Journal Entry (Capital, Drawings, Expenses, Income & Goods)

1. Capital Account: 

The amount invested in the business whether in the means of cash or kind by the proprietor or owner of the business is called capital. The capital account will be credited and the cash or assets brought in will be debited. 

Journal Entry: 

Example: Sahil started his business with cash, furniture, and a Motorbike ₹10000, ₹20000, & ₹30000 respectively.

Solution:

2. Drawings Account: 

Withdrawal of any amount in cash or kind from the enterprise for personal use by the proprietor is termed as Drawings. The Drawings account will be debited and the cash or goods withdrawn will be debited.

Journal Entry: 

Example: Cash and Goods are withdrawn from the office for personal use ₹500 and ₹1000 respectively.

Solution:

3. Expenses Paid:

Any amount spent in order to purchase or sell goods or services that generates revenue in the business is called expenses. Cash Account will be decreased with the amount paid as expenses, so it will be credited and Expenses will be debited.

Journal Entry: 

Example: Rent paid in cash ₹5000.

Solution:

4. Income Received: 

Any monetary benefit arising from the business can be termed as income. Cash Account will be increased with the amount received as income, so it will be Debited and Income Account will be Credited.

Journal Entry: 

Example: Commission received in cash ₹10000.

Solution:

5. Goods: 

Goods are those items in which a business deals. In other words, goods are the commodities that are purchased and sold in a business on a daily basis. Goods are denoted as ‘Purchases A/c’ when goods are purchased and ‘Sales A/c’ when they are sold. 

Goods Account is classified into five different accounts for the purpose of passing journal entries:

A. Purchases Account: When goods are purchased in cash or credit, donated, lost, or withdrawn for personal use, in all these cases, Goods are denoted as Purchases A/c.

Journal Entry: 

1. Goods purchased for cash.
2. Goods Donated.
3. Goods are withdrawn for personal use.
4. Goods lost by fire.

Example: 

1. Goods purchased in cash ₹25000.
2. Goods worth ₹5000 were given as a donation.
3. Goods worth ₹1000 taken away for personal use by proprietor.
4. Goods lost by fire ₹2500

Solution:

B. Sales Account: When goods are sold then it is represented as Sales A/c. 

Journal Entry: 

Example: 

1. Goods sold to Nupur on credit worth ₹2000.
2. Goods sold to Gaurav for cash ₹5000.

Solution: 

C. Purchase Return or Return Outwards Account: When purchased goods are returned to the supplier, it is denoted as Purchase Return A/c or Return Outwards A/c.

Journal Entry: 

Example: Goods purchased worth ₹2000 from Shubham were returned back.

Solution:

D. Sales Return or Return Inwards Account: When goods sold are returned by the customers, it is termed as Sales Return or Return Inwards A/c.

Journal Entry: 

Example: Goods sold to Nupur were returned back worth ₹1000.

Solution: 

E. Stock: The leftover unsold goods at the end of a financial year is represented through stock. Closing Stock is the valuation of goods leftover at the end of a financial year and Opening Stock is the valuation of goods an enterprise has at the beginning of a financial year.

Journal Entry: