EVERY BUSINESS TRANSACTION INVOLVES RECEIVING ASPECT AND GIVING ASPECT. EVERY DEBIT HAS AN...
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Transcript of EVERY BUSINESS TRANSACTION INVOLVES RECEIVING ASPECT AND GIVING ASPECT. EVERY DEBIT HAS AN...
EVERY BUSINESS TRANSACTION INVOLVES RECEIVING ASPECT AND GIVING ASPECT.
EVERY DEBIT HAS AN EQUIVALENT CREDIT.
In cash system, transactions are recorded only if cash is received or paid. E.g. Government accounting.
In mercantile system, cash and credit transactions are recorded. E.g. Credit sales or purchases, salary payable, rent receivable, interest accrued but not received, depreciation provided, etc.
Personal accounts : Accounts of debtor & creditors, natural & artificial persons like bank, club a/c, salary payable, outside rent account etc.
Real accounts : Tangible & Intangible real accounts ( All assets accounts)
Nominal accounts : Impersonal accounts (All expense & income accounts) e.g.
salary account
Classification of Accounts
Personal Nominal Real
Artificial personal
Natural personal Tangible real
Representative personal
Intangible real
In respect to personal accounts : - Debit the receiver & credit the giver In respect to real accounts : - Debit what comes in & credit what goes
out In respect to nominal accounts : - Debit all expenses & losses and credit all
incomes & gains.
Rules of
debit & credit
Types of accounts
Personal account
Real account
Nominal account
Debit
The receiver
What comes in
All expenses & losses
Credit
The giver
What goes out
All incomes & gains
Suchitra started her business with cash Borrowed from Mahesh Purchased furniture Purchased furniture from Mohan on credit Purchased goods for cash Purchased goods from Ram on credit Sold goods for cash Sold goods to Shyam on credit Received cash from Shyam Paid cash to Ram Deposited into bank Withdrew cash for personal use Withdrew from bank for office use Withdrew from bank for personal use
Paid Ram by cheque Paid salary Paid rent by cheque Goods withdrawn for personal use Paid an advance to suppliers of goods Received an advance from customers Paid interest on loan Paid installment of loan Interest allowed by bank
Sources of Funds = Application of fundsOr
Owner’s equity = AssetOr
Owner’s equity + outside liabilities = AssetsOr
Liabilities + proprietor’ equity = Assets
where, L = liabilities P = proprietor’s equity A = assets
hence, L + P = AOR P = A – LOR L = A – POR A – L- P = ZERO
1. MADAN COMMENCED BUSINESS WITH CASH OF RS. 70000.
2. PURCHASED GOODS ON CREDIT RS. 140003. WITHDREW FOR PRIVATE USE RS. 30004. GOODS PURCHASED FOR CASH RS.120005. PAID WAGES RS. 50006. PAID TO CREDITORS RS. 100007. SOLD GOODS ON CREDIT( CP 18000) RS. 220008. SOLD GOODS ON CASH( CP 3000) RS. 60009. PURCHASED FURNITURE FOR CASH RS. 500010. RECEIVED FROM DEBTORS RS. 11000
1. Ganesh started business with a capital of Rs. 40000.
2. He purchased stock of goods Rs. 30000.3. He sold goods on cash Rs. 40000 cost of which is
Rs. 25000.4. Bought goods on credit Rs. 10000.5. Sold goods on credit for Rs. 18000 (c.p. Rs.
10000)6. Paid sales commission Rs. 5000.7. Received cash discount Rs. 3000.8. Purchased furniture Rs. 10000.9. Received cash from debtors Rs. 15000.10. Paid cash to creditors Rs. 6000.