Page 167 - Microsoft Word - 00 BA3 IW Prelims STUDENT.docx

The books of prime entry, discounts and sales tax

Example 5

A business entity entered into the following transactions:
1 May Purchased plant on credit from JSM for $1,000
4 May Sold office machinery for $800 to ABA on credit. The machinery had
cost $1,000 and had been depreciated by $400.

Required:

State the journal entries required to record each of the transactions.

Example 5: Solution

Account
Date name/details Dr Cr Explanation
Purchase of plant on
1 May Plant 1,000 credit see invoice
number X123
Increase non-current
JSM 1,000
assets and payables
Office machinery at Office machinery sold on
4 May 1,000
cost credit, see invoice Y345

Transfer cost of office
Office machinery
400 machinery to asset and
accum dep’n
accum dep’n
to disposal account and
ABA 800 match with amount due
from ABA

to determine profit on
Profit on disposal 200
disposal

161