Chapter # 4
General Journal, General Ledger
& Trial Balance
Principles of Accounting – XI
Sameer Hussain
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General Journal, General Ledger & Trial Balance
Chapter # 4
Chapter content
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Double entry system.
Simple entry.
Compound entry.
General Journal.
Steps to make general entry.
Possible general journal entries.
General ledger.
Trial balance.
Illustrations.
Practice questions.
Multiple Choice Questions (MCQs).
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Sameer Hussain
General Journal, General Ledger & Trial Balance
Chapter # 4
Chapter # 4
GENERAL JOURNAL, GENERAL
LEDGER & TRIAL BALANCE
DOUBLE ENTRY SYSTEM
The system underlying the recording of transactions in which the dollar value of an entry’s
debits must be equal to the dollar value of the entry’s credits.
SIMPLE ENTRY
A journal entry having only two accounts is called a simple journal entry. One of the head of
account is debited and the other account is credited.
COMPOUND ENTRY
A compound journal entry is an accounting entry in which there is more than one debit, more
than one credit, or more than one of both debits and credits.
GENERAL JOURNAL
It is the simplest and the most flexible type of journal. The general journal can be used to record
any kind of transactions. For each transaction, it provides date, name of the accounts included,
the amount of each debit and credit, references, an explanation of transaction and a column to
which each debit and credit was recorded. The debits of a transaction must always equal to the
credits.
Format of General Journal:
Name of Business
General Journal
For the Month of _____
Particulars
P/R
Date
Debit
Credit
STEPS TO MAKE GENERAL ENTRY
Step # 1: Analyze the name of accounts in a transaction.
Step # 2: Analyze the nature of accounts (Heads of accounts).
Step # 3: Analyze the movement of accounts (Increase or decrease).
Step # 4: Rules of debit and credit.
Example # 1:
January 1:
Mr. Ali started business with cash investment of Rs.100,000.
Solution:
Step # 1
Cash
Capital
Sameer Hussain
Step # 2
Asset
Owner’s equity
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Step # 3
Increase
Increase
Step # 4
Debit
Credit
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General Journal, General Ledger & Trial Balance
Chapter # 4
Explanation:
Owner invested cash which is asset and investment is known as capital. Cash is increasing and
investment is also increasing. Increase in asset recorded as debit and increase in owner’s equity
recorded as credit.
General Journal
Date
Particulars
P/R
Debit
Credit
January 1 Cash
100,000
Capital
100,000
(To record the cash invested by owner)
Example # 2:
January 5:
Purchased furniture for cash Rs.12,000.
Solution:
Step # 1
Step # 2
Step # 3
Step # 4
Furniture
Asset
Increase
Debit
Cash
Asset
Decrease
Credit
Explanation:
Furniture is asset and cash is also asset. Furniture is increasing in the business and cash is
decreasing in the business. Increase in asset (furniture) recorded as debit and decrease in asset
(cash) recorded as credit.
General Journal
Date
Particulars
P/R
Debit
Credit
January 5 Furniture
12,000
Cash
12,000
(To record the furniture purchased for cash)
Example # 3:
January 8:
Purchased equipment on account Rs.20,000.
Solution:
Step # 1
Step # 2
Step # 3
Step # 4
Equipment
Asset
Increase
Debit
Accounts Payable
Liability
Increase
Credit
Explanation:
Equipment is an asset and purchased on account which increases liability (accounts payable).
Increase in asset (equipment) recorded as debit and increase in liability (accounts payable)
recorded as credit.
General Journal
Date
Particulars
P/R
Debit
Credit
January 8 Equipment
20,000
Accounts payable
20,000
(To record the purchase of equipment on credit)
Example # 4:
January 13:
Sold merchandise for cash Rs.18,000.
Solution:
Step # 1
Cash
Sales
Step # 2
Asset
Income
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Step # 3
Increase
Increase
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Step # 4
Debit
Credit
Sameer Hussain
General Journal, General Ledger & Trial Balance
Chapter # 4
Explanation:
Sales of merchandise increases the income of the organization and sales were made on cash
which also increases the cash. Increase in asset (cash) recorded as debit and increase in income
(sales) recorded as credit.
General Journal
Date
Particulars
P/R
Debit
Credit
January 13 Cash
18,000
Sales
18,000
(To record the goods sold for cash)
Example # 5:
January 20:
Purchased merchandise for cash Rs.10,000 and on credit Rs.15,000.
Solution:
Step # 1
Step # 2
Step # 3
Step # 4
Purchases
Expense
Increase
Debit
Accounts Payable
Liability
Increase
Credit
Cash
Asset
Decrease
Credit
Explanation:
Purchase of merchandise is an expense for the organization. Purchases was made for cash which
is asset and also on credit which creates liability. Increase in expense (purchases) recorded as
debit with total amount of purchases Rs25,000, increase in liability (accounts payable) recorded
as credit with the amount of liability Rs.15,000 and decrease in asset (cash) recorded as credit
with the amount of cash paid Rs.10,000. An entry with more than one debit or more than one
credit is known as compound entry.
Date
January 13
General Journal
Particulars
P/R
Purchases
Accounts payable
Cash
(To record the purchase of goods for cash and on
credit)
Debit
25,000
Credit
15,000
10,000
Example # 6:
January 25:
Cash paid to supplier Rs.10,000.
Solution:
Step # 1
Step # 2
Step # 3
Step # 4
Accounts Payable
Liability
Decrease
Debit
Cash
Asset
Decrease
Credit
Explanation:
Payment made to supplier decreases the liability of the organization and also decreases the
cash. Decrease in liability (accounts payable) recorded as debit and decrease in asset (cash)
recorded as credit.
General Journal
Date
Particulars
P/R
Debit
Credit
January 25 Accounts payable
10,000
Cash
10,000
(To record the cash paid to supplier)
Sameer Hussain
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General Journal, General Ledger & Trial Balance
Chapter # 4
Example # 7:
January 28:
Deposited cash into bank Rs.5,000
Solution:
Step # 1
Step # 2
Step # 3
Step # 4
Bank
Asset
Increase
Debit
Cash
Asset
Decrease
Credit
Explanation:
Deposit in bank account increases the bank account of the organization and decreases the cash
in the office. Cash and bank both are assets. Increase in asset (bank) recorded as debit and
decrease in asset (cash) recorded as credit.
General Journal
Date
Particulars
P/R
Debit
Credit
January 28 Bank
5,000
Cash
5,000
(To record the cash deposited into bank)
Example # 8:
January 31:
Salaries paid to the employees Rs.8,000 by cheque.
Solution:
Step # 1
Step # 2
Step # 3
Step # 4
Salaries Expense
Expense
Increase
Debit
Bank
Asset
Decrease
Credit
Explanation:
Salaries are expense for the organization which are paid through bank. Payment of salaries
increases the expense and decrease the bank account. Increase in expense (salaries expense)
recorded as debit and decrease in asset (bank) recorded as credit.
General Journal
Date
Particulars
P/R
Debit
Credit
January 31 Salaries expense
8,000
Bank
8,000
(To record the payment of salaries expense)
SOME POSSIBLE GENERAL JOURNAL ENTRIES
1.
2.
Owner invested cash and furniture in the business:
Cash
Debit (with the amount of cash invested)
Furniture
Debit (with the amount of furniture)
Capital
Credit (with the total amount of investment)
Explanation:
Cash and furniture both are assets. Investment in business is known as capital. Assets in the
business are increasing and capital is also increasing. Increase in asset (cash and furniture)
recorded as debit and increase in owner’s equity (capital) recorded as credit.
Paid insurance in advance for one year:
Prepaid insurance
Debit (with the amount of insurance)
Cash
Credit (with the amount of cash paid)
Explanation:
Insurance paid in advance is known as prepaid and all prepaid are treated as asset.
Increase in asset (prepaid insurance) is recorded as debit and decrease in asset (cash)
recorded as credit.
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Sameer Hussain
General Journal, General Ledger & Trial Balance
Chapter # 4
3.
Purchased merchandise for cash:
Purchases
Debit (with the amount of merchandise purchased)
Cash
Credit (with the amount of cash paid)
Explanation:
Purchase of goods is treated as expense and purchases was made against cash which
reduces cash. Increase in expense (purchases) is recorded as debit and decrease in asset
(cash) is recorded as credit.
4.
Sold merchandise for cash and on account:
Cash
Debit (with the amount of cash received)
Accounts receivable
Debit (with the amount of receivable)
Sales
Credit (with the amount of total sales)
Explanation:
Merchandise sold for cash increases the cash and sold on credit increases the receivable.
Cash and accounts receivable both are assets. Sales of merchandise increases the revenue
of the organization. Increase in assets (cash and accounts receivable) is recorded as debit
and increase in revenue (sales) recorded as credit.
5.
Received cash from customers:
Cash
Debit (with the amount of cash received)
Accounts receivable
Credit (with amount of decrease in receivable)
Explanation:
Cash collection from customer increases the cash and decreases the accounts receivable.
Increase in asset (cash) is recorded as debit and decrease in asset (accounts receivable) is
recorded as credit.
6.
Purchased merchandise on account:
Purchases
Debit (with the amount of merchandise purchased)
Accounts payable
Credit (with the amount of payable)
Explanation:
Purchase of merchandise is expense and purchase on credit increases the liability
(accounts payable). Increase in expense (purchases) is recorded as debit and increase in
liability (accounts payable) is recorded as credit.
7.
Sold merchandise on account:
Accounts receivable
Debit (with the amount of accounts receivable)
Sales
Credit (with the amount of sales)
Explanation:
Merchandise sold on credit increases the receivable and increases the revenue of the
organization. Increase in assets (accounts receivable) is recorded as debit and increase in
revenue (sales) recorded as credit.
8.
Purchased office equipment on account:
Office equipment
Debit (with the amount of equipment)
Accounts payable
Credit (with the amount of liability)
Explanation:
Equipment is asset and accounts payable is liability. Increase in asset (office equipment) is
recorded as debit and increase in liability (accounts payable) is recorded as credit.
9.
Sold merchandise for cash:
Cash
Sales
Sameer Hussain
Debit (with the amount of cash received)
Credit (with the amount of sales)
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Chapter # 4
Explanation:
Merchandise sold for cash increases the cash. Sales of merchandise increases the revenue
of the organization. Increase in asset (cash) is recorded as debit and increase in revenue
(sales) recorded as credit.
10.
Paid cash to supplier:
Accounts payable
Debit (with the amount of decrease in liability)
Cash
Credit (with the amount of cash paid)
Explanation:
Cash payment to supplier decreases the liability as well as cash of the business. Decrease
in liability (accounts payable) is recorded as debit and decrease in asset (cash) is recorded
as credit.
11.
Purchased merchandise on credit and paid transportation on it for cash:
Purchases
Debit (with the amount of purchases)
Transportation – in
Debit (with the amount of transportation charges)
Accounts payable
Credit (with the amount of liability)
Cash
Credit (with the amount of cash paid)
Explanation:
Purchase of merchandise is expense and purchase on credit increases the liability
(accounts payable). Transportation charges is also expense. Increase in expense
(purchases and transportation – in) recorded as debit, increase in liability (accounts
payable) is recorded as credit and decrease in cash is recorded as credit.
12.
The customers returned merchandise sold on credit:
Sales return and allowance
Debit (with the amount of goods return)
Accounts receivable
Credit (with amount of decrease in receivable)
Explanation:
Goods returned by customer decreases the receivable and also decreases the revenue of
the business. Decrease in revenue (sales return and allowance) is recorded as debit and
decrease in asset (accounts receivable) is recorded as credit.
13.
Merchandise returned to suppliers purchased on account:
Accounts payable
Debit (with the amount of decrease in liability)
Purchase return and allowance
Credit (with the amount of goods returned)
Explanation:
Goods returned to supplier decreases the liability and also decreases the expense.
Decrease in liability (accounts payable) is recorded as debit and decrease in expense
(purchase return and allowance) is recorded as credit.
14.
Opened a bank account:
Bank
Debit (with the amount of cash deposited into bank)
Cash
Credit (with the amount of cash deposited)
Explanation:
Depositing cash into bank increases the bank account and decreases the cash. Bank and
cash both are assets. Increase in asset (bank) is recorded as debit and decrease in another
asset (cash) is recorded as credit.
15.
Paid salary by cheque:
Salaries expense
Bank
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Debit (with the amount of salaries)
Credit (with the amount of cheque issued)
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Sameer Hussain
General Journal, General Ledger & Trial Balance
Chapter # 4
Explanation:
Salaries are expense which are paid through cheque. Increase in expense (salaries
expense) is recorded as debit and decrease in asset (bank) is recorded as credit.
16.
Paid for advertising:
Advertising expense
Debit (with the amount of advertising)
Cash
Credit (with the amount of cash paid)
Explanation:
Advertising is expense. Increase in expense (advertising expense) is recorded as debit and
decrease in asset (cash) is recorded as credit.
17.
Purchased office supplies on account:
Office supplies
Debit (with the amount of office supplies)
Accounts payable
Credit (with the amount of liability)
Explanation:
Office supplies are assets. Increase in asset (office supplies) is recorded as debit and
increase in liability (accounts payable) is recorded as credit.
18.
Owner purchased gold ring from business cash:
Drawings
Debit (with the amount of cash for personal use)
Cash
Credit (with the amount of cash drawn)
Explanation:
Assets withdraw for personal use of owner is treated as drawing which reduces owner’s
equity of the business. Decrease in owner’s equity (drawings) is recorded as debit and
decrease in asset (cash) is recorded as credit.
19.
Cash sales of which certain amount was deposited into bank:
Cash
Debit (with the amount of cash left on hand)
Bank
Debit (with the amount of cash deposited into bank)
Sales
Credit (with the amount of total sales)
Explanation:
Cash sales increases the cash and revenue. Certain part of cash deposited into bank will
increase the bank account. Both cash and bank account are increasing and revenue is also
increasing. Increase in assets (cash and bank) are recorded as debit and increase in
revenue (sales) is recorded as credit.
20.
Purchased merchandise giving cash and cheque:
Purchases
Debit (with the total amount of purchases)
Cash
Credit (with the amount of cash paid)
Bank
Credit (with the amount of cheque issued)
Explanation:
Purchases for cash and by cheque decreases the cash and bank account. Increase in
expense (purchases) is recorded as debit and decrease in assets (cash and bank) are
recorded as credit.
21.
Paid to supplier by cheque full settlement of his account (availed discount):
Accounts payable
Debit (with the amount of decrease in liability)
Bank
Credit (with the amount of cheque issued)
Purchase discount
Credit (with the amount of discount availed)
Explanation:
Amount paid to supplier less than the actual amount decrease the liability and bank
account and result in purchase discount. Decrease in liability (accounts payable) is
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General Journal, General Ledger & Trial Balance
Chapter # 4
recorded as debit, decrease in asset (bank) is recorded as credit and decrease in expense
or contra expense (purchase discount) is recorded as credit.
22.
Received a cheque in full settlement of customer’s account (allowed discount):
Cash
Debit (with the amount of cheque received)
Sales discount
Debit (with the amount of discount allowed)
Accounts receivable
Credit (with amount of decrease in receivable)
Explanation:
Cheque received from customer but not deposited into bank is treated as cash. Amount
received less than the actual amount results in sales discount. Receiving cheque increases
the cash. Increase in asset (cash) is recorded as debit, decrease in revenue or contra
revenue (sales discount) is recorded as debit and decrease in asset (accounts receivable)
is recorded as credit.
23.
Deposited customer’s cheque into bank:
Bank
Debit (with the amount deposited into bank)
Cash
Credit (with the amount deposited into bank)
Explanation:
Cheque depositing into bank increases the bank account and decreases the cash on hand
as it was initially recorded as cash when cheque was received. Increase in asset (bank) is
recorded as debit and decrease in another asset (cash) is recorded as credit.
24.
Owner withdrew cash and merchandise for personal use:
Drawings
Debit (with the total amount of withdrawals)
Cash
Credit (with the amount of cash withdrawal)
Purchases
Credit (with the amount of goods withdrawal)
Explanation:
Assets withdraw for personal use of owner is treated as drawing which reduces owner’s
equity of the business. Decrease in owner’s equity (drawings) is recorded as debit,
decrease in asset (cash) is recorded as credit and decrease in expense (purchases) is
recorded as credit.
ILLUSTRATION # 1:
(General Journal)
2004 Regular & Private – BIEK
Mr. Maaz started business with cash investment of Rs.500,000. He completed the following
transactions.
a) He acquired a shop by paying Rs.36,000 as advance rent for a year.
b) Purchased furniture for shop Rs.64,000.
c) Purchased merchandise for cash Rs.200,000.
d) Sold merchandise for cash Rs.200,000.
e) Purchased merchandise on account from Mr. Zaid Rs.150,000.
f) Sold merchandise on account to Mr. Obaid Rs.150,000.
g) Paid Rs.100,000 to Mr. Zaid.
h) Received Rs.120,000 from Mr. Obaid.
i) Paid salaries Rs.10,000.
j) Withdrew cash Rs.15,000 for personal use and also took merchandise for personal use
at cost Rs.7,000.
REQUIRED
Record the above transaction in General Journal of Mr. Maaz in proper form.
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Sameer Hussain
General Journal, General Ledger & Trial Balance
Chapter # 4
Solution # 1:
Date
a)
b)
c)
d)
e)
f)
g)
h)
i)
j)
k)
MR. MAAZ
GENERAL JOURNAL
FOR THE MONTH OF _______
Particulars
Cash
Capital
(To record the investment by owner in the business)
Prepaid shop rent
Cash
(To record the rent paid in advance for shop)
Shop furniture
Cash
(To record the furniture purchased for cash)
Purchases
Cash
(To record the merchandise purchased for cash)
Cash
Sales
(To record the merchandise sold for cash)
Purchases
Accounts payable (Mr. Zaid)
(To record the goods purchased on account)
Accounts receivable (Mr. Obaid)
Sales
(To record the goods sold on credit)
Accounts payable (Mr. Zaid)
Cash
(To record the cash paid to supplier)
Cash
Accounts receivable (Mr. Obaid)
(To record the cash received from customer)
Salaries expense
Cash
(To record the salaries paid)
Drawings
Cash
Purchases
(To record the cash and goods withdrew by owner for
personal use)
P/R
Debit
500,000
Credit
500,000
36,000
36,000
64,000
64,000
200,000
200,000
200,000
200,000
150,000
150,000
150,000
150,000
100,000
100,000
120,000
10,000
120,000
10,000
22,000
15,000
7,000
GENERAL LEDGER
Ledger accounts are maintained to get the latest or accurate balance of each and every account
because ledger account is prepared on individual basis; we post all transactions from general
journal to general ledger account. There are two sides of ledger account. Left side is used for
debit and right for credit amount of that particular account. After the completion of posting, we
just calculate the balance of every account.
Posting:
Sameer Hussain
The accounting procedure for putting the amounts recorded in the
journal into the ledger accounts.
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General Journal, General Ledger & Trial Balance
Chapter # 4
Footing:
The process of calculating the balance of an account. The debits and
credits are totaled, and the two are combined to get the balance.
Balancing refers to the difference between the totals on the debit side,
and the totals on the credit side of the account. The account balance
always belongs to the greater side. The account balance is entered on
the lesser side at the end of the month as a balance carried down. This
may be written as ‘balance c/d’. When the account is reopened the first
Balancing:
day of the following month the same balance is entered on the
opposite side as a balance brought down. This may be written as
“balance b/d.’ If the debit side exceeds the credit side, the account is
said to have a ‘debit balance’. If the credit side exceeds the debit side,
the account is said to have a ‘credit balance.’
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Standard form general ledger.
Skeleton form general ledger (T – accounts).
Self – balancing form.
Format of Skeleton Form (T – Account):
Name of Account
Format of Standard Form:
Date
Particulars
P/R
Name of Account
Amount
Date
Particulars
P/R
Amount
Credit
Balance
Format of Self – Balancing Form:
Date
Invoice No.
Name of Account
Particulars
P/R
Debit
Explanation:
Following is an illustrated example of General Journal entries made by a business:
Date
a)
b)
c)
GENERAL JOURNAL
FOR THE MONTH OF _______
Particulars
Cash
Capital
(To record the investment by owner in the business)
Shop furniture
Accounts payable
(To record the furniture purchased on account)
Accounts payable
Cash
(To record the cash paid to supplier)
P/R
Debit
200,000
Credit
200,000
50,000
50,000
10,000
10,000
From the above General Journal entries, General Ledger is prepared as under:
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Sameer Hussain
General Journal, General Ledger & Trial Balance
Chapter # 4
(a)
Capital
Cash
200,000 (c)
Balance b/d
200,000
190,000
Balance c/d
(b)
(c)
Capital
(a)
200,000
200,000
Accounts payable
Shop Furniture
50,000
Balance b/d
50,000
50,000
Cash
Balance c/d
Accounts payable
Balance c/d
10,000
190,000
200,000
Cash
200,000
Balance b/d
200,000
200,000
Balance c/d
Accounts Payable
10,000 (b)
Shop furniture
40,000
50,000
Balance b/d
50,000
50,000
50,000
50,000
40,000
From the above entries, four ledger accounts are prepared (1) cash (2) capital (3) furniture (4)
accounts payable. Left hand side of an account is debit and right side is credit.
 In the first entry, cash is debited so Rs.200,000 is posted on the left hand side of cash
account and capital is credited so Rs.200,000 is posted on the right hand side of capital
account.
 In the second entry, furniture is debited so posted on the left hand side of furniture
account with Rs.50,000 and accounts payable is credited so posted on right hand side of
accounts payable account as Rs.50,000.
 In the third entry, accounts payable is debited so posted on the left hand side of payable
account with Rs.10,000 and cash is credited and posted on the right side of cash account
with Rs.10,000.
 This step is known as posting means transferring data from journal to ledger.
 After posting, accounts totaled are required. Cash account is debited with Rs.200,000
and credited with Rs.10,000 so debited side is more than credit side. Debit total is
recorded on both side (debit and credit side). Similarly capital has only credit posting so
credit amount is posted on both sides. This step is known as footing.
 Difference between debit and credit is recorded on the deficit side of account like cash
accounts has a low balance on credit side 190,000. This balance is called c/d balance and
transferred this balance to the next period on the other side i.e debit side known as b/d
balance. This step is known as balancing.
TRIAL BALANCE
A Trial Balance is a statement of ledger account balances within a ledger, at particular instance.
Its main purpose is to check mathematical/arithmetic accuracy of accounting. It is not an
account. After the closing process of footing and balancing of each and every account, and all the
ledger accounts are summarized into a statement known as trial balance. Since equal amounts
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General Journal, General Ledger & Trial Balance
Chapter # 4
of debit and credit are recorded in the ledger accounts of each transaction, therefore, the sum of
debit and credit must be equal, if the balances had been extracted correctly.
Format of Trial Balance:
Name of Business
Trial Balance
For the Month Ended _____
Title of Accounts
P/R
Debit
Credit
ILLUSTRATION # 2:
1991 Regular & Private – BIEK
(General Journal, General Ledger & Trial Balance)
On February 1, 1991 Aslam started a business with a cash investment of Rs.100,000. He
completed the following transactions during the month:
February:
3:
Purchased merchandise on credit from Esajee Rs.25,000.
5:
Purchased sales equipment on account from Babar & Co. Rs.20,000.
15:
Sold merchandise for cash Rs.10,000 and on credit Rs.15,000.
20:
Paid to Esajee Rs.15,000.
25:
Collection from customers Rs.10,000.
28:
Paid office salaries Rs.3,000.
REQUIRED
a) Record the above transactions in the General Journal.
b) Post the entries from General Journal into the ledger using T-accounts.
c) Balance the accounts and prepare pre-closing trial balance in proper form on February
28, 1991 with complete title and column headings.
Solution # 2:
Date
1.Feb
ASLAM
GENERAL JOURNAL
FOR THE MONTH OF FEBRUARY 1991
Particulars
P/R
Cash
Capital
(To record the investment by owner)
3.Feb
Purchases
Accounts payable (Esajee)
(To record the goods purchased on account)
5.Feb
Sales equipment
Accounts payable (Babar & Co.)
(To record the sales equipment purchased on
account)
15.Feb Cash
Accounts receivable
Sales
(To record the goods sold for cash and on account)
20.Feb Accounts payable (Esajee)
Cash
(To record the cash paid to supplier)
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Debit
100,000
Credit
100,000
25,000
25,000
20,000
20,000
10,000
15,000
25,000
15,000
15,000
Sameer Hussain
General Journal, General Ledger & Trial Balance
Chapter # 4
Date
25.Feb Cash
Particulars
P/R
Accounts receivable
(To record the cash collected from customers)
28.Feb Office salaries expense
Cash
(To record the salaries paid)
1.Feb
Capital
15.Feb Sales
25.Feb Accounts receivable
1.Mar
b/d balance
15.Feb Sales
1.Mar
5.Feb
1.Mar
b/d balance
Cash
b/d balance
20.Feb Cash
28.Feb c/d balance
28.Feb c/d balance
3.Feb
A/P (Esajee)
1.mar
b/d balance
Sameer Hussain
Debit
10,000
3,000
Accounts Receivable
15,000 25.Feb Cash
28.Feb c/d balance
15,000
5,000
Sales Equipment
20,000
28.Feb c/d balance
20,000
20,000
Accounts Payable
15,000 3.Feb Purchases
30,000 5.Feb Sale equipment
45,000
1.Mar b/d balance
15,000
3,000
102,000
120,000
10,000
5,000
15,000
20,000
20,000
25,000
20,000
45,000
30,000
Cash
100,000
b/d balance
100,000
100,000
Purchases
25,000
28.Feb c/d balance
25,000
25,000
Page 59
10,000
3,000
ASLAM
GENERAL LEDGER
Cash
100,000 20.Feb A/P (Esajee)
10,000 28.Feb Salaries expense
10,000 28.Feb c/d balance
120,000
102,000
Capital
1.Feb
100,000
100,000
1.Mar
Credit
25,000
25,000
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General Journal, General Ledger & Trial Balance
Chapter # 4
28.Feb c/d balance
28.Feb Cash
1.Mar
NO.
1
2
3
4
5
6
7
8
b/d balance
Sales
15.Feb Cash/A/R
25,000
25,000
1.Mar b/d balance
25,000
25,000
25,000
Salaries Expense
3,000
28.Feb c/d balance
3,000
3,000
3,000
3,000
ASLAM
TRIAL BALANCE
FOR THE MONTH OF 28 FEBRUARY 1991
PARTICULARS
P/R
DEBIT
Cash
102,000
Accounts receivable
5,000
Sales equipment
20,000
Accounts payable
Capital
Purchases
25,000
Sales
Shop rent expense
3,000
Total
155,000
CREDIT
30,000
100,000
25,000
155,000
Explanation of Solution # 2:
Trial balance shows the balances of every account in active use. Cash ledger account
showed a brought down balance on debit side Rs.102,000. This balance is posted in trial
balance on debit side. Brought down balances of every account are recorded in trial
balance. Similarly brought down balances of others accounts are recorded in trial
balance. After recording all balances of ledger accounts in trial balance, the total balance
of debit equals to the total balance of credits (Rs.155,000).
ILLUSTRATION # 3:
(General Journal of Servicing Business)
2002 Private – BIEK
During the first month of operation, Mr. Jamil’s business completed the following transactions.
a) On March 1, 2001, Mr. Jamil invested cash Rs.25,000/- in the business.
b) On March 2, 2001, he bought Rs.6,000/- supplies for the shop.
c) On March 3, 2001, he paid Rs.5,000/- rent for the month of the March for the shop.
d) On March 5, 2001, he purchased the equipments for Rs.12,000/-.
e) Up to March 16, 2001, receipt from services rendered to various clients Rs.8,250/-.
f) On March 30, 2001, payment of salaries to the office assistant Rs.3,600/-.
g) On March 31, 2001, receipt from services rendered during two weeks’ period ended
March 31, amounted to Rs.9,300/-.
h) On March 31, 2001, Mr. Jamil withdrew Rs.8,000/- cash and supplies worth Rs.500/- for
his personal use.
REQUIRED
Record the above transactions in the General Journal Standard form.
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General Journal, General Ledger & Trial Balance
Chapter # 4
Solution # 3:
Date
1.Mar
2.Mar
3.Mar
5.Mar
16.Mar
30.Mar
31.Mar
31.Mar
MR. JAMIL
GENERAL JOURNAL
FOR THE MONTH OF MARCH 2001
Particulars
P/R
Cash
Capital
(To record the investment by owner)
Supplies
Cash
(To record the purchase of supplies for cash)
Prepaid rent
Cash
(To record the rent paid for the month of March)
Equipment
Cash
(To record the purchase of equipment for cash)
Cash
Service income
(To record the service income received)
Salaries expense
Cash
(To record the cash paid to office assistant)
Cash
Service income
(To record the cash received against service)
Drawings
Cash
Supplies
(To record the cash and supplies withdrew by
owner for personal use)
ILLUSTRATION # 4:
(General Ledger with Opening Balances)
Debit
25,000
Credit
25,000
6,000
6,000
5,000
5,000
12,000
8,250
12,000
8,250
3,600
3,00
9,300
9,300
8,500
8,000
500
2011 Private – BIEK
The following is the trial balance of Shah Latif & Co. on March 31, 2011:
Cash
Rs.20,000 Accounts payable
Rs.30,000
Accounts receivable
Rs.50,000 Salaries payable
Rs.15,000
Merchandise inventory
Rs.60,000 Bank loan
Rs.25,000
Equipment
Rs.40,000 Capital
Rs.100,000
Rs.170,000
Rs.170,000
The following transactions were performed during first fortnight of April:
April 05:
Paid outstanding salaries.
April 06:
Collected 1/2 of accounts receivable.
April 07:
Sold merchandise for cash Rs.20,000 and on account Rs.30,000.
April 10:
Paid 1/3 of the accounts payable.
April 14:
Made additional investment depositing cash into the bank Rs.25,000.
REQUIRED
Prepare the ledgers with opening balances on April 01, and post the above transactions directly
there-in. Foot and balance the accounts. Also prepare trial balance.
Sameer Hussain
Page 61
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General Journal, General Ledger & Trial Balance
Chapter # 4
Solution # 4:
1.Apr.11
6.Apr.11
7.Apr.11
Balance
Accounts receivable
Sales
1.May.11
b/d balance
14.Apr.11 Capital
1.May.11
b/d balance
1.Apr.11
7.Apr.11
Balance
Sales
1.May.11
b/d balance
1.Apr.11
1.May.11
Balance
b/d balance
1.Apr.11
Balance
1.May.11
b/d balance
10.Apr.11 Cash
30.Apr.11 c/d balance
5.Apr.11 Cash
30.Apr.11 c/d balance
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SHAH LATIF & CO.
GENERAL LEDGER
Cash
20,000 5.Apr.11
25,000 10.Apr.11
20,000 30.Apr.11
65,000
40,000
Salaries payable
Accounts payable
c/d balance
Bank
25,000
30.Apr.11 c/d balance
25,000
25,000
Accounts Receivable
50,000 6.Apr.11
30,000 30.Apr.11
80,000
55,000
15,000
10,000
40,000
65,000
25,000
25,000
Cash
c/d balance
25,000
55,000
80,000
Merchandise Inventory
60,000
30.Apr.11
60,000
60,000
c/d balance
60,000
60,000
Equipment
40,000
30.Apr.11
40,000
40,000
c/d balance
40,000
40,000
Accounts Payable
10,000 1.Apr.11 Balance
20,000
30,000
1.May.11 b/d balance
30,000
30,000
20,000
Salaries Payable
15,000 1.Apr.11 Balance
15,000
15,000
15,000
Bank Loan
1.Apr.11 Balance
25,000
25,000
1.May.11 b/d balance
Page 62
25,000
25,000
25,000
Sameer Hussain
General Journal, General Ledger & Trial Balance
Chapter # 4
30.Apr.11 c/d balance
30.Apr.11
c/d balance
Capital
1.Apr.11
Balance
125,000 14.Apr.11 Bank
125,000
1.May.11 b/d balance
Sales
7.Apr.11
50,000
50,000
1.May.11
100,000
25,000
125,000
125,000
Cash/Acc. receivable
50,000
b/d balance
50,000
50,000
Explanation of Solution # 4:
 For preparing cash ledger account, beginning balance is posted on debit side
Rs.20,000 on April 1. After posting balances, the transactions related to cash are
posted in cash ledger account. On April 5, cash paid for salaries and recorded as
credit by Rs.15,000. On April 6, Rs.25,000 collected and recorded as debit. On
April 7, cash received for sale of goods recorded as debit Rs.20,000. On April 10,
Rs.10,000 paid to supplier and recorded as credit. After posting all transactions
in cash account, it showed a balance of Rs.40,000.
 Bank account did not have any balance at beginning. On April 14, bank accounts
is debited by Rs.25,000 for additional investment. No further transactions are
recorded in bank account. Hence, the ending balance is Rs.25,000 as per bank
ledger account.
 Merchandise inventory showed a beginning balance of Rs.60,000 and no
transactions were performed regarding merchandise. Therefore, ending balance
remains same Rs.60,000.
 Remaining accounts were prepared in the same manner.
Sameer Hussain
Page 63
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General Journal, General Ledger & Trial Balance
Chapter # 4
PRACTICE QUESTIONS
Question # 1:
1990 Regular & Private – BIEK
Transactions of Nasir & Company are listed below:
a) Nasir the proprietor invested into the business cash Rs.10,000 and Furniture valued at
Rs.6,000.
b) Purchased merchandise for cash Rs.6,000.
c) Purchased merchandise on credit from Khalid Rs.2,000.
d) Sold merchandise for cash Rs.8,000.
e) Sold merchandise on credit to Rashid Rs.4,000.
f) Returned merchandise to Khalid Rs.300.
g) Merchandise returned by Rashid Rs.200.
h) Paid shop rent Rs.150 in cash.
i) Opened current account with the bank with Rs.10,000.
j) Withdrew from the bank Rs.4,000 for private expenses of the proprietor.
REQUIRED
a) Entries in the General Journal to record the above transactions.
b) T-accounts in the ledger complete with all postings.
c) Trial Balance after all the postings has been done.
Question # 2:
2010 Regular & Private – BIEK
On August 1, 2009, Mr. Ahsan invested Rs.500,000 in the business. He completed the following
transactions during the month.
(a) Aug.06:He paid shop rent in advance for one year Rs.12,000.
(b) Aug.10:He purchased merchandise worth Rs.310,000 cash.
(c) Aug.17:He sold merchandise for cash Rs.210,000 and on account Rs.80,000.
(d) Aug.29:He received Rs.60,000 from customers.
REQUIRED
Record the above transactions in the standard form of General Journal.
Question # 3:
2012 Regular – BIEK
The following transactions were completed by Almas Brothers during April:
April 1: Proprietor commenced business with cash Rs.50,000; office furniture Rs.40,000.
April 3: Deposited cash into bank Rs.30,000.
April 4: Purchased merchandise Rs.8,000; paid Rs.3,000 and issued a note for the balance.
April 7: Sold merchandise on account for Rs.12,000.
April 16: Proprietor withdrew cash Rs.8,000 and merchandise worth Rs.2,000.
April 18: Paid advertising expense by cheque Rs.4,500.
REQUIRED
Record the above transactions in the standard form of General Journal.
Question # 4:
2012 Private – BIEK
On January 1, 2012 Mr. Usman started business with a cash investment of Rs.25,000 and office
furniture worth Rs.35,000.
January 05:
Opened a bank account with cash Rs.10,000.
January 07:
Purchase merchandise for Rs.12,000 from Jawaid and Sons paying cash Rs.2,000
and balance on credit.
January 09:
Returned merchandise worth Rs.2,500 to Jawaid and Sons.
January 11:
Cash sales Rs.8,000 of which 50% of the amount deposited into bank.
January 31:
Paid salaries Rs.2,000 by cheque.
REQUIRED
Record the above transactions in the standard form of General Journal.
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General Journal, General Ledger & Trial Balance
Chapter # 4
Question # 5:
2001 Regular & Private – BIEK
A business was started on March 1, 2001 with the investment of cash Rs.50,000 and office
equipment worth Rs.50,000 and the following transactions were completed during the month:
March 2:
Purchased merchandise for cash Rs.25,000 and on account Rs.15,000.
March 3:
Purchased office supplies for cash Rs.2,000.
March 12:
Purchased furniture on account Rs.5,000.
March 18:
Sold merchandise for cash Rs.20,000.
March 20:
Paid to suppliers Rs.10,000.
March 25:
Sold merchandise on account Rs.5,000.
March 30:
Paid rent for the month Rs.1,500.
REQUIRED
a) Record the above transactions in the General Journal.
b) Post the transactions to “T” accounts.
c) Balance the accounts and prepare a trial balance.
Question # 6:
2003 Regular – BIEK
On March 1, 2003 Majid started a business with cash investment of Rs.80,000/-. He completed
the following transactions during the month:Mar.4:
Purchased merchandise on account from Ahmed Rs.40,000.
Mar.8:
Sold merchandise for cash Rs.8,000 and on credit to Bashir Rs.15,000.
Mar.15:
Paid cash to Ahmed Rs.10,000.
Mar.20:
Received cash from Bashir Rs.7,000.
Mar.28:
Paid office rent Rs.12,000.
REQUIRED
a) Record the above transactions in the General Journal.
b) Post the entries from the Journal into the Ledger using skeleton ‘T’ accounts.
c) Balance the accounts and prepare pre-closing Trial Balance on March 31, 2003.
Question # 7:
2005 Regular & Private – BIEK
M/s. Nadia Traders started business on March 1, 2005 with cash investment of Rs.500,000. She
completed the following transactions during the month.
Mar 02, 05
Paid shop rent in advance for ten months Rs.60,000.
Mar 04, 05
Purchased computer for the business worth Rs.25,600 in cash.
Mar 05, 05
Purchased goods on account for Rs.110,000.
Mar 06, 05
Paid for advertising Rs.17,000.
Mar 10, 05
Purchased merchandise for cash Rs.25,000.
Mar 19, 05
Purchased office supplies for Rs.50,000 on account.
Mar 20, 05
Sold merchandise on credit for Rs.10,000.
Mar 22, 05
Proprietor purchased gold ring from business cash worth Rs.5,000.
Mar 25, 05
Sold goods for cash Rs.100,000.
Mar 29, 05
Paid salary to the salesman Rs.7,000.
Mar 31, 05
Opened a bank account with Rs.50,000.
REQUIRED
Record the above transactions in skeleton form in the books of M/s Nadia Traders.
Question # 8:
2006 Regular & Private – BIEK
M/s. Khalid Traders started business on March 1, 2006 with a cash investment of Rs.700,000.
They completed the following transactions during the month:
Mar.2:
Paid shop rent in advance for one year Rs.120,000.
Mar.4:
Purchased furniture for shop on cash Rs.50,000.
Mar.5:
Opened a bank account with Rs.200,000.
Mar.7:
Purchased a computer for the business worth Rs.50,000.
Sameer Hussain
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Chapter # 4
Mar.10:
Mar.15:
Mar.18:
Mar.20:
Mar.23:
Purchased merchandise for cash Rs.150,000.
Sold merchandise for cash Rs.150,000.
Purchased merchandise on credit Rs.50,000.
Sold merchandise on credit for Rs.80,000.
Proprietor withdrew cash and merchandise for Rs.10,000 and Rs.5,000
respectively.
Paid for advertising Rs.25,000.
Paid salary to the salesman Rs.15,000 by cheque.
Mar.27:
Mar.31:
REQUIRED
Record the above transactions in the General Journal of M/s. Khalid Traders.
Question # 9:
1996 Regular & Private – BIEK
The following transactions were completed by Jan & Company, a sole trader, during the month
of January 1996:January 1:
Commenced business with an investment of cash Rs.50,000 and merchandise
worth Rs.40,000.
January 2:
Purchased merchandise on account from Naim & Co. for Rs.30,000 and paid
carriage thereon Rs.400.
January 4:
Purchased shop furniture for cash Rs.4,000.
January 5:
Withdrew merchandise worth Rs.400 and cash Rs.500 for personal use.
January 8:
Cash sales for the day Rs.6,000.
January 15:
Purchased sales supplies for cash Rs.800.
January 20:
Paid insurance expense in cash Rs.1,000.
January 22:
Sold merchandise on account to Munim Rs.8,000.
January 23:
Munim returned defective goods worth Rs.700.
January 24:
Paid rent expense in cash Rs.1,000.
January 29:
Paid to Naim on account cash Rs.15,000.
January 30:
Received cash from Munim on account Rs.4,000.
January 31:
Paid for salaries expense Rs.1,000 cash.
REQUIRED
a) Set up necessary T-accounts in the ledger of Jan & Company and record the above
transactions direct into the accounts affected, completing the double entry in each case.
b) Foot the accounts in pencil and enter the balances in appropriate columns.
c) Test the accuracy of your postings by taking out a pre-closing Trial Balance on January
31, 1996 having complete title and column headings.
Question # 10:
1997 Regular & Private – BIEK
The following transactions were completed by Aslam Brothers during February 1997:February 1:
Proprietor made investment of Rs.8,000 in the business.
February 2:
Deposited cash into bank Rs.5,000.
February 7:
Purchased merchandise for cash Rs.16,000.
February 15: Sold merchandise for cash Rs.27,000.
February 20: Sold old furniture on account for Rs.12,000.
February 24: Received a cheque Rs.9,800 in full settlement of Rs.10,000.
February 26: Withdrew cash from bank for business use Rs.15,000.
February 28: Salaries paid in cash Rs.9,000.
February 28: Proprietor withdrew cash Rs.8,000 and merchandise worth Rs.2,000.
REQUIRED
Record the transactions given above in the standard form of General Journal. Give explanation
below each entry.
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General Journal, General Ledger & Trial Balance
Chapter # 4
Question # 11:
2002 Regular – BIEK
During the month of March of the current year Mr. Zia, a sole business consultant completed the
following transactions:
March 1.
Zia started his business with the cash investment of Rs.25,000.
March 2.
Bought Rs.6,000 supplies for his office.
March 3.
Paid Rs.5,000 rent for the month of March for the office.
March 5.
Purchased office equipment for Rs.12,000. This amount was to be paid in three
equal installments at the end of March, April and May.
March 16.
Receipt from consultation service was Rs.8,250.
March 30.
Payment of salary to the assistant was Rs.3,600.
March 31.
Paid the first installments on equipment.
March 31.
Receipt from the service rendered during the last two weeks ended March 31,
amounted to Rs.9,300.
March 31.
Zia withdrew Rs.8,000 cash for his personal use.
REQUIRED
(i) Prepare General Journal entries to record the above transactions, giving explanation
below each entry. Set up T-accounts. Prepare a Trial Balance dated March 31.
Question # 12:
2007 Regular & Private – BIEK
st
A trader started business on January 1 , 2007 by investing cash Rs.60,000 and equipment worth
Rs.40,000. During the month the following transactions were completed:
(i)
Purchased merchandise on credit Rs.40,000 and paid cartage on it Rs.2,000 cash.
(ii)
Sold merchandise on credit Rs.18,000 & for cash Rs.10,000
(iii)
The customers returned merchandise Rs.2,000 sold on credit and the merchandise
returned to suppliers worth Rs.3,000.
(iv)
Paid cash to suppliers Rs.10,000 and cash collected from customers Rs.15,000.
(v)
Cash paid to employees Rs.6,000 and cash used by the proprietor Rs.3,000.
REQUIRED
Record the above transactions in the General Journal.
Question # 13:
2008 Regular & Private – BIEK
The following transactions took place during the month of January, 2008 by Mr. Saad:
January 01:
Mr. Saad invested Rs.50,000 cash.
January 02:
Purchased office furniture on account from Daniyal Furniture Store Rs.10,000.
January 04:
Purchased merchandise on account from Asim Rs.15,000.
January 06:
Paid office rent for the month of January Rs.5,000.
January 09:
Sold merchandise for Rs.10,000 cash.
January 14:
Sold merchandise on account to Irfan Rs.12,000.
January 16:
Merchandise purchased for cash Rs.6,000.
January 20:
Paid Rs.5,000 cash to Asim.
January 25:
Withdrew cash Rs.3,000 for private use.
January 31:
Paid Rs.2,000 to the City Government for trade taxed.
REQUIRED
(i)
Record the above transactions in the standard form in General Journal.
(ii)
Post the above transactions in T-Accounts
Question # 14:
2009 Regular & Private – BIEK
The following are transactions relating to the business of Mr. Babar for the month of January
2009.
January:
5.
Mr. Babar invested cash in the business Rs.200,000.
10.
Purchased merchandise on account Rs.20,000.
Sameer Hussain
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Chapter # 4
12.
18.
20.
Returned defective merchandise to the supplier Rs.2,000.
Sold merchandise on account Rs.15,000.
Granted an allowance of Rs.1,000 to the customer due to supply of defective
merchandise.
25.
Paid rent for January, Rs.5,000.
REQUIRED
Record the above transactions in the standard form of General Journal.
Question # 15:
2011 Regular – BIEK
Following is the General Journal of M/S. Amber Traders:
M/S. AMBER TRADERS
GENERAL JOURNAL
Date
Particulars
P/R
Debit
Credit
Jan. 1, 11
Cash
60,000
Capital
60,000
Jan. 4, 11
Prepaid shop rent
80,000
Cash
80,000
Jan. 5, 11
Bank
10,000
Cash
10,000
Jan. 6, 11
Purchases
25,000
Cash
5,000
Accounts payable
20,000
Jan. 10, 11 Cash
10,000
Bank
10,000
Sales
20,000
Jan. 12, 11 Drawings
5,000
Bank
5,000
REQUIRED
Write down a transaction for each general entry recorded in the General Journal of Amber
Traders.
Question # 16:
2009 Regular & Private – BIEK
The following transactions were completed by Khurram & Co. during February 2009.
February:
2.
Khurram started business with a cash investment of Rs.100,000.
9.
Purchased furniture for use in business on credit for Rs.25,000.
10.
Returned defective furniture worth Rs.1,000 to the supplier.
15.
Paid salaries expense Rs.5,000.
28.
Received commission income Rs.12,000.
28.
Received utilities bills of Rs.3,000 to be paid by Mar.10.
REQUIRED
a) Enter the above transactions in the ledger accounts in skeleton ‘T’ form.
b) Foot and balance the accounts in pencil.
c) Prepare a trial balance on February 28.
Question # 17:
2010 Regular & Private – BIEK
The following transactions were completed by Mr. Asif during the month of October 2009.
(a) Oct.01: Asif started business with cash investment Rs.400,000.
(b) Oct.05: He purchased machine for use in business worth Rs.200,000.
(c) Oct.10: He received service income Rs.30,000.
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Chapter # 4
(d) Oct.10: He paid rent for three months from October 2009 to December 2009 of
workshop @ Rs.3,000 per month.
(e) Oct.31: He paid salaries to employees Rs.10,000.
REQUIRED
(i)
Post the above transaction in the ledger accounts in skeleton T form.
(ii)
Prepare Trial Balance on October 31, 2009 after footing and balancing.
Question # 18:
2014 Private – BIEK
Mr. Akbar started his business on January 1, 2014 by investing cash Rs.90,000 and equipment
worth Rs.50,000. During the month, the following transactions were completed:
January:
5.
Purchased merchandise on credit Rs.50,000 from Asim Traders and paid Rs.2,000 for
transportation on it.
7.
Sold merchandise on credit Rs.16,000 and for cash Rs.15,000 to Mr. Khalid.
15.
Received a cheque of Rs.15,000 from Mr. Khalid in full settlement of his account.
20.
Paid by cheque Rs.49,500 to Asim Traders in full settlement of their account.
25.
Deposited the cheque in the bank, received on January 15.
30.
Mr. Akbar purchased a mobile phone for his personal use from the business cash
Rs.5,000.
31.
Paid rent in advance by a cheque of Rs.10,000 for office building.
REQUIRED
Prepare General Journal entries.
Question # 19:
2014 Regular – BIEK
The following transactions were completed by Mr. Saad, a sole trader:
i)
Invested Rs.500,000.
ii) Opened a bank account with Rs.350,000.
iii) Purchased goods from Mr. Ali on credit for Rs.45,000 and cash Rs.33,000.
iv) Sold goods on account for Rs.55,000 and cash Rs.23,000.
v)
Paid for insurance Rs.26,000 through cheque.
vi) Purchased computer for Rs.32,000.
vii) Received commission in advance through a cheque of Rs.12,000.
viii) Issued a cheque of Rs.44,500 to Mr. Ali in full settlement of his account of Rs.45,000.
REQUIRED
a) Make entries in General Journal.
b) Posting, footing and balancing in T – accounts.
Question # 20:
2012 Private – BIEK
Mr. Humza started business on April 01, 2012 in the name of Humza Land Company:
April 02:
Mr. Humza invested cash Rs.100,000 in the business.
April 06:
Purchase land and a small office building at a total price of Rs.97,500 of which
Rs.64,000 was applicable to land and Rs.33,500 to the building. The term of
purchase required a cash payment of Rs.19,500 and the issuance of the note
payable for Rs.78,000.
April 15:
Sold one quarter of land at its cost of Rs.16,000 to Mr. Irfan, issued a note of
Rs.16,000 in a series of five equal monthly installments of Rs.3,200 each
beginning April 30.
April 30:
Received Rs.3,200 first installment from Mr. Irfan.
REQUIRED
Post the above transactions directly in the ledger accounts (T – accounts).
Sameer Hussain
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General Journal, General Ledger & Trial Balance
Chapter # 4
Question # 21:
1998 Regular & Private – BIEK
The following are some of the transactions of Haqqani Store for the month of January 1998:January 01:
Haqqani invested Rs.280,000 cash for his business.
January 01:
Purchased shop building for cash Rs.100,000.
January 04:
Purchased shop furniture for cash Rs.15,000.
January 05:
Paid transporting expense Rs.150.
January 07:
Purchased merchandise on account from (Jamali & Sons) Rs.17,800 and paid
transport Rs.160.
January 10:
Sold merchandise for cash Rs.14,350.
January 13:
Sold merchandise on account to (Patel & Co.) Rs.8,500.
January 16:
Purchased shop equipment for cash Rs.8,000.
January 19:
Paid for merchandise purchased Rs.13,600.
January 22:
Received on account of cash sales Rs.4,500.
January 26:
Paid for transporting Rs.120.
January 27:
Received cash from (Patel & Co.) Rs.5,000.
January 28:
Paid cash to (Jamali & Sons) Rs.15,000.
January 30:
Paid salaries to employees for the month Rs.4,500.
REQUIRED
Post the above transactions in the T-form of ledger account of Haqqani Store.
Question # 22:
2011 Regular – BIEK
Following balances have been taken from the books of Faisal, a sole trader as on Dec. 31, 2010:
Cash Rs.25,000, Bank Rs.15,000, Sales Rs.27,000, Accounts receivable Rs.12,000, Accounts
payable Rs.25,000, Bills payable Rs.15,300, Merchandise Rs.135,300, Capital Rs.120,000.
During January 2011, following transactions were completed:
Jan. 05: Paid cheque to supplier Rs.10,000.
Jan. 06: Received cheque from customer Rs.9,500.
Jan. 07: Paid cheque Rs.5,000 and cash Rs.10,300 against bills payable.
Jan. 27: Paid Rs.3,000 for his son’s school fee.
REQUIRED
Prepare a Trial Balance of Mr. Faisal as on January 31, 2011.
Question # 23:
2013 Private – BIEK
The trial balance of Habib Co. showed the following balances as on December 31, 2012:
Cash
Rs. 10,000
Accounts receivable
Rs.
5,000
Merchandise inventory
Rs.
3,000
Accounts payable
Rs.
8,000
Habib’s Capital
Rs. 10,000
The transactions for the month of December 2012 were as follows:
Dec. 05, 2012: Purchase merchandise on account from Rana & Co. for Rs.7,000.
Dec. 08, 2012: Returned merchandise to Rana & Co. Rs.1,100.
Dec. 12, 2012: Sold merchandise to Mumtaz & Co. on account for Rs.22,000.
Dec. 15, 2012: Sold merchandise for cash Rs.15,000.
Dec. 17, 2012: Merchandise was returned by Mumtaz & Co. Rs.1,200.
Dec. 18, 2012: Purchased office equipment on account for Rs.5,000.
Dec. 20, 2012: Opened a bank account with Rs.10,000.
Dec. 24, 2012: Withdrew merchandise Rs.2,000 and cash Rs.3,000 for personal use.
Dec. 31, 2012: Paid cash for salary expense Rs.2,000.
REQUIRED
Enter the opening balances and post the above transactions in General Ledger.
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Sameer Hussain
General Journal, General Ledger & Trial Balance
Chapter # 4
Question # 24:
2013 Regular – BIEK
On December 31, 2012 the ledger of Naveed Hashmi Traders shows the following balances after
closing process:
Cash Rs.64,000; Merchandise inventory Rs.136,000; Accounts payable Rs.20,000; Capital
Rs.180,000.
During the month of January 2013, he made the following entries in his journal:
NAVEED HASHMI TRADERS
Date
Particulars
P/R
Debit
Credit
January 02, 2013 Accounts payable
14,000
Cash
14,000
January 05, 2013 Purchases
17,500
Accounts payable
10,000
Cash
7,500
January 11, 2013 Cash
12,000
Sales
12,000
January 18, 2013 Accounts payable
2,800
Purchases returns and allowance
2,800
January 26, 2013 Rent expenses
14,000
Cash
14,000
REQUIRED
Maintain Cash account (number 11) and Accounts payable (number 21) in the General Ledger.
Question # 25:
2011 Private – BIEK
Following are the first six transactions of Miqdad Traders, posted in respective ledger account:
Cash (Rs.)
Capital – Miqdad (Rs.)
Jan. 1, 2011 50,000 Jan. 20, 2011 1,000
Jan. 1, 2011 50,000
Jan. 25, 2011 3,000
Jan. 4. 2011
Purchases
5,000
Accounts Payable – Ahmed
Jan. 4, 2011
Jan. 25, 2011
5,000
1,000
Sales
Jan. 15, 2011
4,000
Accounts Receivable – Mansoor
Jan. 15, 2011 4,000
Jan. 20, 2011
Prepaid Rent
1,000
Jan. 25, 2011
Office Supplies
4,000
REQUIRED
Record the effects shown in above ledgers (postings) in standard form of General Journal.
Question # 26:
2014 Private – BIEK
The following are balances taken from the ledger of Qadri Brothers on March 31, 2014:
Cash Rs.?; Accounts receivable Rs.10,000; Merchandise inventory Rs.6,500; Sales Rs.45,000;
Prepaid rent Rs.4,000; Purchase discount Rs.1,500; Service income Rs.4,000; Office equipment
Rs.10,000; Accounts payable Rs.4,000; Purchases Rs.20,000; Supplies expense Rs.1,500; Salaries
expense Rs.14,000; Miscellaneous expense Rs.1,500; Sales return and allowance Rs.2,000;
Capital Rs.30,000.
REQUIRED
Prepare a Trial Balance with proper heading, arranging the accounts in sequence.
Sameer Hussain
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General Journal, General Ledger & Trial Balance
Chapter # 4
MULTIPLE CHOICE QUESTIONS (MCQS)
1)
a)
b)
c)
d)
The collection of accounts receivable is recorded by a:
Credit to Cash and a credit to Accounts Receivable
Debit to Cash and a debit to Accounts Receivable
Credit to Cash and a debit to Accounts Receivable
Debit to Cash and a credit to Accounts Receivable
2)
Transactions that affect the accounting equation are initially recorded in which of
the following?
Trial balance
b) T – account
c) Journal
d) Ledger
a)
3)
a)
The process of transferring information from the journal to the ledger, in order to
update the ledger, is called which of the following?
Posting
b) Recording
c) Journalizing
d) Accounting
4)
a)
c)
If an asset is debited, which of the following might also have occurred?
A credit to owner’s equity account
b) A credit to another asset
A credit to liability
d) All of the above
5)
The following trial balance is incorrect?
Debit
Credit
Inventory
Rs.10,000 Bank overdraft
Rs.15,000
Capital
Rs.15,000 Accounts payable
Rs.30,000
Fixed assets
Rs.25,000 Cash
Rs.2,000
Accounts receivable
Rs.10,000 Investment
Rs.13,000
Sales
Rs.100,000 Purchases
Rs.50,000
Operating expenses
Rs.50,000
Rs.160,000
Rs.160,000
Which of the following groups of items, if moved to the correct side of the trial balance, will
correct it?
a) Capital, investments, cash, sales, purchases and operating expenses
b) Capital, cash, investments
c) Capital, bank overdraft
d) Sales, purchases, operating expenses
6)
a)
c)
Double entry implies that:
Recording entries in journal
Recording two aspects of every transaction
7)
a)
c)
The process of recording is done:
Two times a year
Frequently during the accounting period
8)
a)
Every business transaction affects at least:
One account
b) Two accounts
c)
9)
A journal entry in which two or more accounts are debited or credited is referred
as:
Journal entry
b) Single entry
c) Additional entry
d) Compound entry
a)
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b)
d)
b)
d)
Page 72
Recording entries in ledger account
Recording every transaction in books
Once a year
At the end of accounting period
Three accounts
d)
Infinite accounts
Sameer Hussain
General Journal, General Ledger & Trial Balance
Chapter # 4
10)
a)
The term 2/10, n/30 implies that ______ % discount will be given if the payment is
made within _____ days or full amount is receivable within 30 days:
2, 10
b) 10, 2
c) 10, 30
d) 3, 15
11) Goods returned by customer should be debited to:
a) Sales account
b) Purchase return account
c) Sales return account
d) Expense account
12) Which of the following will be debited if a business purchases goods on credit?
a) Cash
b) Debtor
c) Creditor
d) Purchases
13) The standard format of journal does not include which of the following?
a) Assets column
b) Date column
c) Description column
d) Amount column
14) In which of the following orders data is entered in journal?
a) Alphabetical order
b) Numeric order
c) Bullets order
d) Chronological order
15)
a)
c)
Which of the following accounts will be credited if a company purchases building
for cash?
Capital account
b) Fixed asset account
Building account
d) Cash account
16) A chart of account generally starts with which of the following types of accounts?
a) Assets account
b) Liability account
c) Revenue account
d) Expense account
17)
a)
A brief explanation recorded below every entry in general journal is commonly
known as:
Narration
b) Summary
c) Other information d) None of these
18) The base for preparing trial balance is:
a) Journal
c) Ledger account
b)
d)
Cash account
Balance sheet
19) Which of the following statement is incorrect regarding capital account?
a) Debit increases the capital balance
b) Credit increases the capital balance
c) Fresh capital increases the capital balance
d) Net income increases the capital balance
20) Which of the following is the closing balance of a ledger account?
a) Balance c/d
b) Balance b/d
c) Balance e/d
d)
Balance f/c
21) Trial balance is prepared to check accuracy of:
a) Ledger accounts balances
b) Balance sheet balances
c) Income statement balances
d) Cash flow statement balances
22)
a)
c)
The account will be credited when a typewriter is sold that has been used in the
office is:
Office equipment account
b) Cash account
Sales account
d) Purchase account
Sameer Hussain
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General Journal, General Ledger & Trial Balance
Chapter # 4
23) The process of equalizing the two sides of an account is called as:
a) Balancing
b) Posting
c) Journalizing
d)
24)
a)
b)
c)
d)
None of these
The purpose of trial balance is to:
Determine arithmetic accuracy of double entry
Show financial position at particular date
Show performance of a business
None of these
25) Which account should be debited for recording advance payment of rent?
a) Rent expense account
b) Rent payable account
c) Prepaid rent account
d) Unearned rent account
26)
a)
b)
c)
d)
Posting means:
Making an entry in general journal
Making an entry in special journal
Transferring an entry from a journal to ledger account
Determining balance of an account
27) The act of recording a transaction in General Journal is called:
a) Posting
b) Narration
c) Closing
d)
28) The following best describes a trial balance:
a) Financial position of the business
b)
c) All entries in the journal
d)
Journalizing
A special account
List of balances of the ledger account
29) The act of totaling of money columns of an account is called:
a) Posting
b) Ruling
c) Footing
d)
Balancing
30) These accounts are affected by the transaction credit sales:
a) Cash and sales
b) Sales only
c) Accounts receivable and sales
d) Accounts payable and sales
31) This account is debited to record merchandise returned to supplier:
a) Accounts payable
b) Accounts receivable
c) Purchases
d) Purchase returns
32) Footing is made just:
a) After recording
b) After balancing
c)
Before balancing
d)
Before recording
33) An entry with more than one debit or more than one credit is called:
a) Double entry
b) Contra entry
c) Single entry
d) Compound entry
34) List of balances of accounts having debit and credit columns is called:
a) Special journal
b) Trial balance
c) Schedule of accounts receivable
d) General journal
35)
a)
b)
c)
d)
The term “Balancing” means to:
Tally both sides of trial balance
Tally both sides of balance sheet
Reconcile cash book and bank statement balance
Calculate and write account balances
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General Journal, General Ledger & Trial Balance
Chapter # 4
36) A ledger consists of:
a) Financial statement
c) A group of accounts
37)
a)
b)
c)
d)
38)
a)
b)
c)
d)
b)
d)
Journal entries
Special journal
The following comments each relate to the recording of journal entries. Which
statement is true?
For any given journal entry, debit must exceed credits
It is customary to record credits on the left and debits on the right
The chart of accounts reveals the amount to debit and credit to the affected accounts
Journalisation is the process of converting transactions and events into debit/credit
format
The trial balance:
Is a formal financial statement
Is used to prove that there are no errors in the journal or ledger
Provides a listing of every account in the chart of accounts
Provides a listing of the balance of each account in active use
39) Which item will appear as a debit balance in the ledger accounts?
a) Capital
b) Bank overdraft
c) Accounts payable
d)
Inventory
40)
a)
b)
c)
d)
The basic sequence in the accounting process can best be described as:
Transaction, journal entry, source document, ledger account, trial balance
Source document, transaction, ledger account, journal entry, trial balance
Transaction, source document, journal entry, trial balance, ledger account
Transaction, source document, journal entry, ledger account, trial balance
41)
Owner introduces her car into her business.
Which part of the business’ accounting equation will change?
Assets and capital
b) Capital and profit
Liabilities and assets
d) Capital and liabilities
a)
c)
42)
a)
b)
c)
d)
Which of the following is the correct posting to record a cash purchase of Rs.300
from supplier?
Debit purchases Rs.300; credit accounts payable Rs.300
Debit accounts payable Rs.300; credit purchases Rs.300
Debit purchases Rs.300; credit cash Rs.300
Debit cash Rs.300; credit purchases Rs.300
43) The following are the year end balances in Sam’s ledgers:
Sales
Rs.43,000 Purchases
Equipment
Rs.22,000 Overdraft
Inventory
Rs.19,000 Capital
What is the trial balance total?
a) Rs.43,000
b) Rs.57,000
c) Rs.63,000
Rs.16,000
Rs.8,000
Rs.6,000
d)
Rs.114,000
44) Rs.500 cash taken from office and deposited into bank is entered as:
a) Debit cash Rs.500; credit bank Rs.500
b) Debit bank Rs.500; credit cash Rs.500
c) Debit expense Rs.500; credit cash Rs.500
d) Debit payable Rs.500; credit bank Rs.500
Sameer Hussain
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General Journal, General Ledger & Trial Balance
Chapter # 4
45)
a)
b)
c)
d)
Is it true that the trial balance totals should agree?
No, there are sometimes good reasons why they differ
Yes, except where the trial balance is extracted at the year end
Yes, always
No, because it is not a balance sheet
46)
a)
b)
c)
d)
If we take goods for own use we should:
Debit drawings account; credit purchases account
Debit purchases account; credit drawings account
Debit drawings account; credit merchandise inventory account
Debit sales account; credit merchandise inventory account
47) Journal is prepared in:
a) Columnar form
c) Horizontal form
b)
d)
Vertical form
Raw form
48) Trial balance shows:
a) Complete accuracy
c) Arithmetical accuracy
b)
d)
Whole accuracy
None of these
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