Semester “Fall 2012”

“Financial Accounting-MGT101”

Concept to be Tested: Recording Journal Entries

Discussion Question

From the following journal entries, you are required to identify the mistake therein and also support your answer with logical reason.

 

1.      Machinery sold for Rs. 10,000 has been recorded as:

 

Cash A/C                    10,000

Sales A/C                    10,000

 

2.      Furniture Showroom purchased furniture costing Rs. 8,000 recorded as:

 

Furniture A/C              8,000

Cash A/C                    8,000

 

Note: Your comments should be according to requirement and not be more than 300 words.

 

Instructions:

Read the following instructions before giving your comments on GDB:

1.      Use the font style “Times New Roman” and font size “12”.

2.      Your answer should be relevant to the topic i.e. clear and concise.

3.      Do not copy or exchange your answer with other students.  Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.

4.      Books, websites and other reading material may be consulted before posting your comments but copying or reproducing the text from books, websites and other reading materials is strictly prohibited. Such comments will be marked as Zero (0).

5.      Obnoxious or ignoble answer should be strictly avoided.

 

v     For detailed instructions, you are required to view the announcement related to GDB No. 2

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Replies to This Discussion

koe solution snd kry ic ka

mistake in (1) sales had been created instead of machinery.

correct entry was

cash 10000

machinery 10000

now rectified entry will be

Sales 10000

machinary 10000

(Narration: sales had been created instead of machinery, Now rectified)

For (2)

Show room debited furniture a/c instead of purchase a/c

correct entry was

purchases 8000

Cash 8000

now rectifeid entry

purchase 8000

funiture 8000

(narrtion as for above)

becaues show room purchased furniture for resale purpose.

thank u soo much for providing this excellent guideline...

i can't understand this

Good Work Arsh

in Question #1 why machinery is credited and sales is debited instead of cash account. in the sales of machinery we got the benefit in the form of Cash. 

Question # 2 is clear.

I ll wait your answer.

Thanx for the solution.

Arsh has given a clear solution. i can add the following explanation.

ABC Company has expanded its operations and purchased some furniture for its recently rented show room situated in north of the city, which is expected to have useful life of five years. 
This furniture is not meant for resale; therefore, it should be capitalized and depreciated under "Property, Plant, and Equipment". 

The "exact" account title would depend on the business itself. They could title it "Office Furniture" or they may have a separate account for "Showroom Furniture". Without having a list of the accounts available, there's know way to tell. 



During the same year the company purchased furniture and other home accessories from renowned designers and sold it to customers from its show room.
This furniture is meant for resale; therefore, it should be listed as a current asset under "Inventory" or "Merchandise Inventory".

Simply we can say that the furniture that went into the showroom as part of the showroom will be recorded under assets and the cash account. The furniture bought for sale would first go under purchases, and the cash account. When it is sold, the value of the proceeds will got to the sales account and the cash or bank account.

mistake in (1) sales had been created instead of machinery.

correct entry was

cash 10000

     machinery 10000

now rectified  entry will be

Sales 10000

      machinary 10000

(Narration: sales had been created instead of machinery, Now rectified)

For (2)

Show room debited furniture a/c instead of purchase a/c

correct entry was

purchases 8000

   Cash   8000

now rectifeid entry

purchase 8000

   funiture 8000

(narrtion as for above)

becaues show room purchased furniture for resale purpose. it is its purchases.

what is rectifeid entry

rectify means to put something right or to correct something.

Dear mr shabir we can not rectified these transactions because the  transaction is not completed whether it is cash chaque or credit so we dont have to rectify it Q is about finding the mistake only...what do u thing...

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