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@ Step 1 Recording in Journal ± Journal entries

@ Step 2 Ledger Accounts - Posting

@ Step 3 Trial Balance

@ Preparation of Profit & loss account and Balance

Sheet
 6 
  
Types of Accounts

Personal Account Impersonal Account

Real Account Nominal Account

 Personal Account

It refers to the accounts of persons or

firms with whom the business enters
in to dealings
 Personal Account

Natural Person Artificial Person Representative A/c

Human Beings Firms Capital

Institutions etc Drawings etc

Rule of Journal Entry:

Debit The Receiver
Credit the giver
 |eal Account

It refers to the accounts of the

properties under the control of
the business
 Real Account

Tangible items Intangible items

Machinery Goodwill
Buildings Patents
Furniture etc Trademark etc

Rule of Journal Entry:

Debit What Comes in
Credit what goes out
 Nominal Account

It refers to the accounts of

Expenses, gains, revenues and
losses
 Nominal Account

Revenues & Gains Expenses & Losses

Discount Received Discount Allowed

Commission Received Salary Paid
Professional Fee Received Rent Paid

Rule of Journal Entry:

Debit all expenses and losses
Credit all incomes and gains
[ 6tate the nature of following accounts
(|eal , Nominal or Personal)
@ Machinery
@ |ent
@ Furniture
@ Goods
@ Mr. X (The Debtor)
@ Capital
@ 6alary
@ Building
@ Mr. Y (The Creditor)
@ Bank
 6tate the nature of following accounts
(|eal , Nominal or Personal) and specify whether the
account will be debited or credited

@ 6alary paid
@ Furniture purchased
@ Building sold
@ Commission received
@ Goods sold
@ Capital Introduced
@ Loan taken from Bank
Journalize the following transactions:
@ Mr. A Commenced business with cash
Rs.1,00,000
@ Bought Machinery for cash Rs. 25,000
@ Purchased Goods for cash Rs. 30,000
@ Paid Salaries in cash Rs. 10,000
@ Sold good for cash Rs. 45,000
@ Cash A/c Dr. 1,00,000
To Mr. A¶s Capital A/c 1,00,000
(Being capital introduced by the Proprietor Mr. A)

@ Machinery A/c Dr. 25,000

To Cash A/c 25,000
(Being Machinery bought for cash)

@ Purchases A/c Dr. 30,000

To Cash A/c 30,000
(Being goods purchased for cash)
@ Salary A/c Dr. 10,000
To Cash A/c 10,000
(Being salaries paid in cash)

@ Cash A/c Dr. 45,000

To Sales A/c 45,000
(Being goods sold for cash)
{ournalize the following transactions

@ Commenced business with cash 40,000

@ Purchased goods on credit from |am 30,000
@ Purchased goods for cash 1,000
@ Paid wages 500
@ Purchased furniture for cash 2,000
@ |eceived commission in cash 600
@ Cash sales 3500
@ Paid into bank 500
@ Paid rent by cheque 300
@ Goods sold to kamal 10,000
@ Cash A/c Dr. 40,000
To Capital A/c 40,000
(Being capital introduced by the proprietor)
@ Purchase A/c Dr. 30,000
To |am A/c 30,000
(Being goods purchased on credit from |am)

@ Purchase A/c Dr. 1,000

To Cash A/c 1,000
(Being goods purchased for cash)
@ Wages A/c Dr. 500
To Cash A/c 500
(Being wages paid in cash)
@ Furniture A/c Dr. 2,000
To Cash A/c 2,000
(Being furniture purchased for cash)
@ Cash A/c Dr. 600
To Commission 600
(Being commission received in cash)
@ Cash A/c Dr. 3500
To 6ales 3500
(Being sales made for cash)
@ Bank A/c Dr. 500
To Cash A/c 500
(Being money deposited into bank)
@ |ent A/c Dr. 300
To Bank A/c 300
(Being rent paid by cheque)

@ Kamal A/c Dr. 10,000

To 6ales A/c 10,000
(Being sales made to kamal on credit basis)
@ Mr Praj Starts business with cash Rs. 3,50,000
@ Bought Machinery for cash Rs. 80,000
@ Bought furniture on credit from M/s XYZ Ltd for Rs. 50,000
@ Deposited into bank Rs. 60,000
@ Purchased goods on credit from Mr. A Rs. 1,00,000
@ Purchased goods for cash Rs. 75,000
@ Sold goods on credit to Mr. B Rs. 1,20,000
@ Paid salaries by cheque Rs. 15,000
@ Cash Sales Rs. 90,000
@ Paid Rs. 1,00,000 to Mr. A
@ Paid Rs. 50,000 to M/s XYZ Ltd, Rs. 30,000 paid by cash and Rs.
20,000 by cheque
@ Received Rs. 1,20,000 from Mr. B
[ {ournalize the following
@ Mr. X Commenced his business with a capital of |s. 20,00,000
@ Paid into Bank 2,50,000
@ Bought goods for |s. 2,20,000
@ Bought goods from Mr. H |s. 1,10,000
@ Bought Office furniture from A &Co. |s. 75000
@ Bought building for cash |s. 5,25,000
@ Goods sold to Mr. A |s. 1,25,000
@ Paid |s. 1,00,000 (for purchases made in transaction no. 4) to
Mr. H
@ Bought shares in ABC Ltd for |s. 45,000 for cash
@ |eceived from Mr. A |s. 75,000
@ Withdrawn from Bank |s. 55,000
@ Paid |ent by Cheque |s. 5000
[ Cash A/c Dr. 20,00,000
To X Capital A/c 20,00,000
(Being capital introduced by the proprietor)

[ Bank A/c Dr. 2,50,000

To Cash A/c 2,50,000
(Being cash deposited in to bank)

[ Purchase A/c Dr. 2,20,000

To Cash A/c 2,20,000
(Being goods purchased for cash)

[ Purchase A/c Dr. 1,10,000

To H A/c 1,10,000
(Being goods purchased on credit from H)
@ Furniture A/c Dr. 75,000
To A&Co. 75,000
(Being furniture purchased on credit from A&Co)

@ Building A/c Dr. 5,25,000

To Cash A/c 5,25,000
(Being building purchased for cash)

@ Mr. A¶s A/c Dr. 1,25,000

To 6ales A/c 1,25,000
(Being sales made to Mr. A on credit basis)

@ Mr. H A/c Dr. 1,00,000

To Cash A/c 1,00,000
(Being payment made to Mr. H)
[ Investment A/c Dr. 45,000
To Cash A/c 45,000
(Being investment made in cash)

[ Cash A/c Dr. 75,000

To A¶s A/c 75,000
(Being money received from A)

[ Cash A/c Dr. 55,000

To Bank A/c 55,000
(Being cash withdrawn from bank for office use)

[ |ent A/c Dr. 5,000

To Bank 5,000
(Being rent paid by cheque)
Ledger

It is a book where different types of account

are maintained. After preparation of journal
entries for all the transactions, the entries
are transferred to ledger book under
different heads of accounts to know the net
or final position of a particular account at
the end of a certain period.
 Cash Account

Particulars Amount Particulars Amount

(Dr.) (Cr.)
Mr A¶sCapital 1,00,000 Machinery 25,000
Sales 45,000 Purchases 30,000
Salaries 10,000
Balance c/d 80,000
1,45,000 1,45,000
 Capital Account
Particulars Amount Particulars Amount
Balance C/d 1,00,000 Cash A/c 1,00,000

1,00,000 1,00,000

Machinery Account
Particulars Amount Particulars Amount
Cash A/c 25,000 Balance C/d 25,000

25,000 25,000
 Purchases A/c
Particulars Amount Particulars Amount
Cash 30,000 Balance C/d 30,000

30,000 30,000

Salary A/c
Particulars Amount Particulars Amount
Cash 10,000 Balance C/d 10,000

10,000 10,000

Sales A/c
Particulars Amount Particulars Amount
Balance C/d 45,000 Cash 45,000
45,000 45,000
 Trial Balance

Particulars Amount Particulars Amount

(Dr.) (Cr.)
Cash 80,000 Capital 1,00,000
Machinery 25,000 Sales 45,000
Purchases 30,000
Salary 10,000

1,45,000 1,45,000