Example of Business Transaction With Journal Entries

Example of Business Transactions with Journal Entries

Scenario 1: Business Transaction - Introduction of Capital

An owner introduces capital of ₹500,000 in cash into the business.

Journal Entry:

Particulars	Debit (₹)	Credit (₹)
Cash/Bank A/c	500,000
To Capital A/c		500,000
(Being capital introduced by the owner)

Explanation:

1. Cash/Bank A/c is debited to reflect the cash inflow.
2. Capital A/c is credited to record the owner's equity.

Scenario 2: Business Transaction - Purchase of Inventory

The business purchases inventory worth ₹200,000 on credit.

Journal Entry:

Particulars	Debit (₹)	Credit (₹)
Inventory A/c	200,000
To Accounts Payable A/c		200,000
(Being inventory purchased on credit)

Explanation:

1. Inventory A/c is debited to record the value of inventory acquired.
2. Accounts Payable A/c is credited to reflect the liability for the purchase.

Scenario 3: Business Transaction - Sale of Goods

The business sells goods worth ₹150,000 for cash.

Journal Entry:

Particulars	Debit (₹)	Credit (₹)
Cash/Bank A/c	150,000
To Sales Revenue A/c		150,000
(Being goods sold for cash)

Explanation:

1. Cash/Bank A/c is debited to record the cash inflow from the sale.
2. Sales Revenue A/c is credited to record the revenue earned.

Scenario 4: Business Transaction - Payment of Expenses

The business pays rent of ₹20,000 in cash.

Journal Entry:

Particulars	Debit (₹)	Credit (₹)
Rent Expense A/c	20,000
To Cash/Bank A/c		20,000
(Being rent paid in cash)

Explanation:

1. Rent Expense A/c is debited to record the expense incurred.
2. Cash/Bank A/c is credited to reflect the cash outflow for the expense.

Scenario 5: Business Transaction - Loan Repayment

The business repays a bank loan of ₹100,000.

Journal Entry:

Particulars	Debit (₹)	Credit (₹)
Bank Loan A/c	100,000
To Cash/Bank A/c		100,000
(Being loan repaid to the bank)

Explanation:

1. Bank Loan A/c is debited to eliminate the liability.
2. Cash/Bank A/c is credited to reflect the cash outflow for the repayment.

Scenario 6: Business Transaction - Depreciation of Equipment

The business records annual depreciation of ₹30,000 on equipment.

Journal Entry:

Particulars	Debit (₹)	Credit (₹)
Depreciation Expense A/c	30,000
To Accumulated Depreciation/Asset A/c		30,000
(Being annual depreciation recorded)

Explanation:

1. Depreciation Expense A/c is debited to record the expense for the period.
2. Accumulated Depreciation A/c is credited to reflect the cumulative depreciation on the asset.