Journal Entries of Different Types of Transactions Part 1 Rahul Guhathakurta Indian Institute of Planning & Management, Ahmedabad Rahul Guhathakurta © 2006 , http://www.slideshare.net/rahulogy

Types of Economic Transaction Types of Economic Transactions Cash Transactions Transactions for Goods or Services Transactions Involving Receivables & payables Asset Transaction Goods Transaction Service Transaction Debt Transaction Service Transaction Asset Transaction

Asset Transaction

Goods Transaction

Service Transaction

Debt Transaction

Service Transaction

Asset Transaction

Types of Accounts Types of Accounts Personal Accounts Impersonal Accounts Real Accounts Nominal Accounts

Important Rules of Debit and Credit Rule of Personal Account : “Debit the receiver , Credit the giver” Rule of Real Account : “ Debit What Comes in, Credit what goes out” Rule of Nominal Account : “ Debit the Expenses and Losses, Credit the Incomes and Gains”

Rule of Personal Account :

“Debit the receiver , Credit the giver”

Rule of Real Account :

“ Debit What Comes in, Credit what goes out”

Rule of Nominal Account :

“ Debit the Expenses and Losses, Credit the Incomes and Gains”

Regarding Capital & Drawings Owner brings in “capital” to business: Cash a/c debited (<<< money in) Capital a/c credited (>>> money out) Incase of Drawings, Owner of business take away cash or goods in any form Drawing a/c debited (<<< money in) Cash/ Goods a/c credited (>>> money out)

Owner brings in “capital” to business:

Cash a/c debited (<<< money in)

Capital a/c credited (>>> money out)

Incase of Drawings, Owner of business take away cash or goods in any form

Drawing a/c debited (<<< money in)

Cash/ Goods a/c credited (>>> money out)

Regarding Transactions Relating to Goods and Assets Goods are bought in Goods/ purchase a/c debited (<<< debit what comes in) Cash a/c credited (>>> credit what goes out) or A’s Personal a/c credited (>>> money out) -> if goods purchased from the particular person A

Goods are bought in

Goods/ purchase a/c debited (<<< debit what comes in)

Cash a/c credited (>>> credit what goes out) or

A’s Personal a/c credited (>>> money out) -> if goods purchased from the particular person A

Cont’d… When goods are sold, Goods are out of the business, so by rule no:2 Good Sales a/c credited (>>> credit what goes out) B’s Personal a/c debited (<<< debit what comes in) [Being goods sold to Person B ]

When goods are sold, Goods are out of the business, so by rule no:2

Good Sales a/c credited (>>> credit what goes out)

B’s Personal a/c debited (<<< debit what comes in)

[Being goods sold to Person B ]

Cont’d… When goods are purchased are defective or damaged, they are returned back to the trader. Purchase Return a/c credited (>>> credit what goes out) C’s Personal a/c debited (<<< what comes in) -> [ Being goods returned to Person C]

When goods are purchased are defective or damaged, they are returned back to the trader.

Purchase Return a/c credited (>>> credit what goes out)

C’s Personal a/c debited (<<< what comes in) -> [ Being goods returned to Person C]

When goods are defective and the customer returns them, by rule no: 2 Sales Return a/c debited (<<< what comes in) D’s personal a/c credited (>>> what goes out)->[ Being goods returned by Person D]

When goods are defective and the customer returns them, by rule no: 2

Sales Return a/c debited (<<< what comes in)

D’s personal a/c credited (>>> what goes out)->[ Being goods returned by Person D]

Note 1: Hence only one goods account is not maintained in a business, in that case information on: Purchases Sales Purchase Return Sales Returns, etc has to be maintained separately

Hence only one goods account is not maintained in a business, in that case information on:

Purchases

Sales

Purchase Return

Sales Returns, etc

has to be maintained separately

Goods withdrawn for personal use: when owner of the business takes away goods for personal use, it becomes necessary to pass an entry for an amount to the cost price of the goods. Drawings a/c debited (<<< what comes in) “ goods gone as drawings” a/c credited (>>>>what goes out)

Goods withdrawn for personal use:

when owner of the business takes away goods for personal use, it becomes necessary to pass an entry for an amount to the cost price of the goods.

Drawings a/c debited (<<< what comes in)

“ goods gone as drawings” a/c credited (>>>>what goes out)

Goods given in Charity: Charity a/c debited (<<< what comes in) Goods given for charity a/c credited (>>> what goes out) Goods distributed as Samples for Advertisement Advertisement a/c debited (<<< what comes in) Goods gone for advertisement a/c credited (>>> what goes out)

Goods given in Charity:

Charity a/c debited (<<< what comes in)

Goods given for charity a/c credited (>>> what goes out)

Goods distributed as Samples for Advertisement

Advertisement a/c debited (<<< what comes in)

Goods gone for advertisement a/c credited (>>> what goes out)

Goods destroyed by fire: “loss by fire” a/c debited (<<< what comes in) “goods destroyed by fire” a/c credited (>>> what goes out) Note: If goods are insured, Insurance company a/c debited (<<<) “goods destroyed by fire” a/c credited (>>>)

Goods destroyed by fire:

“loss by fire” a/c debited (<<< what comes in)

“goods destroyed by fire” a/c credited (>>> what goes out)

Note: If goods are insured,

Insurance company a/c debited (<<<)

“goods destroyed by fire” a/c credited (>>>)

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