2. Golden Rules of Accounting
Accounts
Personal Real Nominal
ReceiverDR
GiverCR
What comes inDR
What goes outCR
Expenses and
losses
DR
Income , Profit
and Gains
CR
3. Record the following transaction of A & Co in
Journal & Prepare necessary Ledger AC.
• On 1st Jan,
• 2nd Jan, bought goods on Credit from P & Co for Rs 2,000.
• 3rd Jan, sold goods for Cash to B & Co for Rs 500.
Asset Amt (Rs p) Liabilities Amt (Rs p)
Cash in hand 500 Loan from SBI 10,000
Cash in bank 8,000 Amt due to V & Co 5,000
Stock of goods 4,000
Machinery 20,000
Furniture 5,000
R & Co (Amt due to A & Co) 2,000
S & Co (Amt due to A & Co) 3,000
4. • 4th Jan, sold goods to R & Co on credit Rs 1,000.
• 5th Jan, received from R & Co amount on 1st Jan Rs 1,900 as
full settlement of Rs 2,000.
• 6th Jan, payment paid to V & Co by cheque (V & Co allowed
Rs 50 discount).
• 8th Jan, old furniture sold for cash (book value Rs 300 at Rs
350).
• 10th Jan, bought goods for cash Rs 1,000.
• 11th Jan, received cheque from S & Co deposited in bank Rs
3,000.
• 12th Jan, paid for repair of machinery Rs 200.
• 13th Jan, bought goods from V & Co on credit Rs 2,000.
• 14th Jan, received cheque from R & Co deposited in bank
discount allowed Rs 50 (1,000 – 50 = 950).
5. Journal
In the books of A & Co…
Date Particulars L.F Dr (Rs p) Cr (Rs p)
1st Jan Cash A/C …. Dr
Bank A/C …. Dr
Stock A/C …. Dr
Machinery A/C …. Dr
Furniture A/C …. Dr
R & Co A/C …. Dr
S & Co A/C …. Dr
To, Loan from SBI A/C
To, V & Co A/C
To, Capital A/C
(Being bal of various Assets & Liabilities
transferred)
500
8,000
4,000
20,000
5,000
2,000
3,000
10,000
5,000
27,500
2nd Jan Purchase A/C .... Dr
To, P & Co A/C
(Being purchased on credit from P & Co)
2,000
2,000
6. Date Particulars L.F Dr (Rs p) Cr (Rs p)
3rd Jan Cash A/C …. Dr
To, Sales A/C
(Being ……)
500
500
4th Jan R & Co A/C …. Dr
To, Sales A/C
(Being….)
1,000
1,000
5th Jan Cash A/C ….. Dr
Discount allowed A/C …. Dr
To, R & Co A/C
(Being….)
1,900
100
2,000
6th Jan V & Co A/C.... Dr
To, Discount received A/C
To, Bank A/C
(Being….)
5,000
50
4950
8th Jan Cash A/C …. Dr
P/L A/C …. Dr
To, Furniture A/C
(Being ……)
300
50
350
7. Date Particulars L.F Dr (Rs p) Cr (Rs p)
10th Jan Purchase A/C …. Dr
To, Cash A/C
(Being ……)
1,000
1,000
11th Jan Bank A/C …. Dr
To, S & Co A/C
(Being….)
3,000
3,000
12th Jan Repair to Machinery A/C ….. Dr
To, Cash A/C
(Being….)
200
200
13th Jan Purchase A/C.... Dr
To, V & Co A/C
To, Cash A/C
(Being….)
2,100
2,000
100
14th Jan Bank A/C …. Dr
Discount A/C …. Dr
To, R & Co A/C
(Being ……)
950
50
1,000
8. Ledger
In the books of A & Co
Sales A/C
Dr Cr
Date Particulars J/F Amt (Rs p) Date Particulars J/F Amt (Rs p)
3rd
Jan
To, Cash A/C 500
4th
Jan
To, R & Co A/C 1,000 31st
Jan
By, Balance c/d 1,500
1ST
Feb
To, Balance b/f 1,500
9. Trial Balance
• Trial Balance indicates mathematical accuracy.
• Trial Balance should always balance.
• Total debit entries = Total credit entries.
• Closing Stock will never appear in Trial Balance.
• Suspense A/C can be used to balance the A/C’S but mistakes later needs to be
found out and rectified before preparation on Final A/C’S.
SL. No Particulars/List of Ledger A/C L/P Debit (Rs p) Credit (Rs p)
Capital A/C 1,00,000
Building A/C 2,00,000
Creditors A/C 2,00,000
Loan taken A/C 50,000
Interest on Loan taken A/C 50,000
Drawings A/C 1500
Sales A/C (taken from previous example ) 1,500
Balance 3,01500 3,01,500
In the books of ….
Trial Balance as on…..
(EXAMPLE)
10. Limitation of Trial Balance
• Trial Balance will not show…
• Errors of omission – transaction left out completely.
• Errors of commission – correct amounts, wrong
account(s).
• Errors of principle – e.g. posted a capital expense as
revenue expense.
• Compensating errors – errors which cancel each
other out.
• Reversal of entries – wrong sides of each account
used.
11. Balance Sheet
as on….
Schedule VI of B/S as per Companies Act 1956 (Format)
Liability Amt (Rs p) Amt (Rs p) Asset Amt (Rs p) Amt (Rs p)
Share Capital :
Authorized (……...)
XXXXX
Fixed Assets: [1st
Intangible Assets
Patent, Goodwill,
etc. Then Tangible
Assets like P & M,
Furniture & Fixture,
Land & Building, etc
will come]
XXXX
Issued, Subscribed
& Paid up XXXX
Investments:
(Long term) XXXX
Reserve & Surplus:
Profit & Loss A/C (as
its Mortgaged)
XXXX Current Assets XXXX
Secured Loans XXXX XXXX
Unsecured Loans XXXX
12. Liability Amt (Rs p) Amt (Rs p) Asset Amt (Rs p) Amt (Rs p)
Current Liabilities &
Provision :
Loans & Advances:
Sundry Creditors XXXX Stock in trade XXXX
Bill Payable XXXX Bills Receivable XXXX
Bank Overdraft XXXX Sundry Debtors XXXX
Outstanding
Expenses
XXXX Cash in hand XXXX
Income received in
advance
XXXX Cash in bank XXXX
Provision XXXX XXXX Expenses paid in
advance
XXXX
Loan & Advances
given
XXXXX XXXX
Miscellaneous
Expenditures
XXXX
XXXXX XXXXX