Following are some examples of translations and Journal Entries, its analysis is done on the basis

of rules of double entry system:

1. Cash brought in by proprietor as capital Rs. 30000
a) What comes in business will be debited
Cash has come in business; cash account will be debited in journal entry.
b) Who is giver will be credited
Proprietor is giver of cash to business but he has business motive and he gives the money to
business as capital.
Journal Entry
Cash Account Debit 30, 000
Proprietors capital Account Credit 30,000
2. Goods purchased on credit from Madan Lal Rs. 5,000
a) What comes in business will be debited
Goods have come in business, so its financial value will be debited with the name of purchase
account.
b) Name of person is given from whom we bought the goods on credit, so Ist rules second part
will be applied.
Who is giver, will be credited.
Madan lal is giver, so its account will be credited.
Purchase account debit 5000
Madan Lal account credit 5000
3. Furniture purchased for cash Rs. 10000
a) What comes in business will be debited. In this transaction, furniture came in business, so we
will open furniture account in the debit side of journal entry.
b) Cash is also asset and we paid for purchasing of furniture. 2nd rules second part will be
applied.
Furniture Account Debit 10,000
Cash Account Credit 10,000
4. Goods sold on credit to Dev Raj Rs. 1600
a) Dev Raj is receiver of goods, so his personal account will be debited.
b) Goods go out, so, goods or sale account will be credited.

Dev Raj Account Debit 1600

Sale Account Credit 1600
5. Goods purchased for cash Rs. 4500
a) Goods come in, so goods or purchase account will be debited
b) Cash goes out, so cash account will be credited.
Purchase account debit 4500
Cash account credit 4500
6. Goods sold for cash Rs. 2100
a) Cash comes in, so cash account will be debited.
b) Goods go out, so goods or sale account will be credited.
Cash account debit 2100
Sale account credit 2100
7. Rent paid for shop to landlord 3000
a) Rent is an item of expenses, so it will be debited.
b) Cash is an item of asset and it goes out, so it will be credited.
Rent Account Debit 3000
Cash Account Credit 3000
8. Commission received in cash 2000
a) Cash comes in, so cash account will be debited.
b) Commission is an item of income, so commission account will be credited.
Cash Account Debit 2000
Commission Account Credit 2000
9. Cash deposited into bank 5000
a) Bank is receiver of cash, so bank account will be debited.
b) Cash goes out, so cash account will be credited.
Bank Account Debit 5000
Cash Account Credit 5000
10. Cash withdrawn from bank for office use Rs. 2000

a) Cash comes in the business, so cash account will be debited.

b) Bank is the giver, so bank account will be credited.
Cash Account Debit 2000
Bank Account Credit 2000
11. Cash drawn by proprietor from business for personal use Rs. 3000
a) Proprietor is the receiver of cash, but business will give him as drawing which is decrease in
his capital, so proprietors drawing account will be debited.
b) Cash goes out, so cash account will be credited.
Drawing Account Debit 3000
Cash Account Credit 3000
12. Goods given as charity Rs. 1000
a) Charity is an expense of business, so it will be debited.
b) Goods go out, so goods or purchase account will be credited.
Charity Account Debit 1000
Purchase Account Credit 1000
13. Bad Debts written off Rs. 500
a) Bad debt is loss of business due to not paying the amount by our debtors, so it will be debited.
b) There is decrease in debtor. We are applying what goes from business, debtor is also our
asset, if he does not pay, and it means this asset has gone from business, so its account will be
credited.
Bad Debt Account Debit 500
Debtor Account Credit 500
14. Bad debts recovered in cash Rs. 300
a) Cash comes in, so cash account will be debited.
b) Bad debts recovered are an income, so its account will be credited.
Cash Account Debit 300
Bad Debts Recovered Account Credit 300
15. Carriage paid on machinery ( expenses on purchase of asset ) Rs. 1000
a) Carriage on purchase of machinery is part of cost of machinery, so machinery account will be
debited.

b) Cash goes out, so cash account will be credited.

Machinery Account Debit 1000
Cash Account Credit 1000
16. Depreciation on fixed assets Rs. 500
a) Depreciation on fixed assets is the loss of business, and every loss will be debited.
b) There is a decrease in asset and we will apply what goes from business on it. So, asset
account will be credited.
Depreciation Account Debit 500
Fixed Asset Account Credit 500
17. Carriage paid on the behalf of buyer Rs. 1000
a) This is not our expenses, but this is increase our current asset and its name is debtor, so we
will apply what comes in rule on it.
b) Cash goes out, so cash account will be credited.
Debtor account Debit 1000
Cash Account Credit 1000
18. Goods given as free samples Rs. 1500
a) Goods are given for advertising, advertising is an expense of business, and so advertising
account will be debited.
b) Goods go out at the cost price, so goods or purchase account will be credited.
Advertising Account Debit 1500
Purchase Account Credit 1500
19. Interest allowed on capital Rs. 600
a) Interest is an expense of business, so it will be debited.
b) There is an increase in the amount of capital. Capital is liability account, so increase in the
amount of capital will be also shown in the credit side of journal entry.
Interest on capital Account Debit 600
Capital Account Credit 600
20. Interest charged on drawings Rs. 500
a) Decrease in capital or increase in drawing will be debited.
b) Interest on drawing is an income of business.

Drawing Account Debit 500

Interest on drawing account Credit 500
21. Bank charges or interest charged by bank Rs. 200
a) Bank charges are the expenditures of business, so it will be debited.
b) There is decrease in bank balance, so bank account will be credited.
Bank charge Account Debit 200
Bank account Credit 200
22. Goods lost by fire Rs. 800
a) Goods lost by fire are the loss of business, so loss by fire account will be debited.
b) There is decrease in goods or stock at cost, so purchase account will be credited.
Loss by Fire Account Debit 800
Purchase Account Credit 800
23. Goods insured and a claim is admitted by insurance company in full or in part.
a) Insurance company will be our debtor. Transaction has increase in debtors because we have to
get money from insurance company. So, this account will be debited.
b) Decrease in loss by fire, so this account will be credited.
Insurance company Account Debit XXXX
Loss by Fire Account Credit XXXX
24. Loan taken Rs. 1,00,000
a) Cash comes in, so cash account will be debited.
b) Lender is giver, so his loan account will be credited.
Cash Account Debit 1, 00,000
Lenders loan Account Credit 1,00,000
25. Interest paid on loan. Rs. 1000
a) Interest is an expense of business, so it will be debited.
b) Cash goes out, so it will be credited.
Interest on loan Account Debit 1000
Cash Account Credit 1000

26. Interest on loan due but not paid in cash. Rs. 500
a) Interest is an expense of business, so it will be debited.
b) Increase in creditors will be credited in journal entry.
Interest on loan Account Debit 500
Loan or Creditor Account 500
27. Investment purchased Rs. 50,000
a) Asset in the form of investment comes in, so investment account will be debited.
b) Cash goes out, so its account will be credited.
Investment Account Debit 50000
Cash Account Credit 50000
28. Cash stolen from office. Rs. 6000
a) Cash stolen from office is loss of business, so this account will be debited.
b) Cash goes out, so its account will be credited.
Loss by Theft Account Debit 6000
Cash Account Credit 6000
29. Cash paid to a creditor in full settlement ( When cash discount is received) Amount due to
Madan Lal Rs. 5000 paid him Rs. 4950 in full settlement.
a) Decrease in creditors = Debit
b) Decrease in cash = Credit
c) Discount received is income of business = credit
Madan Lal Account Debit 5000
Cash Account Credit 4950
Discount Received Account Credit 50
30. Cash received from a debtor in full settlement (When cash discount is allowed). Amount
receivable from Dev Raj Rs. 1600, received from him Rs. 1570.
a) Increase in cash = Debit
b) Discount allowed is the loss of business = Debit
c) Decrease in debtors = credit
Cash Account Debit 1570

Discount Allowed Account Debit 30

Dev Raj Account Credit 1600
Following are the journal entries of transactions and financial events relating to depreciation. All
these journal entries have been passed on the basis of double entry system.
1. A company bought machinery for Rs. 10000 and depreciation rate is 10%.
a) Depreciation on fixed assets is the loss of business, and every loss will be debited.
b) There is a decrease in asset and we will apply what goes from business on it. So, Machinery
(Fixed asset) account will be credited.
Depreciation Account Debit 1000
Machinery Account Credit 1000
2. Financial year is 1st Jan. to 31st Dec. Above same machinery has been sold at Rs. 5000 on
31st march 2011. This machinery was purchased on 1 Jan. 2010. Depreciation rate is 10% and it
is charged with diminishing balance method.
Above entry will be same in this case from 1 Jan. 2010 to 31st DEC. 2010. After this, we are
telling you the procedure.
a) Depreciation is loss and with this up to sale date. It will be debit
b) Value of machinery will decrease, it will be credit.
Depreciation Account Debit 225
Machinery Account Credit 225
3. Rs. 10000 depreciation transfer to Profit and Loss account.
a) Profit and loss account complete the double entry record. All expenses and loss will be debit in
its account. With this, all expenses and losses account will be closed. So, profit and loss account
will be debit in this journal entry.
b) Depreciation account will be credit because with this depreciation account will be closed.
Please do not create doubt about showing depreciation loss in credit side. This entry is the part
of closing of accounts at the end of year.
Profit and Loss Account Debit 10000
Depreciation Account Credit 10000
4. A company bought machinery for Rs. 10000 and depreciation rate is 10%. Provision for
depreciation account is maintained.
a) Depreciation on machinery is the loss of business, and every loss will be debited.
b) Provision for depreciation account will be credit because we are maintaining it. It means, we
will not decrease the original cost of machinery at any time except time of sale. So, provision for
depreciation will be just like liability of business. Like other liabilities, this liability account will
also credit.

Depreciation Account Debit 1000

Provision for Depreciation Account Credit 1000
5. A company bought machinery for Rs. 10000 and depreciation rate is 10%. All depreciation will
be transferred to accumulated depreciation account.
a) Depreciation on machinery is the loss of business, and every loss will be debited.
b) Accumulated depreciation account is just like provision for depreciation account and it will be
credit because we are collected all depreciation in the form of accumulated depreciation. It
means, we want to maintain our historical cost of machinery at any time except time of sale. So,
accumulated depreciation will be contra account. So, it will be credited.
Depreciation Account Debit 1000
Accumulated Depreciation Account Credit 1000
6. You sell the Car at Rs. 5,00,000. Its accumulated depreciation is Rs. 50,000. Its original cost is
Rs. 600000.
a) cash account will be debited because cash comes in the business. Everything which comes in
the business will be debit under second rule of double entry system.
b) Accumulated depreciation account will be debit because with this, liability will decrease.
Accumulated depreciation was our liability.
c) Profit and loss account will be debit because this is the loss on sale car.
d) Original Cost of car will be credit because car goes from business.
Cash Account Debit 500000
Accumulated Depreciation Account Debit 50000
Profit and Loss Account Debit 500000
Car Account Credit 600000
7. 1st April 1997, Vishal acquires a 5 year's lease for Rs. 40000. It is decided for renewal of lease
immediately after 5 years by setting up a depreciation fund. It is expected that investment will
fetch interest at 5% p.a. sinking fund table shows that RS. 0.180975 invested each year will
produce Rs. 1 at end of 5 years at 5% p.a.
Annual depreciation = 40000 X 0.180975 = Rs. 7239
a) Depreciation on lease is the loss of business, and every loss will be debited.
b) All depreciation will transfer to depreciation fund account. You know that depreciation cuts
from profit. It decrease the profit but there is no outflow. Same amount, we will transfer in
depreciation fund.
Depreciation Account Debit 7239
Depreciation Fund Account Credit 7239
(this entry will be passed five years)
When We also invest same depreciation fund money in depreciation fund investment.

a) We got investment, so depreciation fund investment account will be debit

b) Money goes from business. It means we will credit to cash account
Depreciation Fund Investment Account Debit 7239
Cash Account Credit 7239
(this entry will be passed five years)
When we receive interest on depreciation fund investment
a) We receive money of interest. So, bank or cash account will be debit.
b) Interest on depreciation fund investment account is our income. So, it will be credit
Bank Account Debit 7239 X 5% = 362
Interest on Depreciation Fund Investment Account Credit 362
(this entry will be passed five years)
8. At the expiry of the lease i.e. on 31st march, 2002, the depreciation fund investment are sold
Rs. 31205 and immediately renewed for a further period of 5 years by a payment of Rs. 44000.
Pass journal entries.
When we get cash on sale of depreciation fund investment
a) Cash will come on the sale, so cash account will be debit
b) Depreciation fund investment will go from our business, so depreciation fund investment
account will credit
Cash Account Debit 31205
Depreciation Fund Investment Credit 31205
When Profit on sale of investment will be transfer to depreciation fund account
Depreciation Fund Investment Account Debit 4
Depreciation Fund Account Credit or Profit and loss Account 4
( Entry just on the basis of balance adjustment)
9. You have one piece of property for which you originally paid Rs. 10,000. Let's also assume
after six years the property is fully depreciated and you sell it for Rs. 1,000.
We will not pass the depreciation entry because this property is fully depreciated. It means total
depreciation of its working life has been transferred to profit and loss accounts. We just show as
profit because total cost will already become nil.
Cash Account Debit Rs. 1000
Profit and Loss Account Rs. 1000

10. Provide depreciation of Rs. 20000 on Factory Machine. Pass the adjusting entry in final
accounts
a) Manufacturing account will be debit because all the expenses relating to production will be
debit in this account.
b) Depreciation account is already debited in day book. Now, this account is closed by
transferring to the debit side of manufacturing account because this is the part of production
expenses.
Manufacturing Account Debit 20000
Depreciation on Factory Machine 20000