Question

ABC book store is selling business books, magazines and stationeries. The following transactions were occurred in February 2020 (GST inclusive).

Feb.     6          Purchased books from Book Depository $880, terms 2/7, n/30.

            7          Paid freight on February 6 purchase $44.

            8          Sold inventory to customers $990, terms n/30. The inventory cost $600.

            10        Returned $99 books to Book Depository.

            13        Paid Book depository in full.

Required

Prepare the journal entries to record the transactions.

Answer 1

Journal entries for the given transactions

Date Particulars               Debt               Credit

                  (in $)               (in $)

Feb.6               Purchases a/c – Dr.                                                              880

                          To Accounts payable a/c Cr.                                                                       880       

                  (Being books purchased on credit terms from

                  Book depository)

Feb 7           Freight a/c Dr.                                                                        44

                      To Accounts payable a/c Cr                                                                              44

                      (Being Freight charges paid on credit purchases)

Feb 8          Accounts Receivable a/c Dr                                                   990

                      To Sales a/c Cr                                                                                               600

                     To Profit and Loss a/c                                                                                      330

                 (Being inventory costing $600 sold at $990 for

                  Profit of $330)     

Feb 10        Accounts payable a/c Dr                                                          99

                      To Purchases Returns a/c Cr                                                                            99

                 (Being books worth $99, returned to book depository

                 On credit purchases)

Feb 12          Accounts Payable   a/c Dr.                                               825

                      To   cash a/c Cr                                                                                     809.38

                   To   Discount received on settlement of payment a/c Cr                         15.62

(Being final payment to book depository after disount and

Freight Charges)—Refer Note given

Note:

Credit Purchases        = $880

Less: Returns              =   $99

                                  ------------

Purchase price               = $781

Add: Freight   charges   =    $44

                                       ----------

Total amount

Paid to book depository = $825

                                   -----------------

Calulation of discount received   = 2% on 781 = 781 x 2/100 =$15.62 being credited to discount received a/c

Balance ($781 – $15.62 = $765.38)    is credited to cash on final settlement after discount