Journal Entry Problems and Solutions

Following content is "journal entry problems and solutions". Journal entry problems have been written by accountants and students like you in Accounting Education's "Ask a Question Section". After choosing some of your journal entry problems, I am trying to provide solution. I hope, it will also be helpful to new readers of accounting education and will encourage to write more journal entry problem for seeking solution.

1st Journal Entry Problem 

Investment of Rs. 10,00,000 made in the year 2009 @10% . What will be Journal entry for accrued interest. Whether TDS to be deducted on accrued interest. Please show me journal entries from the year 2009. In between there is no sale of investment..?

Santosh from India (At 6/27/2011 18:09:10)

Solution

Santosh, accrued interest means interest earned but not received. It means if in the end of 2009, we did not get this interest earning in cash, its adjustment's journal entry will pass in your books.

Accrued Interest Account Dr.  1,00,000

Interest Account Cr. 1,00,000

As per Income Tax Law, No TDS will be deducted on outstanding income, when the company will pay you interest, at that time company will deduct TDS and deposit in govt. account.


2nd  Journal Entry Problem 

Cash purchase of fixed assets are entered in which Subsidiary books.

1.Cash book OR
2.Journal Proper.

Rohit from India ( At 6/25/2011 18:26:10)

Solution 

Rohit, cash purchase of fixed assets are entered in cash book because all cash receipt and payment will only entered in cash book. We can use journal proper, if we have to pass the journal entry of credit purchase of fixed assets.

3rd  Journal Entry Problem 

Dear Sir,

An employee's salary is 40,000 pm but he was getting only 36000 pm.Thus his 4000 pm salary become liability for the company.Then what will be the journal entry for the same.

Amit from India ( At 6/22/2011 22:42:20)

Solution

Amit, It means, we have to do some adjustment in the profit and loss account and in balance sheet by passing adjusting entry.

Salary is our expenses ( Still it has not been paid in cash). So, it will be debit.

By not paying salary cash to employee, we are increasing our liability. Any increase in liability will be credit. So, outstanding salary account will debit.

Salary Account Dr. 4000

O/S Salary Account Cr. 4000



4th  Journal Entry Problem

Sir,
Prepaid fire insurance is given in trial balance as 10,000 on 30th June 2010, and it is written in adjustment, '12-month fire insurance policy was purchased on 1st March 2010, the date on which insurance coverage began. Please inform me about its solution.

M. Sharjeel from Pakistan ( At 6/22/2011 8:52:05)

Solution

Dear, there is no need that prepaid fire insurance will show in adjustment. Try to understand it practically. Suppose, your company is making final accounts on 30th June every year with help of trail balance. But, your company's accountant is very intelligent when he estimated 8 months advance payment of fire insurance policy's premium, he passed the journal entry in the books in march 2010 with 10,000. Entry was following

Prepaid Insurance Premium Account Dr. 10,000

Insurance Premium Account Cr.  10,000

After this, you accountant transfer it to ledger account and prepaid insurance premium account shows debit balance which went to the debit balance side of trail balance. That is the reason, you are seeing prepaid fire insurance premium in trail balance. Ok. Adjustments means all the transactions which happens either in the end of year or we forget to record in journal. So, often, you will see almost all adjustment outside of trail balance.



5th  Journal Entry Problem

I am saif ullah from pakistan . I am doing  M.B.A. My brother  runs a small restaurant. From one month,  he is  facing many problem  to maintain account and passing journal entries. Plz guide me that what type of technique can be utilized.  I am very thankful to u plz reply with in 2 days .

saif ullah  from pakistan ( At 6/21/2011 7:54:00)

Solution

Sorry, dear Saif Ullah, I am late to answer your question. Your brother should learn debit and credit first. This video may be helpful to your brother. I think, your brother will have Internet connect. If yes, then he can learn directly from this accounting education. 

6th  Journal Entry Problem

 If I am an accountant and one person donated books of rupees 1,00,000 to my library then how entry will be done in my accounting books.

Vaishali from India ( 6/20/2011 2:14:17)

 Solution 

First you should see what comes in your organisation. That is books, so books account will debit. Then see who is giver. But if we write that person name, it will increase your organisation's liability. But it is not increase because that person gave the books as donation. So, we can credit to donation account as revenue because all revenue will be credited.

Books Account Dr. 1,00,000

Donation Account Cr. 1,00,000