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Semester “Fall 2012”

“Financial Accounting-MGT101”

Concept to be Tested: Recording Journal Entries

Discussion Question

From the following journal entries, you are required to identify the mistake therein and also support your answer with logical reason.

 

1.      Machinery sold for Rs. 10,000 has been recorded as:

 

Cash A/C                    10,000

Sales A/C                    10,000

 

2.      Furniture Showroom purchased furniture costing Rs. 8,000 recorded as:

 

Furniture A/C              8,000

Cash A/C                    8,000

 

Note: Your comments should be according to requirement and not be more than 300 words.

 

Instructions:

Read the following instructions before giving your comments on GDB:

1.      Use the font style “Times New Roman” and font size “12”.

2.      Your answer should be relevant to the topic i.e. clear and concise.

3.      Do not copy or exchange your answer with other students.  Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.

4.      Books, websites and other reading material may be consulted before posting your comments but copying or reproducing the text from books, websites and other reading materials is strictly prohibited. Such comments will be marked as Zero (0).

5.      Obnoxious or ignoble answer should be strictly avoided.

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Replies to This Discussion

Please Discuss here about this GDB.Thanks

Our main purpose here discussion not just Solution

furniture   8000 Dr.

                  cash      8000Cr. 

Here is no mistake,this entry is correct beacuse 

a furniture is an asset and it is in increased in this case,so furniture is debit.cash is an assest and decrese in asset is credit,in this case cash is decreased,so it is credit.

o mere bhai rectifier entry main aap ny furniture ko credit kis hassab sy kia hy wo assset hy aur purchased kia hy to increase ho ga na.......,2   aur Purchase account merchandise k liye use hota hy wo bebit kesy hua  it is incorrect  ?

Aur pahle entrey main machinary to credit he hy per sales kesy aap ny debit kar di sales to sirf cr. hoti hy debit sirf kuch entires main hoti hy for example charity ya free sample otherwise is any were cr.

APP KI BOTH ENTRIES INCORRECT HAIN /////

ur ans is this Answer:
Journal Entry No. 1 Entry No. 1
Identification of Mistake:
Machinery a/c was credited instead of Sales a/c with 10,000.
Logical Reason:
We have sold a Fixed Asset so that as per the accounting rule "decrease in assets is credit" Machinery a/c recorded on the credit side
J Journal Entry No. 2
Identification of Mistake:
Purchases a/c was debited instead of Furniture a/c with 8,000.
Logical Reason:
Because furniture was bought by a Furniture Showroom and it is bought for resale purpose not to retain in the business so that it is assumed as purchases of that particular business

Fasiha Pervez

I agree with you.. Good!

yar tum to naraz he ho gay ho    

Friend agar mind kar gay ho to i am extremely sorry for that  

I will agree to it in first case as machinery has it's own specific account so any change in machinery should be recorded under the head of machinery...but for sales i think it will come under cash head rather than sales.

i agree with u brother

thnx buddy..!!

yes i agree

Question

 

From the following journal entries, you are required to identify the mistake therein and also support your answer with logical reason.

 

1.      Machinery sold for Rs. 10,000 has been recorded as:

 

Cash A/C                    10,000

 

Sales A/C                    10,000

 

2.      Furniture Showroom purchased furniture costing Rs. 8,000 recorded as:

 

Furniture A/C              8,000

 

Cash A/C                    8,000

 

Note: Your comments should be according to requirement and not be more than 300 words.

 

 

 

__________________________________________________________________________________________________________________________________

 

Answer No 1

 

Machinery is the Tangible Fixed Asset of the business so accordingly any proceed from the sales of these assets should be recorded as disposal of assets instead of recording it as Revenue (Sales).

 

 

Cash / Bank A/C        10,000                                                                                   Dr.

 

TO Machinery A/C            10,000                                                   Cr.

 

__________________________________________________________________________________

 

Answer No 2

 

If the business of showroom is not specifically to deal with the sales and purchase of Furniture then it should be recorded as Tangible Fixed Asset as it has already been recorded.

 

Therefore, if the sole business of showroom is only dealing in the sales and purchase of Furniture items for the purpose of generating revenue and earnings of profit then the correct entry of this transaction shall be as follows.

 

 

 Purchases A/C         8,000                                                                                      Dr.

 

TO Cash / Bank A/C        8,000                                                      Cr.

 

__________________________________________________________________________________

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