Journal entries for a sole trader.
Rahul is a sole trader who runs a small business of selling books online. He has received ₹ 8,000 in cash from a customer and also purchased books worth ₹ 5,000 from a supplier in his business. Prepare a journal entry for these two transactions. Also, explain the reasons for preparing a separate entry for each transaction.
1 Answer
📌 CONCEPT: A journal entry is a record of a transaction that affects the business entity's financial position.
📐 RULE / FORMULA: Each transaction is recorded in a separate journal entry to ensure accurate and complete recording of financial information.
💡 WORKED EXAMPLE: Rahul's business - Cash received from a customer: Debit Cash A/c ₹ 8,000, Credit Sales A/c ₹ 8,000. Books purchased: Debit Books A/c ₹ 5,000, Credit Accounts Payable A/c ₹ 5,000.
⚠️ COMMON MISTAKE: Failing to record each transaction in a separate journal entry, which may lead to incorrect financial statements.
19 Sept 26
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