Journalize the following transactions of Mr. Rahim:
14 Paid Babu Bros. by cheque 1,000
16 Sold goods to Raj & Co. 1,000
20 Bought goods from Swamy & Bros. 1,400
23 Bought goods for cash from Nathan & Co. 450
24 Sold goods to Palani 700
26 Raj & Co., paid on account 500
27 Paid Swamy & Bros. by cheque in full settlement 1,370
31 Paid salaries 500
Rent is due to Satyan but not yet paid 200
Answer (2)
Journalizing is the process of recording transactions in a journal. Each transaction is recorded in a journal entry with a debit and a credit to accounts. Let's journalize the given transactions one by one:
14th - Paid Babu Bros. by cheque $1,000
Debit: Accounts Payable - Babu Bros. $1,000
Credit: Bank $1,000
Reason: Cheque payment decreases the bank balance (credit) and settles part of the payable to Babu Bros. (debit).
16th - Sold goods to Raj & Co. $1,000
Debit: Accounts Receivable - Raj & Co. $1,000
Credit: Sales Revenue $1,000
Reason: Sale increases accounts receivable (debit) since Raj & Co. will pay later, and increases sales revenue (credit).
20th - Bought goods from Swamy & Bros. $1,400
Debit: Purchases $1,400
Credit: Accounts Payable - Swamy & Bros. $1,400
Reason: Purchase increases the purchases account (debit) and establishes a liability to Swamy & Bros. (credit).
23rd - Bought goods for cash from Nathan & Co. $450
Debit: Purchases $450
Credit: Cash $450
Reason: Cash purchase increases the purchases account (debit) and decreases the cash on hand (credit).
24th - Sold goods to Palani $700
Debit: Accounts Receivable - Palani $700
Credit: Sales Revenue $700
Reason: Sale on credit to Palani increases accounts receivable (debit) and sales revenue (credit).
26th - Raj & Co. paid on account $500
Debit: Bank $500
Credit: Accounts Receivable - Raj & Co. $500
Reason: Receiving payment from Raj & Co. increases bank balance (debit) and reduces the receivable (credit).
27th - Paid Swamy & Bros. by cheque in full settlement $1,370
Debit: Accounts Payable - Swamy & Bros. $1,400
Credit: Bank $1,370
Credit: Purchase Discounts $30
Reason: Full settlement, including a $30 discount, reduces the accounts payable (debit), decreases bank balance (credit), and accounts for a purchase discount (credit).
31st - Paid salaries $500
Debit: Salaries Expense $500
Credit: Cash $500
Reason: Salary payment increases salary expense (debit) and decreases cash on hand (credit).
Rent is due to Satyan but not yet paid $200
Debit: Rent Expense $200
Credit: Rent Payable $200
Reason: Rent due is recognized as an expense (debit) and establishes a liability (credit) since it has not yet been paid.
Mr. Rahim's transactions involve various debits and credits, reflecting payments made, sales recorded, purchases, and expenses. Each entry impacts his accounting ledger by adjusting his assets, liabilities, and equity accordingly. This organized process ensures accurate financial records and compliance with accounting principles.
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