Answer Posted / puneet sharma

Loss by fire (Ex;Rs.10,000) reducing our purchases of goods, entry will be:

Loss by fire a/c Dr. 10,000 (debit the exp)
To Purchase a/c 10,000

Now, this loss needs to be set off in P&L:

P&L a/c Dr. 10,000
to Loss by fire a/c 10,000

In case, there is insurance company pays Rs. 6000, then entry would be:

Cash a/c Dr. 6,000
To Ins. comp a/c 6,000

Now, Insurance comp. accounts need to be set off against P&L and this would show up in credit side of P&L account.

Insurance comp a/c Dr. 6,000
To P&L a/c 6,000


So, the ultimate loss was Rs.4,000 (10,000-6,000)

How can you explain the basic accounting equation?

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There is no item category assigned to account

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pass the journal as wellas ledger entries off the foll 1st jan :> started businress with cash rs 1,20,000 & goods worth rs 60,000. 2nd jan > cash purchases rs 50,000. 4th jan >cash sales rs 40,000. 6th jan > purchase good's from sonali on credit worth rs 30,000 at 10 % trade discount. 8th jan> sold sood's to komal on credit rs 20,000 at 10% trade discount. 10th jan > paid rent by a cheque rs 50,000. 12th jan > good's worth rs 4,000 lossed by fire. 14th jan > good's worth rs 3,000 withdrawn from business for personal use. 16th jan > good's worth rs 2,000 distributed as free samples. 18th jan > good's worth rs 1,000 exchange for furniture.

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