Chapter 8, Problem 8QS

To determine

Journal entries: Journal is the book of original entry whereby all the financial transactions are recorded in chronological order. Under this method, each transaction has two sides, debit side and credit side. Total amount of debit side must be equal to the total amount of credit side.

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.

Revenue expenditure: Revenue expenditure is the normal and reasonable expenses that are spent on everyday operations of a particular business or a company.

Capital expenditure: Capital expenditure are those expenditure whose benefits are availed for more than a year and are expenses spent on acquiring the fixed assets such as machinery, furniture and equipment.

1.

To identify: The given expenses come under capital or revenue expenditure.

2.

To determine

To prepare: Journal entries.