Six Double entries questions and solutions

The two fold theory in the double entry principle will be explained with questions and solutions to help you understand it to some extent. The rules of double entry accounting discussed in the previous articlfe will guide you in this article. For every example, an explanation is provided for better comprehension.

Double Entries Questions

The following transactions relate to S&P trading entities for the week ending March 15th, 2024. 

• March 11: Start business with N20,000 cash.
• March 12: Bought goods N5,000 cash.
• March 13: Paid for store rent N2,500.
• March 14: Bought furniture for N1,500.
• March 15: Sold goods for N2,300 cash.
• Required: Show the double entry 

Solution to double entry question

Start business with N20,000 cash

• Dr: Cash a/c
• Cr: Capital a/c

With N20,000

Explanation

When a business person starts a business, what he or she brings in is referred to as capital. In this case, the owner of the entity brings in cash of 20,000 Naira. Based on the DEACIL rule, dividend, expenses, and assets are debited while capital, income and liability are credited. Cash is an asset so it is debited while liability is credited.

Also, we can use the rule, debit the giver and credit the receiver of value to post the double entry to their ledger accounts. This is explained in the next transaction.

Bought goods N5,000 cash

• Dr: Purchases a/c
• Cr: Cash a/c

With the sum of N5,000 each

Explanation

Bought goods means purchases in accounting. Using the rule debit the receiver and credit the giver of value. From the transaction, you debit purchases because it received the value and credit cash since it gives out the value cash of N5,000 to buy the goods. This rule is better than DEACIL when applying double entry to the various accounts. However, DEACIL is best used to identify if an account should have a debit or Credit balancing. We will explain more on balancing ledger accounts later on.

Paid for store rent N2,500

• Dr: Rent a/c
• Cr: Cash a/c

With the sum of N2,500.

Explanation

The transaction shows that rent was paid with cash by the business owner. From the rule of debiting the receiver and creating the giver, rent is receiving the value and cash is giving out a value of N2,500 to the landlord of the shop.

Bought furniture for N1,500

• Dr: Furniture a/c
• Cr: Cash a/c

With he sum of N1,500

Explanation

From the available cash introduced by the owner into the business, furniture was acquired. Cash is given out or paid to acquire the above item. That's why cash is credited and furniture is debited with the amount used in acquiring it.

Sold goods for N2,300 cash

• Dr: Cash a/c
• Cr: Sales a/c

With the sum of N2,300

Explanation

The last question shows a sale of goods. That is, some of the goods initially purchased on March 12 are now sold to a customer. This implies that cash will be received while the goods are going out. So, with the rule above cash is receiving value and sales is giving out value. 

Conclusion

Some practical way on how to deal with the double entry principle has been explained in detail. The rule debit the receiver of value and credit the giver of value is more useful when posting transactions to the ledger. With the above questions and solutions, the reader should have gained some insights and may require textbooks in accounting to practice more. The more you practice the easier it becomes.