
Aug 10 Sold goods to 'Y' & Co. 30,000 and cash received from him 20,000,
Aug 15 'Y' & Co. returned goods 500,
Solution:

Journal Entries
Date Particulars L.F. Amount Dr. Amount Cr.
( ) ( )
2006
Aug 1 Cash A/c Dr. 40,000
Goods A/c 20,000
Dr. 60,000
To Capital A/c
(business commenced with cash and goods)
Aug 3 Purchases A/c Dr. 10,000
To X & Co. 10,000
(Goods purchased from x)

Contd...

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