Illustration

This illustration provides examples of recording everyday transactions of a business

including G.S.T. using the general journal. Assume the use of a physical (periodic)
inventory system.
All transactions are shown as G.S.T. exclusive unless otherwise stated.

This illustration provides examples of recording everyday transactions of a business

registered for G.S.T.

1. The owner invested $25,000 cash into the business

2. Purchase of inventory on credit for $4,000
3. Purchases returns of $600 (credit note given)
4. Sale of inventory on credit for $18,500
5. Sales returns of $100 (credit note given)
6. Sundry expenses: advertising $2,500
7. Payment to supplier (Trade Accounts Payable) of $2,000
8. Receipt of $12,000 from customer (Trade Accounts Receivable)
9. Borrowed $8,500 from bank for 3 years to purchase machinery
10. Paid wages to salesperson $3,800
11. Payment/refund of G.S.T.
12. The owner withdrew $2,000 cash for own use

1. Prepare the general journal entries to record the above transactions.

2. Post the entries from the general journal to the general ledger accounts
3. Prepare a trial balance.

1
 General Journal
$ $
1 Cash at Bank 25,000
Capital 25,000
Owner invested capital

2 Purchases 4,000
GST Paid/Receivable 400
Accounts Payable 4,400
Credit purchase

3 Accounts Payable 660

Purchases returns 600
GST Paid 60
Returned inventory to supplier

4 Accounts Receivable 20,350

Sales 18,500
GST Collected/Payable 1,850
Credit sales

5 Sales returns 100

GST Collected 10
Accounts Receivable 110
Customer returned inventory

6 Advertising expenses 2,500

GST Paid 250
Cash at bank 2,750
Cash paid for advertising

7 Accounts Payable 2,000

Cash at Bank 2,000
Paid supplier for inventory purchased

8 Cash at Bank 12,000

Accounts Receivable 12,000
Received payment from customer

9 Machinery 8,500
GST Paid 850
Loan 9,350
Loan used to purchase machinery

10 Wages expense 3,800

Cash at Bank 3,800
Paid employees wages

11 Drawings 2,000
Cash at Bank 2,000
Owner withdrew cash

2
12 GST Paid 1,440
GST Collected 1,840
GST Payable 400
Transfer of GST to GST payable account

Next month
21 Cash at Bank 400
GST Payable (closing) 400
Payment of GST liability

3
 Ledger Accounts

Account Name: Cash at Bank

Date Explanation Ref Debit Credit Balance
1 Capital GJ1 25,000 25,000.00
6 Advertising/GST Paid GJ6 2,750 22,250
7 Accounts Payable GJ9 2,000 20,250
9 Accounts Receivable GJ9 12,000 32,250
10 Wages expense GJ10 3,800 28,450
11 Drawings GJ13 2,000 26,450
12 GST Payable GJ12

Account Name: Trade Accts. Receivable

Date Explanation Ref Debit Credit Balance
4 Sales/GST Collected GJ5 20,350 20,350
5 Sales Returns/GST Coll. GJ5 110 20,240
9 Cash at Bank GJ9 12,000 8,240

Account Name: Non-Current Asset - Machinery

Date Explanation Ref Debit Credit Balance
9 Loan GJ9 8,500 8,500

Account Name: Trade Accounts Payable

Date Explanation Ref Debit Credit Balance
2 Purchases/GST Paid GJ2 4,400 4,400
3 Pur.returns/GST Paid GJ3 660 3,740
7 Cash at Bank GJ7 2,000 1,740

Account Name: GST Paid/Receivable

Date Explanation Ref Debit Credit Balance
2 Accounts Payable GJ2 400 400
3 Accounts Payable GJ3 60 340
6 Cash at bank GJ6 250 590
9 Loan GJ9 850 1,440
12 Net GST Payable GJ12 1,440 1,440

Account Name: GST Collected

Date Explanation Ref Debit Credit Balance
4 Accounts Receivable GJ4 1,850 1,850
5 Accounts Receivable GJ5 10 1,840
12 Net GST Payable GJ12 1,840.00 0

4
Account Name: GST Payable
Date Explanation Ref Debit Credit Balance
12 GST Paid GJ12 1,440 1,440
12 GST Collected GJ12 1,840 400
12 Cash at Bank GJ12

Account Name: Loan

Date Explanation Ref Debit Credit Balance
9 Machinery/GST Paid GJ9 9,350 9,350

Account Name: Capital

Date Explanation Ref Debit Credit Balance
1 Cash at Bank GJ1 25,000 25,000

Account Name: Drawings

Date Explanation Ref Debit Credit Balance
11 Drawings GJ11 2,000 2,000

Account Name: Sales

Date Explanation Ref Debit Credit Balance
4 Accounts Receivable GJ4 18,500 18,500

Account Name: Sales Returns

Date Explanation Ref Debit Credit Balance
5 Accounts Receivable GJ5 100 100

Account Name: Purchases

Date Explanation Ref Debit Credit Balance
2 Trade Accounts Payable GJ2 4,000 4,000

Account Name: Purchases Returns

Date Explanation Ref Debit Credit Balance
3 Trade Accounts Payable GJ3 600 600

Account Name: Advertising

Date Explanation Ref Debit Credit Balance
6 Cash at Bank GJ6 2,500 2,500

5
Account Name: Wages
Date Explanation Ref Debit Credit Balance
10 Cash at Bank GJ10 3.800 3,800

Trial Balance
Debit Credit
($) ($)

Cash at Bank 26,450

Accounts Receivable 8,240
Machinery 8,500
Accounts Payable 1,740
GST Paid/Receivable 0
GST Collected 0
Net GST Payable 400
Loan 9,350
Capital 25,000
Drawings 2,000
Sales 18,500
Sales Returns 100
Purchases 4,000
Purchases Returns 600
Advertising expense 2,500
Wages expense 3,800

Total 55,590 55,590