Concept explainers
Accounting rules for journal entries:
- To Increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.
- To Decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.
Gross method: Gross method refers to recording of purchases or invoice at original price which does not include any types of discounts that is trade discount and does not include any types of returns and allowances as well.
Perpetual inventory system: In perpetual inventory system, every recent transaction has to be updated such as when an item has been bought or sold, the system needs to be updated.
To prepare: The journal entries for the given transactions.
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