Journal Practice question 3

11.abc  company made 5% allowance on its receivable based on past experiences.the journal  entry will be

Debit	bad debt accounts
Credit	receivable allowance

Effect of revenue expenditure and correction

When revenue expenditure treated/recorded as capital expenditure the following error/effect  will incur

Asset           Expense          Profit

increase                           decrease                                     increase

Effect of capital expenditure and correction

When capital expenditure treated/recorded as revenue expenditure the following error/effect  will incur

Asset           Expense          Profit

decrease                           increase                                     decrease

Key Differences Between Capital and Revenue Expenditure

The benefit generated by the revenue expenditure is for the current accounting year. The examples of revenue expenditure is as under – Wages & Salary, Printing & Stationery, Electricity Expenses, Repairs and Maintenance Expenses, Inventory, Postage, Insurance, taxes etc.

Capital Expenditure Vs Revenue Expenditure

The amount spent by the company for possessing any long term capital asset or to enhance the working capacity of any existing capital asset, or to increase its lifespan in order to generate future cash flows or to decrease the cost of production, is known as Capital expenditure. As a huge amount is spent on it, the expenditure is capitalized, i.e. the amount of expenditure is spread over the remaining useful life of the asset.

Journal Practice question 2

11.When supplier make sales on Credit

Debit	Receivable (Increase current Asset)
Credit	Sales Revenue (Increase income)

12.When customer return goods to supplier,the supplier record the following entry

Debit	Sales Return (decrease in income)
Credit	Receivable (decrease in asset)

What is a 'Journal' with practice question 1

*Journal

*. In accounting, a first recording of financial transactions as they occur in time, so that they can then be used for future reconciling and transfer to other official accounting records such as the general ledger.

* A journal will state the date of the transaction, which account(s) were affected and the amounts, usually in a double-entry bookkeeping method.

JOURNAL