MEANING DEF EXAMPLES

1. Prof. S.N.Gaikwad
Vice Chairman
Prof.S.R. Tajane
Faculty Member

3. • Mr. Ram decides to start a business.
• He has Rs. 5 lakhs with him.
• He takes a loan for another Rs.5 Lakhs from the
Bank.

4. • He procures the necessary permission from
the government and does the following:
➢buys a shop
➢buys the necessary furniture
➢gets electricity connection and
➢employs workers.

5. • His business involves the following
activities:
➢buying clothes from Rahul , a
wholesaler,
➢packing it using a packing machine
and
➢selling packed clothes to retailers
like Atul

6. • CASH
• loan from BANK
• BUILDING
• FURNITURE
• MACHINERY
• REPAIRS to building, furniture or machinery
• ELECTRICITY BILL

7. • SALARY TO WORKERS
called PURCHASES
called SALES
• clothes in wholesale
• packed clothes
• payment to Rahul
• DISCOUNT RECEIVED from Rahul
• payment from Atul
• DISCOUNT ALLOWED to Atul

8. • RAM HIMSELF
(Although he is the owner, he is a separate
person with regard to his business.)
➢The cash he brings in will be called CAPITAL
and the business has to pay this amount
back to him.
➢Any amount he takes from the cash belonging
to the business, for his personal use will be
called DRAWINGS

9. All the elements in the business can be
classified into the following:
1. Real and Artificial persons:
2. Non living things:

10. • : > DISCOUNT ALLOWED to
• : > (Elements like ‘Interest
Received’ from Bank on the amount
deposited)
•(No items mentioned in the current
scenario fall under this class)
3. Expenses : > REPAIRS
> BILL
> SALARY TO
4. Losses
5. Incomes
6. Gains : > DISCOUNT RECEIVED from

11. Once the elements are classified according to
their nature, they can be classified into the
following types of Accounts:
1. Real and Artificial
persons PERSONAL ACCOUNT
2. Non living things
3. Expenses, Losses,
Incomes and Gains
REAL ACCOUNT
NOMINAL ACCOUNT

12. 1. PERSONAL ACCOUNT:
Personal A/c consists of the following:
➢ These elements either RECEIVE
MONEY &/or THINGS or GIVE MONEY &/or
THINGS.
➢ They take the role of RECEIVER or GIVER
➢ gives money to the business as loan.

13. ➢ gives to the business in the beginning.
➢ gives/sells to , for which he receives
for credit, he will be
➢ If gives/sells the
paid later.
➢ gives when receiving/buying from
➢ If buys/receives the on credit, he will pay
later.

14. 2. REAL ACCOUNT:
Real A/c consists of the following:
➢ These elements either COME INTO THE
BUSINESS or GO OUT OF THE BUSINESS.
➢ , and are bought by
for
and
whereby they come into the business
goes out of the business.

15. ➢ When are bought from for ,
come into the business
and
goes out of the business.
➢ If the purchase is done for credit,
comes into the business
and
will go out of the business only at a later date.

16. ➢ When are sold to for ,
goes out of business
and
comes into the business.
➢ If the sales is done on credit,
goes out of the business
and
will come into the business only at a later date.

17. 3. NOMINAL ACCOUNT:
Nominal A/c consists of the following:
>Repairs to building, furniture and machinery
> Bill
>Salary to
>Discount allowed to
>Discount received from

18. ➢Repairs, Bill and Salary to are
expenses incurred by the business.
➢Discount allowed to is a loss for the
business as it involves the business
forgoing a part of the amount that is due
from its debtor.

19. ➢Discount received from is a gain for the
business because a creditor of the business
is forgoing a part of the amount due to him.
➢Expenses and Losses are similar in nature
and Incomes and Gains are similar in
nature.
➢In nominal account, the elemsnts are either
EXPENSES AND LOSSES or INCOMES
AND GAINS

20. Every transaction has a DEBIT aspect and a CREDIT
aspect. According to the Golden Rules of Accounting:
➢ In PERSONAL A/c : DEBIT the RECEIVER &
CREDIT the GIVER
➢ In REAL A/c : DEBIT what COMES IN &
CREDIT what GOES OUT
➢ In NOMINAL A/c : DEBIT all EXPENSES AND LOSSES &
CREDIT all INCOMES AND GAINS

21. TRANSACTIONS

22. (1) 0n 1/1/2015
Ram invests Rs.5lakhs in the business
• Elements : Cash and Ram
(Since Ram is the owner, the
cash he contributes will be called Capital.
It is treated as Personal A/c) Cash and
Capital
• Cash A/c : Real A/c – Comes in – Debit
Capital A/c : Personal A/c – Giver – Credit
• Journal entry:
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
1/1 Cash A/c Dr.
To Capital A/c
(Being cash brought in by
the owner)
5,00,000
5,00,000

23. (2) On 4/1/2015
Ram takes a loan of Rs.5 Lakhs from the bank
• Elements: Cash and Bank
• Cash A/c : Real A/c – Comes in – Debit
Bank A/c : Personal A/c – Giver - Credit
• Journal entry:
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
4/1 Cash A/c Dr.
To Bank A/c
(Being loan taken
from bank )
5,00,000
5,00,000

24. (3) On 7/1/2015
Ram buys a shop building worth Rs.2 Lakhs
• Elements: Building andCash
• Building A/c
Cash A/c
: Real A/c – Comes in – Debit
: Real A/c – Goes out – Credit
• Journal entry:
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
7/1 Building A/c Dr.
To Cash A/c
(Being building
bought for
Rs. 2 lakhs )
2,00,000
2,00,000

25. (4) On 10/1/2015
Buys furniture worth Rs.10,000
• Elements: Furniture and Cash
• Furniture A/c: Real A/c – Comes in – Debit
Cash A/c : Real A/c – Goes out –Credit
• Journal entry:
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
10/1 Furniture A/c Dr.
To Cash A/c
(Being furniture
bought)
10,000
10,000

26. (5) On 13/1/2015
Ram Buys a packing machine worth
Rs.75,000
• Elements: Machine and Cash
• Machine A/c : Real A/c – Comes in – Debit
Cash A/c : Real A/c – Goes out – Credit
• Journal entry:
Date Particulars L.F. Dr. (Rs.) Cr.(Rs.)
13/1 Machinery A/c Dr.
To Cash A/c
(Being Machinery
bought)
75,000
75,000

27. (6) On 16/1/2015 Ram buys cloth from Rahul for
Rs.7500 and pays in cash
• Elements: Cloth and Cash
(‘Cloth’ here refers to the item which Ram
uses in his trade. Hence it is called Purchases.)
Purchases andCash
• Purchases A/c: Real A/c – Comes in – Debit
Cash A/c : Real A/c – Goes out – Credit
• Journal entry:
Date Particulars L.F. Dr. (Rs.) Cr.(Rs.)
16/1 Purchases A/c Dr.
To Cash A/c
(Being cash purchase )
7500
7500

28. (7) On 19/1/2015 Ram incurs Rs.500 as repair charges
for the packing machinery
• Elements: Repair for Machinery and Cash
• Repairs for Machinery A/c
: Nominal A/c – Expense – Debit
Cash A/c : Real A/c – Goes out – Credit
• Journal entry:
Date Particulars L.F. Dr. (Rs.) Cr.(Rs.)
19/1 Repairs for Machinery A/c Dr.
To Cash A/c
(Being repairs for Machinery)
500
500

29. (8) On 22/1/2015 Ram sells packed cloth worth
Rs.10,000 to Ajay for cash
• Elements: Packed cloth and Cash
(‘Packed cloth’ here refers to the item in which
Ram trades. Hence it is called Sales.)
Sales and Cash
• Cash A/c : Real A/c – Comes in – Debit
Sales A/c : Real A/c – Goes out – Credit
• Journal entry:
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
22/1 Cash A/c Dr.
To Sales A/c
(Being cash sales)
10,000
10,000

30. (9) On 23/1/2015
Ram buys cloth worth 10,000 from Atul for
credit
• Elements: Purchases and Credit
(Here the purchase is done for credit. No cash
is paid. The Giver is credited for the amount
due to him.)
Purchases andAtul
• Purchases A/c: Real A/c – Comes in – Debit
Atul A/c : Personal A/c – Giver – Credit
• Journal entry :
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
23/1 Purchases A/c Dr.
To Atul A/c
(Being credit purchases)
10,000
10,000

31. (10) On 25/1/2015 Ram sells packed cloth worth
Rs.15,000 to Amit on credit
• Elements: Sales and Credit
(Here the sales is done for credit. No cash is
received. The Receiver is debited for the
amount due from him.)
Sales and Amit
• Goofy A/c : Personal A/c – Receiver – Debit
Sales A/c : Real A/c – Goes out – Credit
• Journal entry
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
25/1 Amits A/c Dr.
To Sales A/c
(Being credit sales)
15,000
15,000

32. (11) On 28/1/2015 Ram pays Rahul Rs.8,000 and Rahul allows Ram a
Discount of Rs.2,000
• Elements: Cash, Discount Received and Rahul
( Here Ram receives a discount from Rahul. The amount
Ram need not pay is a gain for Ram’s business.)
• Donald A/c
Cash A/c
: Personal A/c – Receiver – Debit
: Real A/c – Goes out – Credit
Discount Received A/c : Nominal A/c – Gain – Credit
• Journal entry:
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
28/1 Donald A/c Dr.
To Cash A/c
To Discount Received A/c
(Being payment to creditor made
and discount received)
10,000
8,000
2,000

33. (12) On 31/1/2015 Ram receives Rs.14,000 from Rohit in full
settlement of the amount due from him
• Elements: Cash, Discount Allowed and Rohit
(Here Ram allows Rohit a discount. The amount Rohit
will not pay because of the discount is a loss to Ram’s
business.)
• Cash A/c : Real A/c – Comes in – Debit
Discount Allowed A/c : Nominal A/c – Loss – Debit
Goofy A/c : Personal A/c – Giver - Credit
• Journal entry:
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
31/1 Cash A/c Dr.
Discount Allowed A/c Dr.
To Rohits A/c
(Being payment received from
debtor and discount allowed)
14,000
1,000
15,000

34. (13) On 2/2/2020
Ram pays Rs.3,000 as salary to
workers
• Elements: Salary to workers and Cash
• Salary A/c: Nominal A/c – Expense – Debit
Cash A/c : Real A/c – Goes out - Credit
• Journal entry:
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
2/2 Salary A/c Dr.
To Cash A/c
(Being salary paid)
3,000
3,000

35. (14) On 2/2/2015 Ram pays Rs.5000 as electricity bill
charges for the last month
• Elements: Electricity Bill and Cash
• Electricity Charges A/c
: Nominal A/c – Expenses – Debit
Cash A/c : Real A/c – Goes out – Credit
• Journal entry:
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
2/2 Electricity charges A/c Dr.
To Cash A/c
(Being electricity charges
paid)
5,000
5,000

36. (15) 0n 4/2/2015 Ram takes Rs.3,000 to buy a cycle for
his personal use
• Elements: Cash and Ram
(Here Ram withdraws cash for his personal use. Such
withdrawals are called Drawings. It is treated as
Personal A/c )
Cash and Drawings
• Drawings A/c : Personal A/c – Receiver – Debit
Cash A/c : Real A/c – Goes out – Credit
• Journal entry:
Date Particulars L.F. Dr. (Rs.) Cr. (Rs.)
4/2 Drawings A/c Dr.
To Cash A/c
(Being drawings made by
the owner )
3,000
3,000

37. Now that we’ve helped Ram learn the
basics of Accounting, and Journalizing,
lets hope that he does well in his
business…

39. Prof. Satish R. Tajane
(M.Com, GDC&A,CMA-Inter,Ph.D. Appear)
GST & Income Tax
Consultant