Chapter 3:

RECORDING IN THE JOURNAL

Course: PRINCIPLES OF ACCOUNTING 1

Course Code: BSAC1104/BAAC 1102
Specialization: Accounting
Department of Business Studies
Contents:
1. Accounting Cycle.

2. The rule of debit and credit (Double Entry System).

3. Journal and the rules of recording business transaction in

journal book.

4. Recording business transactions in the general journal.

2
1. Accounting Cycle
 Accounting cycle is :
 a step-by-step process of : recording, classification and summarization of economic
transactions of a business.

 It generates :
 useful financial information in the form of financial statements including
income statement, statement of financial position, cash flow statement and statement
of changes in equity.

 The time period principle requires :

 that a business should prepare its financial statements on periodic basis.
 therefore accounting cycle is followed once during each accounting period.

 Accounting Cycle :
 starts : from the recording of individual transactions
and
 ends : on the preparation of financial statements and closing entries. 3
4
1. Accounting Cycle
Step 1: Analysis of Business transaction normally includes understanding the accounts that will be involved in such transaction and
its effect on such identified accounts in terms of increase and decrease.

Step 2: After analyzing the transaction in terms of accounts getting effected they are then recorded in the books of original entry
called as Journal in chronological order by following dual aspect principle.

Step 3: The journal entries are then posted to the general ledger where a summary of all transactions to individual accounts can be
seen. Towards the end of an accounting period closing balance are calculated for every individual account

Step 4: At the end of the accounting period (which may be quarterly, monthly, or yearly, depending on the company), a list is prepared
consisting of all debit and credit balances taken from the ledger accounts. Such list is called as trial balance.

Step 5: In this step adjusting entries are posted. Adjusting entries are journal entries that are made at the end of an accounting
period to adjust the accounts to accurately reflect the revenues and expenses of the current period.

Step 6: This step involves taking the adjusted balances and preparing adjusted trial balance

Step 7: On the basis of adjusted trial balance the accountants prepare the required financial statements

Step 8: In this step temporary accounts like revenue and expense accounts are closed and zeroed out for the next accounting
cycle. This is because revenue and expense accounts are income statement accounts, which show performance for a specific
period. Balance sheet accounts are permanent accounts and are not closed because they show the company’s financial position at
a certain point in time.

Step 9: In this step the accountant prepares post – closing trial balance by preparing a list of balances of ledger accounts prepared
after closing entries have been passed and posted to the ledger accounts.
5
2. Rules of Debit and Credit:
 All accounts are divided into five categories for the purposes of recording the
transactions: (a) Asset (b) Liability (c) Capital (d) Expenses/Losses, and (e)
Revenues/Gains.

 Two fundamental rules are followed to record the changes in these accounts:

For recording changes in Assets/Expenses (Losses):

• “Increase in asset is debited, and decrease in asset is credited.”
• “Increase in expenses/losses is debited, and decrease in expenses/losses is credited.”

For recording changes in Liabilities and Capital/Revenues (Gains):

• “Increase in liabilities is credited and decrease in liabilities is debited.”
• “Increase in capital is credited and decrease in capital is debited.”
• “Increase in revenue/gain is credited and decrease in revenue/gain is debited.”
6
2. Rules of Debit and Credit

Debit/Credit Rules
Accounting Equation Accounts
Owner’s
Assets = Liabilities + Capital + Revenue - Expense - Drawings

Debit

Credit
3. Journal: Books of Original Entry
 The book : in which the transaction is recorded for the first time is called
journal or book of original entry.
 The source document: is required to record the transaction in the journal.
 The process of : recording transactions in journal is called journalizing.
 The transactions : are recorded in the chronological order, as and when they
take place.
 Afterwards: transactions from this book are posted to the respective
accounts.
 Each transaction : is separately recorded after determining the particular
account to be debited or credited.

8
3. Journal: Books of Original Entry
Format of Journal:
Date Particulars L.F. Debit Credit
(Account title & Explanation) Amount - RO Amount - RO

Date : on which the transaction took place.

Particulars :
• Account Title - The account title to be debited is written on the first line beginning from the left hand corner.
The account title to be credited is written on the second line leaving sufficient margin on the left side.
• Explanation - Below the account titles, a brief description of the transaction is given which is called Narration.
Having written the Narration blank space is left or a line is drawn in the Particulars column, which
indicates the end of recording the specific journal entry.

L.F. : Ledger Folio records the page number of the ledger book on which relevant account is appears. This
column is filled up at the time of posting and not at the time of making journal entry.

Debit amount : records the amount against the account to be debited

9
Credit Amount : records the amount against the account to be credited.
Illustration 1: Trading Organization

Date of Mr. Hussain Al Lawati has furnished the following information pertaining to his
transaction newly started business for the month of January 2022:

1-Jan Hussain started a new store in Muscat with cash OMR 50,000

4-Jan He deposited OMR 20,000 in to his bank account

7-Jan Purchased vehicles for OMR 10,000 and office supplies for OMR 1,000

8-Jan Purchased goods for resale for OMR 10,000 and paid cash

12-Jan Paid rent for office building in cash OMR 1,000

15-Jan Sold goods worth OMR 8,000 to his customers for cash

25-Jan Paid salary OMR 5,000 in cash

30-Jan He withdrew cash OMR 4,000 from his bank account for his personal use
31-Jan He took a loan of OMR 10,000 from Bank Muscat
Journal entries in Hussain Al Lawati’s books:
Date Account Titles and Explanation LF Debit Credit
2022 Cash 50,000
Jan 1 Capital 50,000
(Invested cash in business)

Jan 4 Bank 20,000

Cash 20,000
(Deposited cash in bank account)

Jan 7 Vehicles 10,000

Office Supplies 1,000
Cash 11,000
(Purchased Vehicles and Office supplies for cash)

Jan 8 Inventory 10,000

Cash 10,000
(Purchased Inventory for resale)

Jan 12 Rent expenses 1,000

Cash 1,000
(Paid rent in cash)

Jan 15 Cash 8,000

Sales Revenue 8,000
(Sold goods to customers for cash)

Jan 25 Salary expenses 5,000

Cash 5,000
(Paid salary in cash)

Jan 30 Drawings 4,000

Bank 4,000
(Withdrew money from bank for personal reasons)

Jan 31 Bank 10,000

Bank Loan 10,000
(Obtained Loan from bank)
Illustration 2: Manufacturing Organization

Date of
transaction Following are the transactions recorded for the month of February 2022

1-Feb Sara started business with RO 80,000 as cash and RO 5000 by Furniture.
Purchased Machinery for RO 30,000 by paying RO 15,000 in cash and balance at a later
3-Feb date.

5-Feb Deposited RO 60,000 into the bank.

9-Feb Purchased office furniture for RO 10,000 and made payment by cheque.

12-Feb Purchased goods worth RO 8000 for cash and for RO 3500 on credit.

21-Feb Goods sold on credit to Ahmed LLC worth RO 12,500

24-Feb Cheque amounting to RO 3500 was issued to suppliers

28-Feb Cheque received from customer amounting to RO 12,500

Date Particulars L.F. Debit Credit
Amount - RO Amount - RO
• Date
Date
Cash A/c
Particulars
L.F.

Debit
80,000

2022 • Particulars
Furniture A/c
Amount - RO
Credit Capital A/c
Amount
5,000
85,000
Feb. 1 L.F. - business
• (Being RO started
with cash and furniture)

• Debit
Machinery A/c
Cash A/c
30,000
15,000
•(Being
Amount
Accounts Payable
- RO
machinery purchased for cash and accounts payable
15,000

Feb. 3
•Bank
Credit
created)
A/c 60,000

Feb. 5
•(Being
Amount
Cash A/c
- RO
cash deposited into the bank)
60,000

Furniture A/c 10,000

Bank A/c 10,000
Feb.9 (Being office furniture purchased and payment made by cheque)
Inventory A/c 11,500
Cash A/c 8,000
Accounts payable A/c 3,500
Feb. 12 (Being goods purchased for cash and accounts payable created)
Accounts Receivable A/c 12,500
Sales Revenue A/c 12,500
Feb. 21 (Being goods sold on credit to Ahmed LLC)
Accounts Payable A/c 3,500
Bank A/c 3,500
Feb. 24 (Being payment made by cheque to suppliers)
Bank A/c 12,500
Accounts Receivable A/c 12,500 13
(Being cheque received from the customer)
3. Journal: Books of Original Entry
TECHNIQUE OF JOURNALIZING - 1
The
Thedate
dateof
ofthe
thetransaction
transactionisisentered
enteredin
inthe
thedate
datecolumn.
column.

GENERAL JOURNAL J1
Date Account Titles and Explanation L.F. Debit Credit
2020
Sept. 1 Cash 15,000
Ahmed, Capital 15,000
(Invested cash in business)

4 Computer Equipment 7,000

Cash 7,000
(Purchased equipment for
cash)
3. Journal: Books of Original Entry
TECHNIQUE OF JOURNALIZING - 2
••The
Thedebit
debitaccount
accounttitle
titleisisentered
enteredat
atthe
theextreme
extremeleft
leftmargin
marginof
of
the
theAccount
AccountTitles
Titlesand
andExplanation
Explanationcolumn.
column. The
Thecredit
credit
account
accounttitle
titleisisindented
indentedon onthe
thenext
nextline.
line.

GENERAL JOURNAL J1
Date Account Titles and Explanation L.F. Debit Credit
2020
Sept. 1 Cash 15,000
Ahmed, Capital 15,000
(Invested cash in business)

4 Computer Equipment 7,000

Cash 7,000
(Purchased equipment for
cash)
3. Journal: Books of Original Entry
TECHNIQUE OF JOURNALIZING - 3
••The
Theamounts
amountsfor
forthe
thedebits
debitsare
arerecorded
recordedininthe
theDebit
Debitcolumn
column
and
andthe
theamounts
amountsfor
forthe
thecredits
creditsare
arerecorded
recordedininthe
theCredit
Credit
column.
column.

GENERAL JOURNAL J1
Date Account Titles and Explanation L.F. Debit Credit
2020
Sept. 1 Cash 15,000
Ahmed, Capital 15,000
(Invested cash in business)

4 Computer Equipment 7,000

Cash 7,000
(Purchased equipment for
cash)
3. Journal: Books of Original Entry
TECHNIQUE OF JOURNALIZING - 4
••AAspace
spaceisisleft
leftbetween
betweenjournal
journalentries
entriesor
oraaline
lineisisdrawn.
drawn. The
The
blank
blankspace
space or orthe
theline
lineseparates
separatesindividual
individualjournal
journalentries
entriesand
and
makes
makesthe
theentire
entirejournal
journaleasier
easierto
toread.
read.

GENERAL JOURNAL J1
Date Account Titles and Explanation L.F. Debit Credit
2020
Sept. 1 Cash 15,000
Ahmed, Capital 15,000
(Invested cash in business)

4 Computer Equipment 7,000

Cash 7,000
(Purchased equipment for
cash)
3. Journal: Books of Original Entry
TECHNIQUE OF JOURNALIZING - 5
••The
Thecolumn
columnentitled
entitledL.F.(Ledger
L.F.(Ledgerfolio)
folio)isisleft
leftblank
blankat
atthe
thetime
time
journal
journalentry
entryisismade
madeandandisisused
usedlater
laterwhen
whenthethejournal
journalentries
entries
are
aretransferred
transferredtotothe
theledger
ledgeraccounts.
accounts.

GENERAL JOURNAL J1
Date Account Titles and Explanation L.F Debit Credit
2020
Sept. 1 Cash 15,000
Ahmed, Capital 15,000
(Invested cash in business)

4 Computer Equipment 7,000

Cash 7,000
(Purchased equipment for cash)
3. Journal: Books of Original Entry
SIMPLE JOURNAL ENTRY
••IfIfan
anentry
entryinvolves
involvesonly
onlytwo
twoaccounts,
accounts,one
onedebit
debitand
andone
one
credit,
credit,ititisisconsidered
consideredaaSimple
SimpleEntry.
Entry.

An example of a simple entry

GENERAL JOURNAL J1
Date Account Titles and Explanation L.F. Debit Credit
2020
July 1 Cash 20,000
Ameer, Capital 20,000
(Invested cash in the business)
3. Journal: Books of Original Entry
COMPOUND JOURNAL ENTRY
••When
Whenthree
threeor
ormore
moreaccounts
accountsare
arerequired
requiredin
inone
onejournal
journal
entry,
entry,the
theentry
entryisisreferred
referredto
toas
asaaCompound
CompoundEntry.
Entry.

An example of a compound entry

GENERAL JOURNAL J1
Date Account Titles and Explanation L.F. Debit Credit
2020
July 1 Delivery Equipment 14,000
Cash 8,000
Accounts Payable 6,000
(Purchased truck for cash
with balance on account)

3
Journalizing Transactions:
•• TRANSACTION
TRANSACTION1.1.On On11st ofofSeptember,
st
September,2020
2020Mr.
Mr.Ahmed
Ahmedinvested
investedOMR
OMR15,000
15,000cash
cashininthe
the
business of app development company that named as
business of app development company that named as Softbyte. Softbyte.
•• This
Thisisisthe
theinitial
initialinvestment
investmentthat
thatwas
wasmade
madeby bythe
theowner.
owner.This
Thistransaction
transactionresults
resultsininan
anequal
equal
increase in both assets and equity of OMR15,000 , Cash is Debited as it increased
increase in both assets and equity of OMR15,000 , Cash is Debited as it increased at Assets at Assets
side
side(Left
(LeftSide)
Side)and
andAhmed’s
Ahmed’sCapital
CapitalisisCredited
Creditedasasititincreased
increasedatatthe
theequity
equityside
side(Right
(Right
Side) .
Side) .

GENERAL JOURNAL J1
Date Account Titles and Explanation L.F. Debit Credit

Sep. 1 Cash 15,000

2020 Ahmed, Capital 15,000

(Invested cash in the business)

Journalizing Transactions:
•• TRANSACTION
TRANSACTION2.2.On On44th ofofSeptember,
th
September,2020
2020thethebusiness
businesspurchased
purchasedcomputer
computerequipments
equipmentsforfor
OMR 7,000 cash.
OMR 7,000 cash.
•• The
Thepurchase
purchaseofofthe
thecomputer
computerequipments
equipmentsled
ledtotoan
anincrease
increaseofofcomputer
computerequipments
equipmentsfor forOMR
OMR
7,000 and a decrease of cash for OMR 7,000. Computer equipments is Debited
7,000 and a decrease of cash for OMR 7,000. Computer equipments is Debited as it increased as it increased
atatassets
assetsside
side(Left
(LeftSide)
Side)and
andthe
theCash
CashisisCredited
Creditedasasititdecreased
decreasedatatthe
theassets
assetsside
side(Left
(LeftSide).
Side).

GENERAL JOURNAL J2
Date Account Titles and Explanation L.F. Debit Credit

Sep. 1 Computer Eq. 7,000

2020 Cash 7,000

(Purchase of computer Eq. for cash)

Journalizing Transactions:
•• TRANSACTION
TRANSACTION3.3.On Onthe
the77th ofofSeptember,
th
September,20202020the
thebusiness
businesspurchased
purchasedfor forOMR
OMR1,600
1,600
headsets
headsets and other accessories expected to last several months. The supplier allows Softbytetoto
and other accessories expected to last several months. The supplier allows Softbyte
pay
paythis
thisbill
billininOctober.
October.
•• The
Thepurchase
purchaseofofthe thesupplies
suppliesled
ledtotoananincrease
increaseofofassets
assetsfor
forOMR
OMR1,600
1,600and andaaincreases
increasesofof
liabilities
liabilitiesfor
forthethesame
sameamount
amountofof OMR OMR1,600.
1,600.Supplies
SuppliesDebited
Debitedasasititincreased
increasedatatassets
assetsside
side
(Left Side) and the Accounts Payable is Credited as it increased at the liabilities
(Left Side) and the Accounts Payable is Credited as it increased at the liabilities side (Right side (Right
Side).
Side).

GENERAL JOURNAL J3
Date Account Titles and Explanation L.F. Debit Credit

Sep. 7 Supplies 1,600

2020 Accounts Payable 1,600

(Purchase of supplies on account)

Journalizing Transactions
•• TRANSACTION
TRANSACTION4.4.On Onthe
the88th ofofSeptember,
th
September,2020
2020the
thebusiness
businessperformed
performedaaserviceservicetotoaa
customer
customerandandreceives
receivesOMR
OMR1,200
1,200cashcashfor
forapplication
applicationdevelopment
developmentservices
servicesitithas
hasperformed.
performed.
•• InInthis
thistransaction
transactionservices
servicesrevenues
revenueswas wasgenerated
generatedand
andincreased
increasedthe
theEquity
Equityfor forOMR
OMR1,2001,200and
and
the collected cash increased Assets for same amount. Cash Debited as it increased at
the collected cash increased Assets for same amount. Cash Debited as it increased at assets side assets side
(Left
(LeftSide)
Side)and
andthe
theServices
ServicesRevenue
RevenueisisCredited
Creditedasasititincreased
increasedatatthe
theequity
equityside
side(Right
(RightSide).
Side).

GENERAL JOURNAL J4
Date Account Titles and Explanation L.F. Debit Credit

Sep. 8 Cash 1,200

2020 Service Revenues 1,200

(Cash collected from customer)

Journalizing Transactions
•• TRANSACTION
TRANSACTION5.5.On Onthe
the10
10th ofofSeptember,
th
September,2020
2020the
thebusiness
businessreceived
receivedaabill
billfor
forOMR
OMR250 250
from the Programming News for advertising on its website but postpones payment
from the Programming News for advertising on its website but postpones payment until a lateruntil a later
date.
date.
•• InInthis
thistransaction
transactionadvertising
advertisingexpenses
expenseswas wasincurred
incurredand
anddecreased
decreasedthe
theEquity
Equityfor
forOMR
OMR250 250andand
the accounts payable increased Liabilities for OMR 250. Advertising Expenses Debited
the accounts payable increased Liabilities for OMR 250. Advertising Expenses Debited as it as it
decreased
decreased thetheequity
equityside
side(Right
(RightSide)
Side)and
andthe
theAccounts
AccountsPayable
PayableisisCredited
Creditedasasititincreased
increasedatatthe
the
liabilities side (Right Side).
liabilities side (Right Side).

GENERAL JOURNAL J5
Date Account Titles and Explanation L.F. Debit Credit

Sep. 10 Advertising Expenses 250

2020 Accounts Payable 250

(Advertising bill for the month not paid)

Journalizing Transactions
•• TRANSACTION
TRANSACTION6.6.On Onthethe13
13th ofofSeptember,
th
September,2020
2020thethebusiness
businessprovided
providedOMROMR3,5003,500ofof
services.
services.The
Thecompany
companyreceived
receivedcashcashofofOMR
OMR1,500
1,500from
fromcustomers,
customers,and andititbills
billsthe
thebalance
balanceofof
OMR
OMR2,000
2,000on onaccount.
account.
•• InInthis
thistransaction
transactionservices
servicesrevenues
revenueswas wasgenerated
generatedand andincreased
increasedthe theEquity
EquityforforOMR
OMR3,500
3,500and
and
the collected cash increased Assets for OMR 1,500 , the rest (OMR 2,000) not received
the collected cash increased Assets for OMR 1,500 , the rest (OMR 2,000) not received increased increased
Assets
Assetsasasananaccounts
accountsreceivable.
receivable.Cash Cashand
andA/R
A/RareareDebited
Debitedasasititincreased
increasedatatassets
assetsside
side(Left
(Left
Side) and the Service Revenues is Credited as it increased at the equity side
Side) and the Service Revenues is Credited as it increased at the equity side (Right Side).(Right Side).

GENERAL JOURNAL J6
Date Account Titles and Explanation L.F. Debit Credit

Sep. 13 Cash 1,500

2020 Accounts Receivable 2,000
Service Revenues 3,500
(Cash collected from customer and bill
of balance on account)
Journalizing Transactions
•• TRANSACTION
TRANSACTION7.7.On Onthethe15
15th ofofSeptember,
th
September,2020
2020the
thebusiness
businessthe
thebusiness
businesspaid
paidthe
thefollowing
following
expenses
expenses in cash for first 2 weeks of September: office rent OMR 600, salaries and wagesofof
in cash for first 2 weeks of September: office rent OMR 600, salaries and wages
employees
employeesOMR OMR900,
900,andandutilities
utilitiesOMR
OMR200.200.
•• InInthis
thistransaction
transactionrent
rentexpenses,
expenses,salary
salaryexpenses
expensesand
andutility
utilityexpenses
expenses increased
increasedfor
forOMR
OMR600,600,900
900
and 200 respectively, this decreased the Equity and the cash decreased Assets for OMR
and 200 respectively, this decreased the Equity and the cash decreased Assets for OMR 1,700. 1,700.
Expenses
ExpensesDebited
Debitedasasititdecreased
decreased thetheequity
equityside
side(Right
(RightSide)
Side)and
andthe
theCash
CashisisCredited
Creditedasasitit
decreased
decreasedatatthe
theassets
assetsside
side(Left
(LeftSide).
Side).

GENERAL JOURNAL J7
Date Account Titles and Explanation L.F. Debit Credit

Sep. 15 Rent Expenses 600

2020 Salaries Expenses 900
Utilities Expenses 200
Cash 1,700
(Expenses paid cash for the month)
Journalizing Transactions
•• TRANSACTION
TRANSACTION8.8.On Onthe
the18
18th ofofSeptember,
th
September,2020
2020the
thebusiness
businesspaid
paidits
itsOMR
OMR250 250Programming
Programming
News
News bill in cash. The company previously (in Transaction 5) recorded the bill as an increaseinin
bill in cash. The company previously (in Transaction 5) recorded the bill as an increase
Accounts
AccountsPayable.
Payable.
•• This
Thistransaction
transactionisisrelated
relatedtotothe
thepayment
paymentofofcash
cashfor
forOMR
OMR250 250made
madeby
bythethebusiness
businessfor
for
Advertising
Advertising expenses previously recorded on account. Accounts Payable is Debited asitit
expenses previously recorded on account. Accounts Payable is Debited as
decreased
decreased the theLiabilities
Liabilitiesside
side(Right
(RightSide)
Side)and
andthe
theCash
CashisisCredited
Creditedasasititdecreased
decreasedatatthe
theAssets
Assets
side (Left Side).
side (Left Side).

GENERAL JOURNAL J8
Date Account Titles and Explanation L.F. Debit Credit

Sep. 18 Accounts Payable 250

2020 Cash 250

(Payment for Adv. Expenses billed

on 8th of September )
Journalizing Transactions

•• TRANSACTION
TRANSACTION9.9.On Onthe
the22
22ndofofSeptember,
nd
September,20202020the
thebusiness
businessreceived
receivedOMR
OMR600 600inincash
cashfrom
from
customers who had been billed for services (in Transaction
customers who had been billed for services (in Transaction 6). 6).
•• This
Thistransaction
transactionisisrelated
relatedtotothe
theservice
serviceperformed
performedpreviously
previouslybybythe
thebusiness
businessbut
butcash
cashwas
wasnot
not
received
received on time (i.e. the customer promised to pay in future). Cash is Debited as it increasedatatthe
on time (i.e. the customer promised to pay in future). Cash is Debited as it increased the
Assets side (Left Side) and the Accounts Receivable is Credited as it decreased at the Assets
Assets side (Left Side) and the Accounts Receivable is Credited as it decreased at the Assets side side
(Left
(LeftSide).
Side).

GENERAL JOURNAL J9
Date Account Titles and Explanation L.F. Debit Credit

Sep. 22 Cash 600

2020 Accounts Receivable 600

(Cash collected from customer billed

on 10th of September)
Journalizing Transactions
•• TRANSACTION
TRANSACTION10. 10.On
Onthethe30
30th ofofSeptember,
th
September,20202020the
thebusiness
businesspaid
paidananamount
amountofofcash
cashofofOMR
OMR
1,800 for an insurance policy covering a full
1,800 for an insurance policy covering a full year.year.
•• This
Thistransaction
transactioncash
cashpaid
paidfor
forinsurance
insurancepolicy
policyforforOMR
OMR1,800
1,800for
forthe
thefull
fullyear
year(i.e.
(i.e.Advance
Advance
payment).
payment). Prepaid Insurance is Debited as it increased Assets side (Left Side) and theCash
Prepaid Insurance is Debited as it increased Assets side (Left Side) and the Cashisis
Credited
Creditedasasititdecreased
decreasedatatthe
theAssets
Assetsside
side(Left
(LeftSide).
Side).

GENERAL JOURNAL J10

Date Account Titles and Explanation L.F. Debit Credit

Sep. 30 Prepaid Insurance 1,800

2020 Cash 1,800

(Insurance paid for the business)

Journalizing Transactions

•• TRANSACTION
TRANSACTION11. 11.On
Onthe
the30
30th ofofSeptember,
th
September,2020
2020Mr.
Mr.Ahmed
Ahmedwithdraw
withdrawcash
cashofofOMR
OMR200 200from
from
the business for his personal use.
the business for his personal use.
•• This
Thistransaction
transactiondecreased
decreasedboth
bothAssets
Assetsand
andEquity
Equityfor
forOMR
OMR200.
200.Drawing
DrawingisisDebited
Debitedasasitit
decreased
decreasedEquity
Equityside
side(Right
(RightSide)
Side)andandthe
theCash
CashisisCredited
Creditedasasititdecreased
decreasedatatthe
theAssets
Assetsside
side(Left
(Left
Side).
Side).

GENERAL JOURNAL J11

Date Account Titles and Explanation L.F. Debit Credit

Sep. 30 Drawing 200

2020 Cash 200

(Cash taken for personal issues)

Practice question 1: Trading Organization

Date of
transactio The given below are transactions undertaken by Mr Ahmed in his newly started business for
n the month of September 2020

1-Sep Ahmed Started business with cash RO. 25,000 and computers RO. 10,000
2-Sep Purchased Land & Building for RO. 10,000
3-Sep Purchased goods for resale from Rahim on cash RO 4,200
Sold goods to customer for RO. 2,500 and received 1,200 RO immediately and rest agreed to
4-Sep pay later
5-Sep Purchased office supplies on credit from Sahim RO. 1,500
6-Sep Purchased Machinery for cash RO. 1,450
7-Sep Paid electricity bill RO. 450

8-Sep Received money from customer whom we sold on 04-09-2020

9-Sep Purchased goods for resale for RO. 4600 and 50% paid immediately
15-Sep Sold goods to customer RO. 480 for cash
18-Sep Paid wages and salary RO. 1450
20-Sep Paid water bill RO. 150, Internet Bill RO. 100.

21-Sep Ahmed withdrawn money from the business RO. 1200

Practice question 2: Service Organization

Mohammed started a delivery company in Muscat in June 2018 (Mohammed Delivery Service). During
the month of June, several transactions occurred which are as follows:

June 5. The owner invested OMR 35,000.

June 8. Purchased van for OMR 20,000 and paid 12,000 in cash and the remaining amount to be paid
in the near future.

June 10. Performed a service on account for OMR 5,000.

June 12. Paid OMR 500 for office rent.

June 13. Paid the remaining OMR 8,000 for the van bought on 8 June.

June 18. Received cash OMR 5,000 for the service provided on 10 June.

June 20. Purchased supplies for OMR 7,000 on account.

June 24. Paid electricity bill OMR 250.

June 28. Paid OMR 7,000 for the supplies bought on 20 June.
Practice Question 3: Trading Organization

Following are the transactions of Mr. Shabir for the month of March 2019. You are required to analyze each
transaction and show its effect on the accounting equation:
1 Mr. Shabir invested RO 25,000 in a new business to start a store in Sohar.
5 Purchased one building in the market for RO 10,000 and paid cash.
7 Purchased some furniture for RO 5,000 from Danube and promised to pay after three months.
8 Purchased goods for resale for RO 6,000 and paid cash.
9 Sold some goods for RO 3,500 and received cash at same time.
11 Purchase goods for resale for RO 2,500 on credit
12 Sold some goods for RO 1,800 on credit
20 Received RO 1,000 from customer to whom sales were made on 12 th March
22 Paid RO 1000 to payables for goods purchased on 11 th March
23 Received remaining amount from customer to whom sales were made on 12 th March
25 Paid for electricity expenses RO 200 and telephone expense RO 100
27 Paid salaries to staff RO 200
28 Purchased a delivery van for transport for RO 3,000 and paid only RO 500 and promised to pay balance after six
months
Practice question 3: Service Organization
Practice question 3: Service Organization
Practice Question 4: Trading Organization
References
References

This chapter has been prepared by using the following books:

• https://ebookcentral.proquest.com/lib/momp/detail.action?docID=437704&query=Accounting

• Ramagopal, C.. Accounting for Managers, New Age International Ltd, 2009. ProQuest EBook Central,
https://ebookcentral.proquest.com/lib/hctom/detail.action?docID=437704.

• Hogget J., Edwards L., Medlin J., Chalmers K., Hellman A., Beattie C., Maxfield J., (2015) “ Financial
Accounting”, 9th Edition, Wiley Publisher

• Larson KD, Wild JJ, Chiappetta B (2002), ”Fundamental of Accounting Principles” sixteenth edition,
McGraw-Hill Irwin Publisher

• Needles Jr BE, Powers M (2001), “ Financial Accounting” Seventh Edition, Houghton Muffin Company

• Sangster A, Wood F, (2015), “Business Accounting” Thirteen Edition, Pearson Publisher

• Weygandt JJ, Kimmel PD, Kieso DE (2015), “Financial Accounting” IFRS edition, WILEY Publisher

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 CONTACT INFORMATION:

Name of the Staff : Dr.Venkata Durga Rao

Office:: BS047
Email: [email protected]

VERSION HISTORY

Version No Date Approved Changes incorporated

01 Sem. (I)
2022/2023

41