Accounting for

Managers Introduction

Raghavendra
M.B.A, M.Phil., P.G.D.I.T, (Ph.D)

Senior Asst. Professor

MITE

Journal
Derived

from Jour, a French word,

meaning a day

Journal

Ledger Trial BalanceAnnual Reports- Cash Flow and Fund

Flow Statements

Classification of Accounts
Personal

Accounts
Real Accounts
Nominal Accounts

Personal Account
Names

of Persons, companies etc.

Ex: Rajan A/c, Ganesh A/c, Canara Bank A/c,

Capital A/c, Drawings A/c, ABC Ltd. A/c etc.

DEBIT

THE RECEIVER
CREDIT THE GIVER

Real Account
Assets

and Liabilities

Ex: Cash, Machinery, Furniture, Vehicles, Debtors,

B/R, Creditors, Loans, B/P, Purchases, Sales,
Purchase returns and Sales Returns etc.

DEBIT

WHAT COMES IN
CREDIT WHAT GOES OUT

Nominal Accounts
Accounts

incomes

relating to expenses and

Ex: Salary, rent, telephone charges, stationary,

carriage, wages, commission, discount etc.

DEBIT

ALL EXPENSES AND LOSSES

CREDIT ALL INCOMES AND GAINS

Steps in Journalising
Identify

the 2 aspects (accounts) of a

transaction
Find out whether the accounts are
Personal A/c, Real A/c or Nominal
Accounts.
Apply the rules for these accounts,
find out Debit and Credit entries
Make the journal entry

Points to be considered

Regarding salary, commission etc. paid to a

certain person, recording them under salary or
commission is appropriate than recording in their
personal names.
Purchase a/c includes purchase of Goods only, i.e
those items bought for the purpose of selling later.
Those items purchased for own use, or assets
purchased do not come under Purchases A/c, as
they are purchased not for sale.
When Cheques are received, they are treated as
cash received. Only when these cheques are
deposited into Bank, does the bank balance gets
affected and hence Bank account is debited.

1999 July 1: Mr. Ramesh started business with a capital of

Rs.2,00,000
July 2: Deposited into Bank Rs.75,000
July 2: Purchased goods worth Rs.25,000 by paying cash
July 4: Purchased goods from Mr.Mahesh for cash
Rs.10,000
July 7: Purchased goods from Mr. Rahul on credit Rs.5,000
July 7: Machinery purchased Rs.20,000
July 10: Sold goods to Rahim Rs.8,000
July 14: Received a cheque from Rahim for the full
amount due. This cheque was deposited into bank the
next day.
July 17: Salary paid Rs.1500
July 18: It was found that Rahims cheque was
dishonoured.
July 19: Cash sales Rs.7,000
July 24: Received a cheque from Rahim for Rs.7500,
discount Rs.500
July 27: Paid rent of the building by cash Rs.1000.

The following transactions were noticed in the books of Mr. Mohan:

2012 January 3 : Mohan started business with Rs.1,00,000 cash, Rs.50,000 Furniture
and Rs.75,000 Vehicles
4: Purchased new furniture costing Rs.20,000 from Raj Ltd
5. Purchased goods Rs.30,000 from Anil. Out of this, Rs.10,000 was paid by cash
immediately.
6. Sold goods costing Rs.10,000 to Rehman for Rs.9,800 in full settlement.
6. Gave a cheque to Raj Ltd. for the amount due.
8. Sold goods to Arun Rs.8000 and received cheque. This cheque was deposited into
bank the same day.
9. Albert, a customer, directly deposited into our bank account Rs.5,000
15. It was found that Aruns cheque was dishonoured, bank charges Rs.50
18. Settled Anils account. He allowed us a discount of 10 %.
20. Withdrew Rs.10,000 from bank for office use.
22. Withdrew Rs.5000 from bank for personal use.
24. Introduced additional capital into business Rs.40,000
Enter the above transactions in their respective ledger accounts. Also prepare
Trial Balance.

From the following transactions in the books of Mahesh,

prepare Cash account:
2011 September 1: Started business with Rs.5,00,000
Sept 2: Opened a savings account with Canara Bank, Mangalore
Sept 4: Purchased building Rs.2,00,000 and Furniture Rs.50,000
Sept 8: Deposited Rs.1,00,000 into bank
Sept 10: Purchased goods Rs.50,000 from ABC Ltd. Out of this,
Rs.20,000 was paid in cash immediately.
Sept. 15: Settled the dues of ABC Ltd by cheque
Sept. 20: Cash sales Rs.20000
Sept 25: Out of the goods sold on Sept 20, goods costing
Rs.2,000 was returned to Mahesh
Sept. 30 : Withdrew Rs.3000 from bank for office use and Rs.2000
from cash balance for personal use.

The following transactions were reported by a

businessman:
1 April 2002: Opening cash balance Rs.2,200, bank balance
Rs.8700
April 4: Sold goods Rs.5,500 and received a cheque. This
cheque was deposited into our bank account immediately.
April 9: Received from Das Rs.8,000 in full settlement of his
account. (Actual amount due Rs.8200)
April 10: Gave Rs.7,000 to Rahim (Actual amount due Rs.7,300)
April 12: Furniture purchased and paid by cheque Rs.5,500
April 15: Paid carriage Rs.200
April 18: A dividend of Rs.500 was directly credited to our bank
account.
April 20: Withdrew from bank Rs.2,000
April 25: Paid wages Rs.1,500
April 27: Paid Ghosh Rs.1,000 by cheque.
Draft cash account, bank a/c and discount account to
record the above transactions.

of Varshitha:
2009 April 1: Opening balance: Cash Rs. 8,000 Bank Rs.3000
April 3 : Purchased goods and paid by cheque Rs.1000
April 4 : Cash sales Rs.500
April 5: Deposited Rs.300 into bank
April 6: Received from Kalinga Rs.400, in settlement of his account
balance of Rs.410
April 12: Withdrawn Rs.550
April 15: Paid Kanchana Rs.1000 by cheque in settlement of her
account, discount allowed by her Rs.10
20: Cheque received from Kashyap Rs.525. This cheque was endorsed
to Kadambari the next day
23: Received from Kinara Rs.300 on account, discount allowed Rs.8
29: A cheque of Rs.400 was received from Keerthan in settlement of
his account balance of Rs.410. This cheque was deposited into bank
the same day.
30: It was found that Keerthans cheque was dishonoured. Bank
charges Rs.50
30: Bank credited our account with Rs.300 as interest.