AccountsISC Class 11 · Accounting Equation and Journal

Journal Entries with Discounts, Losses and Opening Entry: ISC Class 11 Accounts

Updated 17 October 2026 · Fact-checked

The journal is the book of original entry where transactions are first recorded in date order as Dr account, To account, with a narration. A compound entry combines several debits or credits. Trade discount is deducted before recording; cash discount allowed is an expense (debit), cash discount received is an income (credit); goods taken by the owner are drawings at cost.

In a compound entry the debit comes first, each credit starts with To, and the one debit equals the sum of the credits.

Illustration drawn for QuestionBuddy.

Understand Journal Entries: Compound Entries, Discounts, Goods Withdrawn and Opening Entry

Format. Date | Particulars (Dr account, To account, narration) | L.F. | Debit | Credit. The debited account is written first, the credited account starts with "To".

Simple and compound entries. A simple entry has one debit and one credit. A compound entry has more than two accounts, for example paying a creditor with a discount: Creditor Dr; To Cash; To Discount received.

Trade discount. A reduction in the list price given to buyers; it is not recorded. Record the net amount. Cash discount is allowed for prompt payment. *Discount allowed* (to a customer) is a loss: debit. *Discount received* (from a supplier) is a gain: credit.

Goods withdrawn by the proprietor. Dr Drawings, Cr Purchases (at cost price). Free samples: Dr Advertisement, Cr Purchases. Loss of goods by fire/theft: Dr Loss by fire, Cr Purchases (if uninsured). If insured, Dr Insurance claim (or Insurance company) for the amount admitted and Dr Loss for the balance; credit Purchases.

Goods Dr/Cr items. Purchases of goods: Dr Purchases. Purchase of an asset: Dr the asset account, never Purchases. Sales return: Dr Sales return, Cr customer.

Opening entry. Passed at the start of a new year to bring forward balances: debit all assets, credit all liabilities, and credit the balancing figure, Capital. Particulars: "Assets Dr ... To Liabilities ... To Capital".

GST in brief. Output tax on sales is a liability (credit); input tax on purchases is an asset (debit); the net is paid to the government.

Journal Entries: Compound Entries, Discounts, Goods Withdrawn and Opening Entry: key facts

Opening entry: Capital = Assets - Liabilities | Debit assets, credit liabilities and capital; Balancing figure.
Net of trade discount: Invoice value = List price - Trade discount | Only this is recorded; Cash discount is shown separately.
Cash discount: Discount = Rate x Amount settled | Allowed: Dr, Received: Cr; Allowed is an expense.

How to answer Journal Entries: Compound Entries, Discounts, Goods Withdrawn and Opening Entry questions

Convert each narrative sentence into accounts, then apply debit and credit.

1Remove trade discounts and find the net amounts.
2Identify the two or more accounts and their nature.
3Personal: debit the receiver, credit the giver. Real: debit what comes in, credit what goes out. Nominal: debit expenses and losses, credit incomes and gains.
4Check total debits = total credits and write a narration.

Journal Entries: Compound Entries, Discounts, Goods Withdrawn and Opening Entry in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Cash discount received

Suppose a stationer owes a wholesaler Rs 10,000 and pays Rs 9,800 in full settlement.

Pass the journal entry.

Try it first, then show the solutionSolution

The wholesaler (a creditor) is debited with the full Rs 10,000 because the debt is closed.
Cash goes out Rs 9,800 and the Rs 200 saved is a discount received (gain).

Answer: Wholesaler Dr 10,000; To Cash 9,800; To Discount received 200.

Memory hook: Settle the whole debt, split the credit.

Tricks to remember Journal Entries: Compound Entries, Discounts, Goods Withdrawn and Opening Entry

Short memory aids. Say each one aloud once, then use it on a question the same day.

Discount direction
Allowed = gives away (expense, Dr); Received = gets (income, Cr).
Use it when: Cash discount.
Opening entry
Assets Dr, liabilities Cr, capital is the plug.
Use it when: Opening entry.
Own goods, own cost
Goods for personal use go to drawings at cost.
Use it when: Goods withdrawn.

Journal Entries: Compound Entries, Discounts, Goods Withdrawn and Opening Entry: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Goods withdrawn · 1 mark · MCQBoard level

Goods costing Rs 6,000 were taken by the proprietor for personal use. The entry is:
(a) Dr Purchases (b) Dr Drawings (c) Dr Sales (d) Dr Salaries

Try it first, then show the solutionSolution

The owner takes goods: drawings increase; goods go out, so Purchases is credited.

Answer: (b) Dr Drawings, Cr Purchases

Example 2: Journal for transactions · 5 marks · Long answerBoard level

Pass journal entries: (i) Bought goods from Aman, list price Rs 20,000, trade discount 10%, on credit. (ii) Sold goods to Bina Rs 15,000 on credit. (iii) Bought furniture Rs 9,000 for cash. (iv) Paid rent Rs 2,000. (5 marks)

Try it first, then show the solutionSolution

(i) Net = 20,000 - 2,000 = 18,000: Purchases Dr 18,000, To Aman 18,000.
(ii) Bina Dr 15,000, To Sales 15,000.
(iii) Furniture Dr 9,000, To Cash 9,000.
(iv) Rent Dr 2,000, To Cash 2,000.

Answer: (i) Purchases Dr 18,000 To Aman 18,000; (ii) Bina Dr 15,000 To Sales 15,000; (iii) Furniture Dr 9,000 To Cash 9,000; (iv) Rent Dr 2,000 To Cash 2,000.

Example 3: Discounts and a compound entry · 7 marks · Long answerHarder board level

Pass entries: (a) Received Rs 7,600 from Dev in full settlement of Rs 8,000. (b) Paid Rs 5,880 to Esha in full settlement of Rs 6,000. (c) Goods costing Rs 3,000 distributed as free samples and goods costing Rs 5,000 destroyed by fire; the insurance company admitted a claim of Rs 3,500. (7 marks)

Try it first, then show the solutionSolution

(a) Cash Dr 7,600; Discount allowed Dr 400; To Dev 8,000.
(b) Esha Dr 6,000; To Cash 5,880; To Discount received 120.
(c) Advertisement Dr 3,000, To Purchases 3,000.
Insurance company Dr 3,500; Loss by fire Dr 1,500; To Purchases 5,000.

Answer: Entries as above; debits equal credits in each (8,000; 6,000; 3,000; 5,000).

Example 4: Opening entry · 5 marks · Long answerHarder board level

Pass the opening entry on 1 April: cash Rs 14,000, bank Rs 36,000, stock Rs 50,000, debtors Rs 40,000, plant Rs 1,20,000; creditors Rs 25,000, bills payable Rs 15,000, loan Rs 60,000. (5 marks)

Try it first, then show the solutionSolution

Assets = 14,000 + 36,000 + 50,000 + 40,000 + 1,20,000 = Rs 2,60,000.
Liabilities = 25,000 + 15,000 + 60,000 = Rs 1,00,000.
Capital = 2,60,000 - 1,00,000 = Rs 1,60,000.
Debit total 2,60,000 = credit total 1,00,000 + 1,60,000.

Answer: Cash, Bank, Stock, Debtors, Plant Dr Rs 2,60,000; To Creditors 25,000, To Bills payable 15,000, To Loan 60,000, To Capital 1,60,000.

Example 5: Spot the wrong entry · 5 marks · Long answerHOTS / competency

A bookkeeper recorded the purchase of a computer for Rs 40,000 as Dr Purchases, Cr Cash. Also, goods bought were recorded in Purchases at the list price, and the trade discount of Rs 1,500 was credited to Discount received. Identify the errors and give correct entries, with the effect on profit. (5 marks)

Try it first, then show the solutionSolution

A computer is a fixed asset: Dr Computer 40,000, Cr Cash 40,000.
Trade discount is not recorded; purchases are entered at the net price.
The computer was debited to Purchases, so expenses are overstated by 40,000 and profit is understated by 40,000. Purchases at the gross price with the 1,500 discount credited to Discount received cancel each other, so profit is unaffected by the discount. Net effect: profit is understated by Rs 40,000 (computer error only).

Answer: Computer Dr 40,000, To Cash 40,000; record purchases net of trade discount (reverse the Rs 1,500 credit to Discount received against Purchases); profit was understated by Rs 40,000.

Where students lose marks in Journal Entries: Compound Entries, Discounts, Goods Withdrawn and Opening Entry

The slips examiners see most often, and what to write instead.

Mistake: Recording trade discount as an expense
Confusing with cash discount.
Wrong working
Dr Discount allowed 2,000
Right working
Purchases at net 18,000
Do this: Never record trade discount.
Usually costs: 2 marks.
Mistake: Debiting Purchases for furniture
Goods versus assets.
Wrong working
Purchases Dr 9,000
Right working
Furniture Dr 9,000
Do this: Purchases are for resale only.
Usually costs: 1-2 marks.
Mistake: Capital missing in the opening entry
Not computing the balancing figure.
Wrong working
Assets Dr 2,60,000 To Liabilities 1,00,000
Right working
To Capital 1,60,000 as well
Do this: Find capital first.
Usually costs: 2 marks.

Exam tips

Always write a narration in brackets, as the marking scheme expects it.
Total the debits and credits of every compound entry.
Mention "at cost" in goods withdrawn and free-sample entries.

Practice questions on Journal Entries: Compound Entries, Discounts, Goods Withdrawn and Opening Entry

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

Q1 · 1 mark · MCQBoard level
Discount received from a supplier is credited to:
(a) Supplier's account (b) Discount received account (c) Purchases (d) Cash
Hint
A gain.
Answer
(b) Discount received account
Q2 · 4 marks · Short answerBoard level
Pass journal entries: (i) Paid salary Rs 12,000 by cheque; (ii) Sold goods to Chitra Rs 8,000 less 5% trade discount, on credit; (iii) Goods returned by Chitra Rs 1,900. (4 marks)
Hint
Net sale = 7,600.
Answer
(i) Salary Dr 12,000 To Bank 12,000. (ii) Chitra Dr 7,600 To Sales 7,600. (iii) Sales return Dr 1,900 To Chitra 1,900.
Q3 · 7 marks · Long answerHarder board level
Pass entries: (a) Charles settled his account of Rs 12,500 by paying Rs 12,100; (b) the proprietor took goods of Rs 4,000 (cost) and a typewriter Rs 5,000 for his home; (c) Goods of Rs 9,000 were stolen, insured for Rs 6,000 and the insurer admitted Rs 5,400. (7 marks)
Hint
Loss = 9,000 - 5,400.
Answer
(a) Cash Dr 12,100, Discount allowed Dr 400, To Charles 12,500. (b) Drawings Dr 9,000, To Purchases 4,000, To Typewriter 5,000. (c) Insurance company Dr 5,400, Loss by theft Dr 3,600, To Purchases 9,000.
Q4 · 5 marks · Long answerHarder board level
Pass the opening entry: machinery Rs 2,40,000, stock Rs 90,000, cash Rs 10,000, debtors Rs 50,000, creditors Rs 60,000, bank overdraft Rs 20,000, loan Rs 1,00,000. Find the capital. (5 marks)
Hint
Overdraft is a liability.
Answer
Assets = 3,90,000; liabilities = 1,80,000; capital = Rs 2,10,000. Machinery, Stock, Cash, Debtors Dr 3,90,000; To Creditors 60,000, To Bank overdraft 20,000, To Loan 1,00,000, To Capital 2,10,000.
Q5 · 4 marks · Short answerHOTS / competency
A trader allowed Rs 600 cash discount to a debtor and recorded Dr Cash 7,400, Cr Debtor 7,400 for a debt of Rs 8,000. Show the error, the correct entry and its effect on debtors and profit. (4 marks)
Hint
Debtor still shows Rs 600.
Answer
Correct: Cash Dr 7,400, Discount allowed Dr 600, To Debtor 8,000. The debtor wrongly keeps a balance of Rs 600 and profit is overstated by Rs 600.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

1.Journal is?Show answer
Book of original entry.
2.Discount allowed is a?Show answer
Loss; debit.
3.Goods withdrawn credit which account?Show answer
Purchases.
4.Opening entry credits capital as?Show answer
Balancing figure.
5.Is trade discount recorded?Show answer
No.

Journal Entries: Compound Entries, Discounts, Goods Withdrawn and Opening Entry: frequently asked questions

Do I write a narration?

Yes, a short explanation after each entry.

Is free sample an expense?

Yes, advertisement.

Where are entries posted from?

From journal to ledger.

What is L.F.?

Ledger folio, the page number of the ledger account.