Grade 12

Chapter 3
Double Entry System

Name: ………………………………………………………

A/L Year: ………………………………………………………

Contact details: 0778759158

Maryam Ali Mohamed (ACCA Lecturer @ PPIM)
 Chapter 3 – Double Entry System
1. In the preparation of draft financial statements for the year 2011, it was revealed that the inventory at
the end of year 2010 had included fully damaged inventory with a cost of Rs. 225 000. Insurer had
agreed in 2010, to pay a sum of Rs. 200 000 to indemnify this loss. However, no adjustment has been
made with regard to the insurance claim and the damaged inventory.
Write the journal entry to rectify the above error.
………………………………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………

2. A telecommunication company collects two months charges for the internet usage in advance when
the connection is given to customers. Monthly charges for internet usage is Rs. 600. On 01.03.2011, 10
customers took these connections. All the collections are posted to the advances received account.
Write the journal entry to recognize the income for the month ending 31.03.2011 with regard to the
above collection.
………………………………………………………………………………………………………………………………………………………………
……………………………………………………………………………………………………………………

3. Given below is the summary of the salary of an entity for a month.

Particulars Rs.000
Basic salary 250
Allowances 20
Gross salary 270
Staff loan deduction (45)
EPF deduction (25)
Net salary 200
Write the journal entry to record salary for the month based on above information.
………………………………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………………………………………………
…………………………………………………………………………

4. Office expenses amounting to Rs. 60 000 incurred by an entity in March 2012 has been posted as Rs.
600 000 to office equipment account. The office equipment is depreciated at 10% per annum on cost
on straight line method and depreciation for this month has also been provided.
Write the journal entry to correct the ledger accounts of office equipment and office expenses.
………………………………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………

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5. The following information relates to a business for the month of March 2013.

Sales List Price (Rs’000) Trade Discount

Cash 1 000 10%
Credit 4 000 5%

The debtors are given a cash discount of 5% if they settle the amount due within 15 days from the date
of sale. As per the records of the business 50% of debtors’ balances have been settled utilizing this
discount. The correct journal entry to record the discount allowed to debtors is:
Dr (Rs.) Cr (Rs.)
(1) Discount Allowed Account 95 000 Cash Account 95 000
(2) Discount Allowed Account 95 000 Debtors Control Account 95 000
(3) Discount Allowed Account 195 000 Cash Account 195 000
(4) Discount Allowed Account 295 000 Debtors Control Account 295 000
(5) Discount Allowed Account 395 000 Cash Account 395 000
(…….)
6. The debit balance of the Debtors Control Account of a business as at 01.03.2013 was Rs. 50 000. The
total of the sales journal for March 2013 amounting to Rs. 520 000 has been recorded in the Debtors
Control Account as Rs. 250 000. However, the correct amount has been recorded in the sales account.
The debtors paid Rs. 200 000 during the month. A provision of 10% for doubtful debts has been
provided on the month end balance of debtors.
Write the journal entries required to correct the above errors. (Narration is not required)
………………………………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………………………………………………
………………………………………………………………………………………………………………………………………………………………
…………………………………………………………………………

7. The following information relates to a company for April 2014.

Purchases List price (Rs.) Trade Discount (%) Cash Discount (%)
On credit 400 000 5 5
On Cash 200 000 10 -
A cash discount is allowed by the suppliers only if the dues are settled within 15 days from the date of
purchase. The company was able to settle only 50% of the amount due within this period.
The correct amounts of the journal entry to record the discount received by the company during April
2014.
Creditors Control Account Discount Received Account
Dr (Rs.) Cr (Rs.)
(1) 9 500 9 500
(2) 10 000 10 000
(3) 29 500 29 500
(4) 30 000 30 000
(5) 39 500 39 500 (……)

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8. A company issued 200 000 ordinary shares at Rs. 20 per share during the year ending 31.03.2015.
Applications for 300 000 shares were received with the full amount of money. The company incurred
Rs. 50 000 as share issue expenses. The company allotted 200 000 shares proportionately and the
excess money was returned to the applicants.
The journal entry to record the allotment of shares (Narration is not required)
………………………………………………………………………………………………………………………………………………………………
……………………………………………………………………………………………………………………

9. State the accounts in the general ledger to which the following transactions are posted.
Transaction Dr. Cr.
A- Sale of goods on credit basis ………………………. ……………………
B- Writing off a debtor’s balance as bad debt ……………………….. ……………………..

10. The following information relates to Amal PLC as at 01.04.2017.

Rs.000
Trade receivables 900
Allowance for doubtful debts 90
The following transactions were carried out in the entity during the year ending 31.03.2018.

Rs.000
Credit sales 3 600
Sales returns 400
Receipt of cash for trade receivables 2 800
Bad debts written off 200
The business makes a 10% allowance for doubtful debts on the year end balances of trade receivables.
Journal entries to record the bad debts and doubtful debts for the year ending 31.03.2018:
Description Dr (Rs.000) Cr (Rs.000)
(a) ……………………………………………….. ……………………
……………………………………………….. …………………….
(Being recorded of bad debts)
(b) ………………………………………………. ……………………
……………………………………………… ……………………..
(Being recording of doubtful debts)

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11. The following information has been extracted from the profit and loss appropriation account of Anura
and Bimal partnership for the year ending 31.03.2018.
Rs. Rs.
5% interest on capital
Anura 5 000
Bimal 20 000 25 000
Profit share:
Anura 20 000
Bimal 10 000 30 000
This account has been prepared by a trainee accounts clerk without considering the partnership
agreement. However, these amounts have been posted to the partners’ current accounts.
As per the partnership agreement, profits and losses should be shared between Anura and Bimal in the
ratio 3:2 respectively. There is no provision in the agreement as to interest on capital. Write the journal
entry to rectify the current account balances of the partners.

Description Dr (Rs.) Cr (Rs.)

…………………………………………………………… ……………………
…………………………………………………………… …………………..

12. Following information has been extracted from the payroll of Saman’s business for the month of March
2019. This business was commenced on 01.03.2019.
Description Rs.000
Gross salary 500
Less: Employee contribution to Employees Provident Fund (EPF) – 10% 50
Net salary 450
Employer contribution to EPF – 15% 75
Employer contribution to employee trust fund (ETF) – 3% 15

The EPF and ETF of a particular month are remitted on the 10th day of the following month and the net
salary is paid in the same month itself.
What Is the correct double entry to record he EPF expenses for the month ending 31.03.2019 and the
EPF liability as at 31.03.2019?
Dr (Rs.000) Cr (Rs.000)
(1) EPF expenses 50
EPF payable 50
(2) EPF expenses 75
EPF payable 75
(3) EPF expenses 125
EPF payable 125
(4) EPF expenses 50
Salary expenses 75
EPF payable 125
(5) EPF expenses 75
Salary expenses 50
EPF payable 125 (……)
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 13. The trial balance of a business as at 31.03.2019 did not balance and the difference was transferred to a
suspense account. The subsequent investigation revealed the following errors.
A- The total of the sales journal for March 2019 of Rs. 540 000 has been posted to the debtors
control account and sales account as Rs. 450 000.
B- The discounts allowed Rs. 10 000 to the debtors has been debited to discount allowed account
as Rs. 1 000. However, this amount has been correctly posted to the debtors control account.
Write the journal entries to rectify the above errors. (Narration is not required.)
Error Description Dr (Rs.) Cr (Rs.)
A ………………………………………………………………. …………….
………………………………………………………………. …………………
B ………………………………………………………………. ……………….
………………………………………………………………. ………………….

14. Anada and Jayantha carried out a partnership without a written agreement. On 01.04.2018, Ananda
paid Rs. 250 000 for the insurance premium of the motor vehicles of the partnership using his personal
money. However, this had not been adjusted for when preparing financial statements for the year
ending to be recognized as a loan provided to the partnership by Ananda.
Write the journal entries to recognize the insurance premium of the partnership paid by Ananda as a
loan and the interest payable on the loan as at 31.03.2019.

Description Dr (Rs.) Cr (Rs.)

(a) ……………………………………………………………………………… ……………….
……………………………………………………………………………… ……………………
(Insurance premium of partnership paid by Ananda)
(b) ………………………………………………………………………………. ………………….
………………………………………………………………………………. ………………….
(Interest payable on the loan provided by Ananda)

15. Write the journal entries to adjust the following two transactions in the preparation of financial
statements of a business for the year ending 31.03.2020. (Narration is not required.)

A - Goods were sold on 31.03.2020 for an order of Rs. 180 000. This order was received in February 2020 with
an advance of Rs. 60 000. The balance amount is yet to receive.
B - An agreement was entered by paying Rs. 90 000 to conduct a sales promotion campaign for a three months
period starting from 01-03-2020. It has been duly operated since 01.03.2020.

Transaction Description Dr. (Rs. '000) Cr (Rs. ‘000)

A

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