Accounting mechanics basic records

1. Types of Accounts
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Eg: Individuals,
Firms, Companies,
Banks, etc.
Eg: Individuals,
Firms, Companies,
Banks, etc.
Real Accounts Nominal Accounts
Eg: Individuals,
Firms, Companies,
Banks, etc.
Impersonal AccountsPersonal Accounts
AccountsAccounts

2. Rules of Debit and Credit
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Rules of Debit and Credit
Personal
Accounts
Nominal
Accounts
The
Receiver
All
expenses
and losses
The Giver All incomes
and gains
Real
Accounts
What
Comes in
What goes
out
Debit
Credit

3. Journal
• The daily business transactions are recorded in a book
called Journal. The journal is called ‘book of original entry.’
• All the transactions are first entered in the journal in the
order of their occurrence.
• Recording of entries in the journal is known as journalizing.
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4. Format of a Journal
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Date Particulars L.F. Debit
Rs.
Credit
Rs.

5. Steps in Journalizing
• Analyze the transaction and identify the two accounts that
are being affected by the transaction.
• Ascertain the nature of the accounts involved as real,
personal or nominal.
• Determine which rule of debit and credit is applicable for
each of accounts involved.
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6. Steps in Journalizing
• Ascertain the account to be debited and the account to be
credited.
• Write the name of the account to be debited along with
the abbreviation “Dr” on the same line against the name of
the account in particulars column and the amount to be
debited in the debit amount column against the name of
the account.
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7. From the following state the nature of the accounts and
which are to be debited and credited
1. Mr A started business with cash
2. Purchased goods from x for cash
3. Sold goods for cash to Y
4. Purchased goods from X for credit
5. Sold goods to B on credit
6. Purchased furniture from ABC
7. Paid wages
8. Discount allowed by Goutam
9. Discount given by A
10. Cash paid into bank
11. Withdrew from bank for office use
12. Withdrew from bank for personal use
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8. Steps in Journalizing
• Write the name of the account to be credited in the next
line preceded by the word “To” at a few spaces towards
the right in the particulars column, and the amount to be
credited in the credit amount column against the name of
the account.
• Write Narration (a brief description of the transaction)
within brackets in the next line in particulars column
usually starting with being.
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9. Format of a Journal
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Date Particulars L.F. Debit
Rs.
Credit
Rs.
Year
Mth/date ABC a/c Dr.
To XYZ A/c
(being……….brief
narration)
XXX
XXX

10. Journalize the following
2010
Jan 1
Ahmed commenced business with Rs 75,00,000
3 Opened a current a/c in bank and deposited there Rs 30,00,000
5 Bought furniture Rs 10,00,000
7 Bought goods worth Rs 90,000 for cash
10 Bought goods from Bharath Rs 1,50,000 on account
12 Sold goods to Dayanand Rs 1,25,000
15 Cash sales 75,000
20 Paid to Bharath Rs 1,00,000
26 Withdrew from bank for office use Rs 25,000
28 Withdrew from bank for personal use Rs 30,000
30 Received a cheque from Dayanand Rs 1,00,000
31 Paid rent Rs 15,000
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11. • A compound journal entry is an accounting entry
which effects more than two account heads.
• A simple journal entry has one debit and one credit
whereas a compound journal entries includes one
or more debits and/or credits than a simple journal
entry
• Instead of recording numerous simple journal
entries on a single day it is better to record journal
entries as a compound entry because it saves time
and keeps related debits and credits in one place.
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12. Trade discount and cash discount
1. Trade discount is given with the aim to purchase at high
quantity.
Cash discount is given with the aim to get payment
fastly and before payment date .
2. Trade discount is shown as deduction in Invoice.
Cash Discount is not shown as deduction in Invoice.
3. There is no any accounting treatment for trade
discount.
There is accounting treatment for cash discount both in
vendor and buyer’s day book.
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13. 2010
March 1
Ahmed commenced business with Rs cash 3,00,000,stock 1,00,000 and
buildings 4,00,000 and 75000 loan from his brother at 12%
5 Purchased furniture for Rs 1,20,000 from star furniture on credit
7 Bought goods worth Rs 60,000 from Amar
11 Sold goods to Akash Rs 40,000
12 Purchased goods worth Rs 50,000 at 20% trade discount from Hind ltd and
paid half of the amount at 5% cash discount
14 Paid to Amar Rs 40,000
15 Sold goods to Mahesh worth Rs 30,000 at 5% trade discount
18 Deposited into bank Rs 45,000
21 Paid to Star furniture house Rs 1,15,000 in full settlement
25
Paid to Hind Ltd Rs 19,000 in full settlement out of which 10,000 was paid in
cash and the balance by cheque
26 Mahesh returned good worth Rs 1,500
28 Mahesh paid a cheque of Rs 25,000
29 Received from Akash Rs 30,000 by cheque
30 Paid rent by cheque Rs 4000
31 Paid electricity bill Rs 1,400
31 Akash became insolvent and paid 50 p in a rupee
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