5. Journal Book of Original Entry
Transaction are written in chronological order based on
Source Document
ARPIT SIDHU (Assit. Prof.)(LPU)
6. Identify and compare the rules of recording different transactions in
accounting books
Identify and construct the journal book based on different transactions
Classify and construct different accounts depending upon their nature
LEARNING OUTCOMES
ARPIT SIDHU (Assit. Prof.)(LPU)
8. Book of original or prime entry as business
transactions are recorded at the first instance.
Transactions recorded in the order in which they
occur, i.e. in chronological order.
Basic book of accounting
Journal
ARPIT SIDHU (Assit. Prof.)(LPU)
9. The process of entering or recording the
transaction in the journal is called Journalising.
Record of each transaction in the journal is called
journal entry.
ARPIT SIDHU (Assit. Prof.)(LPU)
10. Date Particulars L.F Debit Credit
Journal’s Format
ARPIT SIDHU (Assit. Prof.)(LPU)
11. Rules of Debit and Credit
ARPIT SIDHU (Assit. Prof.)(LPU)
12. Personal Account
Accounts relates to a person (individuals, firms, companies, debtors, creditors
Purpose: To ascertain the balance due to or due from persons/organizations
Natural Personal Account (Ram’s Account, Ramesh’s Account etc).
Artificial Personal Account : recognised as persons in business
dealings(Account of body corporate or limited Co’s).
Representative Personal Account : representing certain person. Eg:
rent outstanding
ARPIT SIDHU (Assit. Prof.)(LPU)
13. Real Account
Real account includes all the tangible and intangible assets
Examples
• Tangible: Land, Building, Investment, Plant and Machinery, Stock , cash etc.
• Intangible: Goodwill, Patents, Trademark
Nominal Account
Nominal account are related to Revenue and Expense, losses, gains etc.
Examples
• Salary account, purchase account, interest paid account, Sales account ,
commission received account etc.ARPIT SIDHU (Assit. Prof.)(LPU)
14. Classification of
Accounts
Traditional Approach
Modern
Approach
(Write Down)
Accounting Rules
Personal Accounts
Real Accounts
Nominal Accounts
Debit the Receiver, Credit the Giver
Debit what comes in, Credit what goes
out
Debit all the Expenses and Losses,
Credit all the income and Gains
Assets
Liabilities
Capital
Revenue
Expense
Dr (+) Cr (-)
ARPIT SIDHU (Assit. Prof.)(LPU)
15. Classification of accounts under different Heads
Capital Introduced (Personal Account)
Drawing Account (Personal Account)
Cash Received (Real Account)
Interest Paid (Nominal Account)
Discount Received (Nominal Account)
Bank Account (Personal Account)
Bank Overdraft (Personal Account)
Bad Debt written off (Nominal Account)
Outstanding Salaries (Personal Account)
Prepaid Rent (Personal Account)
Purchases Account (Nominal Account)
Sales Account (Nominal Account)
Interest Accrued (Personal Account)
ARPIT SIDHU (Assit. Prof.)(LPU)
17. Journal provides a chronological i.e. date wise record of all business transactions
at one place.
Transactions recorded as and when they take place, chances of any transaction
being unrecorded is reduced to the minimum.
Facilitates preparation of ledger accounts.
Serves as evidence in the court of law.
Transactions recorded with narration, reason for each transaction can be
ascertained.
Advantages of journal
ARPIT SIDHU (Assit. Prof.)(LPU)
18. When the number of transactions is very large, it may practically be difficult,
if not impossible, to record all the transactions through one journal because
of the following reasons:
(1) The system of recording all the transactions in a journal requires the
writing down the name of the account involved as many times as the
transactions occur.
(2) Such a system does not provide the information on prompt basis.
(3) Such a system does not facilitate the installation of an internal check
system, since the journal can be handled only by one person.
Limitation of journal
ARPIT SIDHU (Assit. Prof.)(LPU)
20. (Traditional Vs. Modern Approach)
Traditional Approach
3 Drawbacks
Modern Approach
Limited Applications
Not explained clearly
Very slow approach
Always correct
Universally applicable
Used in computerised accounting
Which one is superior
ARPIT SIDHU (Assit. Prof.)(LPU)
21. Numerical question on the
basis of Modern Approach of
Accounting
ARPIT SIDHU (Assit. Prof.)(LPU)
24. 1. Hari om Started Business and Introduced Capital in Cash Rs 100000.
2. Purchased plant from Raj furniture on credit Rs 10000
3. Paid salary Rs 3000 in cash
4. Purchase goods for cash Rs 50000
5. commission paid in cash Rs 1000
6. Paid to Mr. Ram creditors Rs 5000
ARPIT SIDHU (Assit. Prof.)(LPU)
29. 1. Hari om Started Business and Introduced Capital in Cash Rs 100000.
2. Purchased plant from Raj furniture on credit Rs 10000
3. Paid salary Rs 3000 in cash
4. Purchase goods for cash Rs 50000
5. commission paid in cash Rs 1000
6. Paid to Mr. Ram creditors Rs 5000
ARPIT SIDHU (Assit. Prof.)(LPU)
31. 1] Ganesh Started his business with cash
worth Rs. 2000
2] Borrowed from Mahesh Rs. 12,000
3] Purchased from Furniture on credit Rs.
10,000
4] Purchased goods for cash Rs. 2000
5] Purchases goods from Ram on credit Rs.
1200
6] Received cash from shyam Rs.2000
ARPIT SIDHU (Assit. Prof.)(LPU)
32. Cont..
7] Deposited cash into Bank Rs. 1200
8] Withdrew cash for personal use Rs.20,000
9] Withdrew from bank for personal use
Rs.12,000
10] Received a cheque from a customer Shyam
Rs. 4000
13] Paid interest on loan Rs.1200
14] Interest allowed by bank Rs.1500
ARPIT SIDHU (Assit. Prof.)(LPU)
33. Question
01 july 2019] Sold goods to Mr. Moon worth Rs.3500
2 july 2019] Goods are returned worth Rs.500 from
Mr. Moon
3 july 2019] Sale placed to Mr. Sea Rs.5000 and
discount allowed to him Rs. 400
4 july 2019] Withdrew goods for private use (Cost
Rs. 500 and selling price Rs. 600)
5 july 2019] Cash sales Rs.10,000 and credit sales
Rs.20,000
6 july 2019] Purchases goods Rs.10,000 whereas
discount involved Rs.500
ARPIT SIDHU (Assit. Prof.)(LPU)
35. Question
1 july 2019] Purchased goods from sohan at listprice
of Rs. 30,000 at a trade discount of 10%
2 july 2019] Bought goods of listprice of Rs. 1,25,000
from Mohan less 20% trade discount and paid 40% by
cheque with 2% of cash discount
3 july 2019] Rejected and returned 10% of goods
supplied by Sohan
ARPIT SIDHU (Assit. Prof.)(LPU)
36. Question
1] Sold goods to sunil worth Rs. 3,00,000 less 20% trade
discount and received a cheque under cash discount of 2%.
2] Purchased goods worth Rs. 2,00,000 with trade discount of
30% and paid in cash after deducting 3% of cash discount
from the Mr. Mohit.
3] Sold goods costing Rs. 40,000 to Anil at profit of 20% on
sales less 20% trade discount and charged 8% of sales tax.
4] Mohit returned goods worth Rs. 15000
ARPIT SIDHU (Assit. Prof.)(LPU)
38. Question
1] Interest on capital worth Rs. 10,000 P.a.
2] Interest on drawings worth Rs. 12,500
2] Accrued Interest worth Rs. 2000
3] Payment done in advance Rs. 2500
4] The rent is outstanding worth Rs. 10,000
5] The advances received worth Rs. 12000
6] Paid cash to creditors Rs. 3500 and discount
allowed by him Rs. 500
ARPIT SIDHU (Assit. Prof.)(LPU)
39. Conclusive
1] Mr. Karam invested money in his business Rs. 10,00,000
2] Goods purchased from Sunil Rs. 15000
3] Goods sold to Mr. Karim Rs. 13500
4] Goods returned to Sunil Rs.1200
5] Goods returned from Sunil Rs. 120
6] Purchased goods from Mahesh Rs. 15000 with trade discount of 10% and cash
discount 5%.
7] Sold goods to Swami Rs.12,000 with trade discount 10% and cash discount 5%
8] Interest on capital of Rs. 10,00,000 is being charged @ 10%
9] Interest on drawings is Rs. 15000 P.a.
10] Wages paid in advance Rs. 1500
11] Salary turns out to be outstanding for Rs. 12000
12] Accrued interest Rs.12300
13] The advances received Rs. 20,000
ARPIT SIDHU (Assit. Prof.)(LPU)
43. Book of secondary entry
Transactions recorded in the journal are finally
carried to the ledger.
Contains all the accounts of a business whether
real, personal or nominal.
An Apercue
45. BASIS JOURNAL LEDGER
1.Nature
Of Book
It is a book of prime entry It is book of secondary entry
2.Basis Of
Preparatio
n
It is prepared on the basis of
source documents.
It is prepared on the basis of
journal.
3.Object It is prepared to record all
transactions in chronological
order.
It is prepared to know the net
effect of various transactions
affecting a particular account.
4.Balancing Journal is not balanced. All ledger accounts are balanced
5.Narration Narration is written for each
entry
No narration is given.
6. Name of
process
The process is called
journalizing.
The process of recording in the
ledger is called posting.
DISTINCTION BETWEEN JOURNAL AND
LEDGER
Representative Personal Account ….which represents certain groups of persons…if rent is due to landlord, an out standing rent account will be opened in the in the books representing the landlord to whom the rent is payable.
Real Account
Bank dr To bank interest
Interest on loan Dr. To cash
Back exercise 4, 5, 6 in tutorial
1st 3 in home
15000
(1500)
13500
(775)
Purchases Dr 13500
To mahesh 12725
To discount Received 725
