Journal Entries and Accounting Principles

 Compound journal entries are those in which more than two accounts are affected. A compound entry may require that two or more accounts be debited or two or more accounts be credited. Suppose a business borrows money to purchase an asset, such as a building.

Business entity or separate entity concepts defines that the owner and the business are to be treated separately. 

Capital is a contribution done by the owner in business. If any interest is payable, this need to be debited to Interest expenses and credited to the capital account.

Sales of goods on cash involves cash and goods account. Both cash and goods are real account. Rule for real account says" debit what comes in". Against sale of goods cash is coming in the system, hence cash account should be debited.

A contra entry is the entry that involves both the accounts, i/e/ Cash and Bank. When cash is deposited in a bank or withdrawn from the bank for office use, such transactions will be recorded on both sides of the cash book. Thus, it affects both the columns of the cash book, i.e. the cash column as well as the bank column. Thus, an entry recorded on both sides of the cash book is known as contra entry.

Discounts are two types: 

To close the Sales account, which has a credit balance, it must be debited. The balance is transferred to the Trading account to determine gross profit.

When a claim is partly accepted, the amount accepted is debited to the Insurance Claim account, the loss not covered is debited to the Profit and Loss account, and the total value of the lost stock is credited to the Trading account.

When the full loss is recoverable, the entire amount is debited to the Insurance Claim account and credited to the Trading account to offset the loss of stock.

The total insurance is 4000. The premium for the period from April 1 to June 30 (3 months) is prepaid. Calculation: (3000 / 12) * 3 = 750. The entry to record the prepayment is to debit Prepaid Insurance and credit the Insurance expense account.

When employees receive benefits in kind, the cost is treated as part of their salary. Therefore, the Salaries/Wages account is debited, and the individual expense accounts (Meals, Water, Apartment) are credited to remove these costs from their respective expense categories.

Discount are two types , trade discount and cash discount. 

Goods returned by the business to the supplier are recorded in the Purchases Return Journal (also known as the Returns Outward Journal).

2/10 net 30, defined as the trade credit in which clients can opt to either receive a 2 percent discount for payment to a vendor within 10 days or pay the full amount (net) of their accounts payable in 30 days, is extremely common in business to business sales.

When a company purchases office equipment, the asset account (Office Equipment) increases and is debited. If it is purchased on account, the liability account (Accounts Payable) increases and is credited.

Salary to proprietor can't be paid and it is not permissible expenditure under income tax act,1961. 

In accounting and bookkeeping, a journal is a record of financial transactions in order by date. Traditionally, a journal has been defined as the book of original entry.

The essential elements of the journal entry format are as follows:

• A header line may include a journal entry number and entry date. The number is used to index the journal entry, so that it can be properly stored and retrieved from storage.
• The first column includes the account number and account name into which the entry is recorded. This field is indented if it is for the account being credited.
• The second column contains the debit amount to be entered.
• The third column contains the credit amount to be entered.
• A footer line may also include a brief description of the reason for the entry. An entry in the footer line is highly recommended, since there are so many journal entries that it is easy to forget why each entry was made.

'Wages paid' for the 'installation of machinery' should be debited to machinery account. 

Purchasing office equipment on credit should be recorded in the Journal Proper, not the Purchases Journal (which is for inventory). To correct this, we must remove the entry from Purchases and record it as an asset (Office Equipment).

When a business is commenced with multiple assets contributed as capital, all individual asset accounts (Furniture, Car, Cash) are debited to record their respective inflows, and the total sum of these values is credited to the Capital Account in accordance with the dual-aspect accounting principle.

A combined journal entry is used when multiple accounts are involved in a single transaction or when multiple transactions occur simultaneously that share the same debit or credit accounts.

The journal is known as the book of original or primary entry because transactions are recorded here chronologically before being classified in the ledger.

Transfer entries are used to move an amount from one account to another, such as transferring a balance or correcting an allocation.

When Rs 15,000 received from Karan is wrongly credited to Ravan's account, we need to reverse this by debiting Ravan to remove the wrong credit and crediting Karan to give him the correct credit. Option A shows the correct rectification entry. Note there is a typo in the option where 'Karan' appears as 'Karen'.

Book keeping is that branch of knowledge which tells us how to keep a record of financial transaction of a business. Book keeping is a clerical job. Book keeping is concerned with recording and classifying the data and accounting is concerned with interpreting and analysing of transactions.

Accounting records financial transactions in terms of a common unit of measure to ensure consistency and comparability. This unit is the monetary unit of the country where the business operates.

The operations are generally performed for business firms for e.g. ABC started business with Rs. 5 lakh and purchased goods worth Rs. 2.5 lakh is an operation of business.