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Certain rules must be observed in recording transactions under double entry system.
The two elements of every transaction must be grouped under three types of accounts
and each type of account has its ru8le for recording the debit and credit aspect of the
transaction.
The two principal type of accounts are one personal accounts and other Impersonal accounts. Personal
accounts are subdivided into a) Real or asset accounts and b) nominal accounts. Personal account
contains record of transaction with a person that could be an individual group or society banks etc. Real
accounts are accounts of properties or assets and contain a record of purchases and sales of the
properties or assets like land building goods cash etc. Nominal accounts are accounts of expenditure and
income and record gains and losses. The accounting rules to be followed for the three types of accounts
are.
Trial Balance,
Trading Account and Profit and Loss Account,
General Ledger
Capital,
Assets,
Liabilities,
Creditors,
Debtors,
Sales,
Purchases,
Drawings,
Purchase
Returns,
Sales Returns,
Stock, Income,
Expenses etc.,
Various Assumptions viz Accounting Entry, Money Measurement, Accounting
period, Going concern.
Basic concepts like Double Entry, Revenue Realization concept, Historical cost
concept, Period matching concept, Full disclosure concept, Evidence concept
etc.,
Modifying principles like Cost benefit, consistency, materiality, etc.,
Double entry concept like Debit Aspect, Credit Aspect
Golden rules of Accountancy viz
3) M/s Varma &co remit cash Rs 10000 into their current a/c.
4) John gives a cheque for Rs 500 in his SB account and wants cash
1) VOC College maintain SB a/c. issues a cheque for RsTwo Lakhs with
instructions to credit SB accounts of ten Lecturers a/c with Rs20000 each.
Here we have to debit VOC College a/c with Rs 2 Lakhs and credit the SB a/c of
10 Lecturers with Rs20000/ each. In this one transaction gives rise to 11
changes.
1) A company may give instruction to debit their current a/c and credit salary for
1000 employees. Here one debit may give rise to 1000 credits under Double
Entry.
3) The Bank want to buy a Tube light for your branch at a cost of Rs 150/
Debit- Charges Expenditure A/c-Rs150/
Credit cash a/c Rs 150/(The bills from the shop should be attached to the Debit
voucher. Later on all entries may undergo Inspection or Audit. This is Evidence).
In all the above, one transaction have given rise to many changes in
different accounts also.
From the following particulars extracted from the books of accounts of M/s XYZ PAC at
the close of the year ended 31.3.2010 prepare a Balance Sheet as on that date in order
of liquidity.
Particulars Amount in
Rs
Savings Deposit 50000
Investments 10,000
Cash on Hand 250
Questions Answers.
Book keeping means System of maintaining book of
accounts.
Accounting Includes Book keeping
balancing of books /accounts ,
preparation of final accounts
and drawing conclusion.
Cost accounting Process of accounting for cost
Management Accounting Concerned with supply of
useful information to the
Management to enable to take
useful decision.
Business entity Business is treated as a
separate entity from the
owners/ proprietor.
Money measurement All business transactions are
measured in terms of money.
Objective evidence Bills , Cash memo Cheque book
, vouchers etc are objective
evidence for recording an entry.
Dual aspect Each transactions have two
effect.
Going concern Business entity has indefinite
life of existence.
Journal Book of original entry.
Journalising The process of recording
transactions in a journal.
Capital account is ---- Account Personal Account
Amount invested in business Capital.
by its owner is known as
A book which contains all Ledger
accounts
A process of transferring Posting
transactions from Journal into
ledger account
A statement as on a particular Trial Balance
date showing all the ledger
balances.
Test.
On 31st march , the total d ebit and Credit sides of various ledger accounts and receipts and
payment sides of Cash and Bank column of cash book of Shri Baghavan Das were as under