Illustration 2 : Analyse the transactions given in Illustration 1 by using the
"MODERN APPROACH"
Solution :
S. no.
Transaction
Accounts Affected
Nature of Accounts
Changes
Debit (Rs.)
Credit (Rs.)
1.
Commenced Business
Cash
Asset
Increase
1,00,000
Capital
Capital
Increase
1,00,000
2.
Purchased goods
Purchases
Expenses
Increase
20,000
Cash
Asset
Decrease
20,000
3.
Bought goods on
Purchases
Expenses
Increase
10,000
credit
Pravesh
Liabilities
Increase
10,000
4.
Sold goods for cash
Cash
Assets
Increase
5,000
Sales
Income
Increase
5,000
5.
Sold goods on Credit
Vikas
Assets
Increase
12,000
Sales
Income
Increase
12,000
6.
Paid Salary
Salary
Expenses
Increase
5,000
Cash
Assets
Decrease
5,000
7.
Received
Cash
Assets
Increase
2,000
Commission
Comm-ission
Income
Increase
2,000
JOURNAL
Journal is a book in which transactions are originally recorded in a chronological order (as per the occurance) after analyzing the transaction and applying the rules of debit and credit.
PROCESS OF RECORDING
1. Identification of financial transactions
2. Analysis of tansactions
3. Application of rules of debit and credit
4. Recording in JournalIllustration 3 : By using illustration 1, record the transactions in Journal.
JOURNAL
Date
Particulars
L.F.
Debit (Rs.)
Credit (Rs.)
2011
Jan 1
Cash a/c
To Capital a/c
Dr.
1,00,000
1,00,000
(Being business commenced)
Jan 5
Purchases a/c
To Cash a/c
Dr.
20,000
20,000
(Being goods bought for cash)
Jan 7
Purchases a/c
Dr.
10,000
To Pravesh’s a/c
(Being goods bought on credit)
10,000
Jan 10
Cash a/c
To Sales a/c
Dr.
5,000
5,000
(Being goods sold for cash)
Jan 12
Vikas’s a/c
To Sales a/c
Dr.
12,000
12,000
(Being goods sold on credit)
Jan 15
Salary a/c
Dr.
5,000
To Cash a/c
(Being salary paid)
5,000
Jan 20
Cash a/c
Dr.
2,000
To Commission a/c
(Being Commission received)
2,000
Simple Entries : The entries in which only two accounts are affected, one a/c is debited and other one is credited. All entries in the above illustration 3 are this nature.
Compound Entries : The entries in which there are at least two accounts are debited and at least one account is credited or vice versa.
Example 1 Received Rs. 3,900 from Ram in full settlement of a claim of Rs. 4,000.
Cash a/c
Dr.
3,900
Discount allowed a/c
Dr.
100
To Ram
4,000
(Being cash received in full settlement)
Example 2 Paid Rs. 4,900 to Shyam in full settlement who owes us Rs. 5,000.
Shyam’s a/c
Dr.
5,000
To Cash a/c
4,900
To Discount received a/c
100
(Being Cash paid in full settlement)
SPECIAL TRANSACTIONS RELATED TO GOODS
1.
Withdrawal of goods by owner for personal use.
Drawings a/c
Dr.
To Purchases a/c
2.
Goods given as charity.
Charity a/c
Dr.
To Purchases a/c
3.
Goods distributed as free samples
Advertisement a/c
Dr.
To Purchases a/c
4.
Goods lost by fire/ flood/theft etc.
Loss by fire/theft a/c To Purchases a/c
Dr.
Note : Purchases a/c is credited in the above entries because the goods are going out of our business on cost and it is not a sale hence, deducted from the purchases a/c.
CBSE Accountancy Class XI ( By Mr. Aniruddh Maheshwari )
Email Id : [email protected]
