CHAPTER
Accounting ProceduresRules of Debit and Credit
This
Chapter would enable you
LEARNING OBJECTIVES
to
Meaning of an Account
Meaning of Debit and Credit
understand:
Rules of Debit and Credit
Classification of Accounts
Balancing an Account
Significance of Debit and Credit Balance in Accounts
Transactions are recorded in the books of account on the basis of
evidences, i.e., source
documents, such as invoices for purchases, invoices for
sales, debit and credit notes,
etc. Rules of debit
and credit are applied to each transaction and
recorded in the book
entry, i.e., Journal or Special Purpose Books in a
transactions recorded in the books of account are transferredchronological order. The
to the
of original
account
maintained in the Ledger. At this stage,
it is
understand the term 'account.
(posted)
appropriate
specific
to
define and
ACCOUNT
Account is
a
record of transactions under
a
particular head. It records
not
amount of transactions but also their effect and direction.
An account is divided into two parts, i.e., debit and credit. It is
and the commonly used layout of an account is as follows:
Dr.
in
a
T" form
NAME OF THE ACCOUNT, eg., WAGES ACCOUNT
Date
Particulars
J.F.
Amount ()
Date
Particulars
Date of
Name of the
Amount of
the
Name of the
other account
Page or
Reference
Date of
the
the
other account
Number of
the Subsidiary
transaction
transactlon
transaction
usually
only the
Book,
where
the entry
Cr.
|J.F.
Page or
Reference
Number of
the Subsidiary
Book,
where
wasf first
the entry
was first
recorded,
recorded,
e.g, Cash
eg, Cash
Book
Book
Amount ()
Amount of
the
transaction
6.2
Double Entry Book
Keeping-CB
Followig points about the lavout of account should be noted:
Name of the account is
written at the top.
ACcount
divided into
identical halves, separated by a thick vertical linee
Lett hand
side is called the debit side (debit' is abbreviated as Dr.).
Right hand side is called the
credit side (credit' is abbreviated as 'Cr.).
Date
of the transaction is entered in the column for Date.
In the
is
two
Partieulars' column, the
is entered
The tolio'
name
of the other account involved in tthe
Journal Folio (J.F.) column is used as
original entry was recorded in the
Journal Book.
I n the
It is
Dr.
or
last column, the amount
a
transact
reterencing system
where tthe
transacted is written
amountS
illustrated below by taking
imaginary
Date
CASH ACCOUNT
Increase
J.F.
2019
April 1 Opening Balance
April 3 Cash Sales of Goods
April 10 Receipts from Debtors
April 14 Receipts from Commission
April 21Sale of Fixed Assets
April 27 Commission
Date
Decrease
C
J.F
2019
1,00,000 April
50,000 April
2
4
70,000 April
20,000 April 28
30,000 April 29
5,000 April 29
April 30
Payments for Purchases
Payments to Creditors
Wages and Salaries
Rent
Postage
Cartage
Closing Balance
2,75,000
56.00
20.0
16.00
10,000
2,00
1,0
105.0
1,70,000
2.75,.00
What has been done is
the increases in cash on
place
the left hand side
side or Debit side) and the
(i.e., Receipts
decreases on the right hand
side (i.e., Payments side or
Credit side). The closing balance is
ascertained by deducting the total
of payments,
71,05,000 from the total of the left hand
7
side,
MEANING
2,75,000.
OF DEBIT AND
CREDIT
Debit refers to the left side of an account
and credit refers to
the right side of an account
Dr. stands for debit and Cr.
stands for credit. An item
on the debit side of an
recordeu
account is said to be debited to
the account. An item recordeu
on the credit side of an
account is said to be credited to
the account.
Both debit and credit may represent either
he
increase or decrease
depending
nature of an account. The rules of debit and
upon
credit depend on the nature of
In the
abbreviated form
account
RULES OF DEBIT AND CREDIT
ct
Under Double Entry System of accounting each transaction has two
aspects. One aspe
debit, i.e., receiving or incoming aspect. Another aspect is credit, i.e., giving or outgo
1s
aspect. Debit and credit aspects ofa transaction form the basis of Double Entry Systen
Accounting Procedures-Rules of Dobit and Crodit
6.3
Rules of Double Entry or Rulea of Debit nnd Credit nre formed on the basis of
these two
aspects in ench of the businesN Lransnctions. There are two appronches
for deciding when
to write on the debit side of nccount and when to
write on the eredit side of an
account,
1e, which account is to be debited and which
account is to be
The
rules on
credited.
the basis of which such decision is taken are called Rules of
Dehit and Credit.
CLASSIFICATION OF AccoUNTS
Accounts
can be
classified in two ways:
A. Traditional Approach (English Approach): and
B.
Modern Approach (Accounting Equation
Approach
A. Traditional Approach (English
Approach)
Under this approach, accounts are
classified into
two
or
American Approach).
groups
as
shown below:
Traditional Classification of Accounts
Personal Accounts
Natural Personal
Accounts
Artificial Personal
Accounts
Impersonal Accounts
Representative
Personal Accounts
Real
Accounts
Nominal
Accounts
Personal Accounts
1. Personal Accounts: Accounts which
relate to persons, i.e., individuals. firms,
companies, debtors or creditors, etc., are Personal Accounts.
Examples of Personal
Accounts are the account of Ram & Co., a customer
or
(Debtor), the account of Jhaveri
& Co., a supplier of goods (Creditor),
Capital Account and Drawings Account of the
proprietor. The main purpose of preparing a Personal Account is to determine the
balance due to or due from persons or organisations.
Personal Accounts can be classified into three
categories:
i) Natural Personal Accounts: The term Natural Persons' means
who are
creations of God.
Therefore, these will include
persons
accounts in individual name. For
example, Ram's Account, Asha's Account, etc.
(11) Artificial Personal Accounts: These accounts include
accounts of corporate bodies
institutions which are recognised as persons in business
dealings. For example,
the account of a limited company, the account ofa club or a cooperative society, etc.
u) Representative Personal Accounts: These are accounts which represent a certain
or
person or a group of persons. For example, if rent is due to the landlord, an
Outstanding Rent Account will be opened in the books. The Outstanding Rent
Account represents the amount of rent payable to the landlord. Other examples
of the Representative Personal Accounts are Prepaid Rent Account, Accrued
Commission Account, Unearned Interest Account, ete.
Rule of Debit and Credit-Debit the receiver, Credit the giver.
6.4
Double
Entry
ook
Keeping-C8
rSonal Accounts: Accounts which are not personal such as M
d
Account, Cash Acount, Rent Account, etc., are
hese can
be further sub-divided into
two
accounts
the
Accounts: Real Accounts
)Real
ngible assets ofthe firm (excluding debtors).
are
accounts
as
Impersonal
which relate
late
CBSEA
aehi
n
er
Accounts
to tangibl
Examples of tangible asse"a
land, building, investments, plant and machinery, stock or cash in hand, Exa
Examples
of intangible assets are: goodwill, patents and trademarks.
Rule of Debit and Credit-Debit what comes in, Credit what goes out.
ii) Nominal (Revenue or Expense)
Accounts: Accounts which
relate to exper
1O8ses, gains, revenue, etc., are termed as Nominal Accounts. Thesa
are
Salary Account, Purchases Account, Interest Paid Account, Sales Account and
and
Commission Received Account. The net result of all the Nominal Accounts is pro
or loss which is transferred to the Capital Account.
Rule of Debit and Credit-Debit all expenses and losses, Credit all incomes and gains,
Ifa
prefix or suffix (Outstanding, Prepaid or Accrued) is added to a Nominal Account
itbecomesa Personal Account. The table given below explains the above:
Nominal Account
Personal Account
1. Interest Ac
OutstandingInterest A/c, Interest Received in Advance Alc, Prepaid Interest Alc
2. Rent Ac
Outstanding Rent A/c, Prepaid Rent A/c
3. Salary Ac
Outstanding Salaries A/c, Prepaid Salaries A/c
4. Commission A/c
Outstanding Commission Alc, Prepaid Commission A/c
Rules of Debit and Credit (Traditional Classification) at a Glance
ypes of Account
Account to be Debited
Account to be Credited
1. Personal Account
Receiver
Giver
2. Real Account
What comes in
What goes Out
3. Nominal Account
Expense and Loss
Income and Gain
Illustration 1.
Classify the following accounts into Personal, Real and Nominal Accounts:
() Cash
(ii) Bank
(ii) Outstanding Salaries
(iv) Sales
(v) Accrued Interest
(vi) Leasehold Property
(vii) Drawings
(viii) Discount Received
(ix) Bad Debts Written off
(x) Purchases
(xi) Bad Debts Recovered
(xii) Plant and Machinery
(xii) Capital
(xiv) Interest (Paid)
(rv) Bank Overdrat
(xvi) Prepaid Rent
(xvii) Carriage Inwards
(xvii) Goodwill
6.5
Accounting Procedures-Aules of Debit and Credit
Solution:
Personal Accounts
() Bank
(i Outstanding Salaries
()AccruedInterest
(i)Drawings
Nominal Accounts
Real Accounts
()
(vi)
(xii)
(xvii)
Cash
Leasehold Property
Plant and Machinery
Goodwill
(N) Capital
(x) Bank Overdraft
(v) Sales
(vi) Discount Received
(ix) Bad Debts Writen off
Purchases
(xi) Bad Debts Recovered
(xiv) Interest (Paid)
(vi) Prepaid Rent
(xvi) Carriage Inwards
Each transaction involves two or more accounts. After ascertaining the accounts
involved, it is decided which account is to be debited and which account is to be credited.
Illustration 2.
State the nature of account (Personal, Real or Nominal) and show which will be debited
and which will be credited:
)
Rent received
(vi) Interest received
(ii) Machinery purchased
(vi) Building sold
(ii) Goods purchased
(vii) Discount allowed
(iv) Capital introduced
(ix) Goods sold
() Rent paid
Solution:
Accounts
()
i)
(i)
(i
(
Nature of Accounts
Debited/Credited
Rent Received Alc
Machinery A/c
Purchases A/c
Capital Ac
Nominal
Credited
Real
Nominal
Debited
Debited
Personal
Rent Paid A/c
Nominal
Credited
Debited
Nominal
(vi)Interest Received Alc
(vi)Building Alc
Real
(Wii) Discount Allowed A/c
i)Sales Ac
Mlustration 3.
rom the following transactions,
Nominal
Debited
Nominal
Credited
the nature of accounts and
will be debited and which account will be credited:
state
Credited
Credited
state which account
1. Mohan started business with cash
5,00,000
2.
Purchased goods for cash
1,00,000
3.
Sold
goods for
cash
4. Received interest from Ram in cash
5. Sold goods to Ashok
6.
Purchased furniture for cash
7. Paid wages
1,50,000
500
60,000
50,000
20,000
Double Entry Book
6.6
Solution:
ANALYSIS OF TRANSACTIONS
Transactions
Accounts
Mohan started business
Cash
with5,00,000 in cash.
Capilal
4
5.
6.
7.
Deblt
Real
Personal
1,00,000
Cash
Real
1,50,000
Sales
Nominal
Received interest from Ram in
Cash
Real
cash 500.
Interest
Nominal
Sold goods to Ashok for 60,000.
Ashok
Sales
Personal
Purchased furniture for cash
Furniture
50,000
20,000
1,50,000
Reason
50,000
Cash
Paid wages20,000.
Wages
Nominal
Cash
Real
Giver
Expenses
1,00,000
Goes out
Comes in
1,50,000
Income
500
500
Comes in
ncome
60,000
Receiver
Income
60,000
Nominal
Real
Real
Cornes in
5,00,000
Nominal
Real
Sold goods for cash
Credit
5,00,000
Purchases
Cash
2 Purchased goods for cash
1,00,000.
3.
Nature of
Account
Involved
1.
(eeping-cBSE,SEA
Comes in
50.000
Goes out
20,000
Goes out
Expenses
B. Modern Approach
Under this
approach all
the accounts
are
classified into the
following
five
categorie.
Modern Classification of Accounts
Asset Accounts
1.
Liability Accounts
Asset Accounts. Asset accounts
Capital Accounts
Revenue Accounts
Expense Accounts
those accounts which relate to the economie
of an enterprise such as Land and
Building, Plant and Machinery
Furniture, Patents, Inventory, Bank and Cash, etc.
are
resources
Rule of Debit and Credit-Debit the increases
and Credit the decreases.
2.
Liability Accounts. Liability accounts are accounts of
lenders, creditors for
outstanding expenses, ete.
goods
Rule of Debit and Credit-Debit the
decreases and Credit the increases
3. Capital Accounts. These are the accounts
of
who navve
invested amount in the business. It includes both proprietors/partners
Capital and
Drawings Accoln
Rule
4.
of Debit and Credit-Debit the decreases and
Credit the
increases
Revenue Accounts. These are accounts of incomes and
gains. Examples
Discount received, Interest received, commission received, bad
debts
Rule of Debit and Credit-Debit the decreases and Credit the
are:
a
les,
recoverea,
etc
increases
Accounting Procedures-Rules of Debit and Credit
6.7
5Expense Accounts. These are the accounts of expenses or losses incurred in
carrying the business. Examples are: Purchases, Wages, salaries, Depreciation,
Discount allowed and Rent, etc.
Rule of Debit and Credit-Debit the increases and Credit the decreases.
Rules for Debit and Credit (Modern Classification) at a Glance
Types of Account
Accounts to be Debited
Accounts to be Credited
1. Asset Accounts
Increase
Decrease
2
Liability Accounts
Decrease
Increase
3. Capital Accounts
Decrease
Increase
4. Revenue Accounts
Decrease
Increase
5. Expense Accounts
Increase
Decrease
It should be noted that an increase in assets is favourable to the firm but an increase
in expenses may not be so, even though in both the cases, increase will be recorded
on the debit side. Similarly, increase in liabilities is, of course, not favourable but an
increase in revenue is favourable. Nonetheless, both will be recorded on the credit side.
Thus, the terms 'debit' and 'credit' should not be taken to mean respectively favourable
and unfavourable-they merely describe the two sides of an account. In other words,
both debit and credit may represent either increase or decrease depending upon the
nature of an account.
Another way to understand the rules of debit and credit is as follows:
Rules of Debit and Credit
Assets = Liabilities + Capital + Profits- Losses
(1) Assets
(2)Liabilities
Credit
Decrease (9
Debit
Increase (+)
Debit
Credit
Decrease(-
Increase (+)
(3) Capital
Credit
Increase (+)
Debit
Decrease F
(5) Revenue
(4)Expense(Loss)
Debit
Credit
Increase (+)
Decrease
Debit
Decrease (
Study the following Illustrations and observe how increase and
accounts are debited and credited.
Illustration 4.
Credit
Increase (+)
decrease in various
recorded? Also, mention the
which side will the increase in following accounts be
of Accounts:
nature of the account on the basis of Modern Classification
(iii) Abhishek (Proprietor)
(i) Creditor's A/c
(i) Buildings A/c
(vi) Cash A/c
Inwards A/c
(iu) Purchases A/c
(o) Carriage
A/e
(ix) Bills Payable A/c
Payable
Interest
(U) Rent Received Alc (vii)
Receivable A/c
Commission A/c (xii) Bills
On
(x) Debtors Alc
(xi)
Accrued
Entry Book.
Keeping--CBS
CBSE
Double
6.8
Solution:
)Debit-Asset
(iii) Credit -Capital
(i) Credit-Liability
() Debit-Expense
(vi) Debit Asset
(ix) Credit-Liabilitu
( )DebitExpense
(vin Credit-Revenue
(x) Debit-Asset
(vii) Credit-Liability
(xii) Debit-Asset
(ri) Debit-Asset
llustration 5.
Analyse the following transactions, state the nature of accounts and sta
state which
account will be debited and
Classification of Accounts: which
1.
2.
3.
4.
5.
account
will be
credited
on
the
basis of
basis
of Mode
Modera
Dinesh started business with cash
5,00,00
Borrowed from Naresh
1,00,000
Purchased furniture for cash from Raj Furniture House
Purchased furniture from Delhi Safe
20,000
40,0
Purchased goods for cash
6. Purchased
goods from Mahesh
7. Sold goods for cash to
Karim
8. Sold goods to
Shyam on credit
9. Cash received from
Shyam
10. Cash paid to Mahesh
Solution:
Accounts
Involved
20,000
10,000
Nature of
Account
How
Debit
Affected
Dinesh started business
Cash
with cash
Asset
Capital
Capital
Increased
Increased
5,00,000
Cash
Asset
Loanfrom Naresh
Increased
Furniture
20,000 in cash frorn
Raj Furniture House.
Asset
Cash
Increased
Increased
1,00,000
Purchased furniture for
Liability
Asset
Decreased
Furniture
Asset
Delhi Safe
Liability
Increased
increased
40,000
Purchases
Cash
Expense
Increased
Asset
15,000
Purchases
Expense
Decreased
Increased
5,00,000.
2 Borrowed from Naresh
1,00,000.
3.
30,000
25,000
30,000
ANALYSIS OF TRANSACTIONS
Transactions
1.
15,000
4 Purchased furniture from
Delhi Safe for
40,000.
5. Purchased goods for
cash 15,000.
6. Purchased goods from
Mahesh 30,000.
7. Sold goods for cash
to Karim 25,000
Mahesh
Liability
5,00,000
1,00,000
20.000
20.000
40,000
15,000
,000
Increased
30,000
Cash
Asset
Sales
Revenue
8. Sold goods to Shyam
on credit 30,000.
Shyam
Asset
Revenue
Increased
Increased
30,000
9. Cash received from
Shyam 20,000.
Cash
Asset
Asset
Increased
Decreased
Decreased
Decreased
20,000
10. Cash paid to Mahesh
10,000.
Sales
Shyam
Mahesh
Liability
Cash
Asset
Increased
Credit
25,000
25,000
Increased
30,000
20,000
10,000
10,000
Accounting Procedures-Rules of Debit and Credit
6.9
llustration 6.
Analyse the following transactions, state the nature of accounts and state which
ccount will be debited and which account will be credited:
1.
Anuj started business with cash
2.
Deposited cash
into bank for
1,00,000
opening
an
50,000
account
3. Withdrew cash for personal use
5,000
4.
Withdrew
5.
Received a cheque from debtor Shyam
Deposited Shyam's cheque next day.
6.
7.
Paid to
a
cash from bank for office
10,000
use
5,000
creditor Mahesh by cheque
10,000
8. Paid salary to staff
20,000
9. Paid rent by cheque
6,000
10. Paid interest on loan
5,000
Solution:
ANALYSIS OF TRANSACTIONS
Transactions
1. Anuj stated business
with cash
1,00,000.
2. Deposited cash into bank
50,000 for opening an
account.
3 Withdrew cash for
Accounts
Involved
Nature of
Account
Cash
Asset
Capital
How
Debit
1,00,000
Capital
Increased
Increased
Bank
Asset
Increased
50,000
Cash
Asset
Decreased
1,00,000
50,000
Drawings
Capital
Asset
Decreased
Decreased
5,000
Cash
4. Withdrew cash from bank Cash
Asset
Increased
10,000
Bank
Asset
Decreased
Cash/Cheques in Hand
Asset
Increased
Shyam
Asset
Decreased
Bank
Asset
Increased
cheque next day.
Cash/Cheques in Hand
Asset
Decreased
Paid to a creditor Mahesh
Mahesh
Bank
Liability
Decreased
Asset
Decreased
Salary
Expense
Increased
Cash
Asset
Decreased
Rent
Expense
Increased
T6,000.
Bank
Asset
Decreased
Paid interest on loan
Interest
Expense
5,000
Cash
Increased
Decreased
personal use 5,000.
foroffice use 10,000.
5. Received a cheque from
debtor Shyam 5,000.
6. Deposited Shyam's
7.
by cheque 10,000.
8 Paid
salary to staff
20,000
9. Paid rent
10.
by cheque
Asset
Credit
Affected
5,000
10,000
5,000
5,000
5,000
5,000
10,000
10,000
20,000
20,000
6,000
6,000
5,000
5,000
Double Entry Book
6.10
ping-CBStSE
BALANCING AN ACCoUNT
At the end
ecessary to k
of a period (say a day, month or a year), it may be necessar
balance in an account. Abalance of an account is the difference between tho t
debit and credit sides. the total debit side is
the
of
If
nmore
than
Lotal ofcredit s
account is
said to have a debit balance. It has a credit balance when total ofcree
is more
credit siu
than the total of debit side.
The process of
balancing is as follows:
0) Total the two sides (i.e., Debit and Credit) of the account.
(ii) Caleulate the difference in totals
the balan
of the two sides. The difference is the
balan.
( ) Enter the difference in
the side with shorter total. Now the total of two sia
will match.
ey
credit side is
f
shorter, then the amount is entered on the credit side by wi
By Balance c/ in the Particulars column. It is caried forward
by writing in theriting
de bit
Side "To Balance b/d', it
being a debit balance.
lf debit side is
shorter, then the amount is entered on the debit side
by
To Balance c/d in the
Particulars column. It is carried forward by writing on writine
side 'By Balance b/d, it
the creti
being a credit balance.
As
an
illustration, following
Dr
account is
given with imaginary amounts:
RANJAN'S ACCOUNT
Date
Particulars
Date
2019
Particulars
2019
April 5 To Cash Alc
April 20 To Returns Outward A/c
April 27 To Bank A/c
April 30 To Balance c/d
10,000 April
7
1,500
20,000
8,500
40,000
Purchases ANc
40,00
40,00
May
The account shows that the
firm has
It is to be noted that Revenue
and
By
1 By Balance bd
8,500
liability towards Ranjan for 8,500
Expense Accounts are not balanced, they are totaleu
a
and closed by transferring them to
or Profit and
Loss Account. Balances in Ase
Liability and Capital Accounts areTrading
transferred to the Balance Sheet.
In other words, at the end
of year all the Nominal Accounts are closed by
their balances to Trading orthe
transterr
Profit and Loss Account.
The Personal and Real Accoun
are balanced and their
balances are carried forward to next
year.
Balancing of accounts is also discussed in the
chapter on Ledger.
SIGNIFICANCE OF DEBIT AND CREDIT BALANCE IN
Some accounts show
as follows:
1.
Credit balance
business.
debit balances and some
credit
AccoUNTS
balances. These balance
are
in the Capital Account means
of the
amount
due
to
the
owner
In other words, the amount invested
in the business by the
owne
Credit
the
business, i.e., linbility
etc.,
debit
that
account
T
means
either
that:
Solution:
5. Depreciation
is
a
in
etc.,
Cash
ount
Account,
Purchased
2.
on
credit
and write the following
creditor, Mohan,
1. Purchases
4. Purchases
60,000
27,000
3,000
30,000
2. Cash Paid
MOHAN'S (CREDITOR)ACCOUNT
Increase (+)
Goods Returned (Returns Outward)
Balance
Fumiture*
the
65,000
47,000
10,000
5,000
3,000
Cr
5,000
10,000
on
poste
60,000
50,000
10,000
Cr.
10,000
3,000
50,000
30,000
transactions
of fixed assets
in the book value
5. Depreciation on
Balance
4.
continuous decrease
65,000
50,000
15,000
discarded
Cash-Sale of Furniture
Furniture Discarded
Decrease(
transactions
transactions
sold-costing
wing
Oldfurniture
Furniture
Decrease
Solution:
Dr.
or
by
rent,
invested
(salary,
amount
expense
or the
or a n
liability
FURNITURE ACCOUNT
3,000 |
50,000 2.
15,000 4.
4. Repurchased goods from Mohan on credit
.
Received
the business.
(cash, bank, etc.)
obsolescence, etc.
goods from Mohan
2. Paid to Mohan
3.Goodsreturned to Mohan
a
of time,
Upen a "T shape account of
on the proper side:
Illustration8.
asset
by
the
for furniture and write
permanent and
due to use, effluxion
Depreciation
Cash-Fumiture Purchased
1. Cash-Fumiture Purchased
Increase (+)
an
expenses incurred
given period.
on furniture
3. Furniture purchased
1. Furniture purchased
3
terest
all
the net effect of
necessary to ascertain
account
a
is
during
shape
shaj
proper side:
Open a
Dr
of
shows the income earned
is
account
Ilustration 7.
to
Balancing an
the p r o p r i e t o r .
(b) A credit balance
etc.); and
balance
briefly say
debit
we
can
Paid Account,
P
(a) A
So.
Account, Suppliers
means
balance in Discount Received Account,
Interest
income earned by the business.
means
Rent Account,
Account,
balance in Discount Allowed Account, Salary
Han
land,
Deb
ebit
ayable by
5 Debit
4.
3.
Bank Loan
Account, etc.,
the business,
t , means
Account,
balance in Cash Account, Bank Account, Debtor's
Cash at Bank, and amount receivable against sale respectively.
in
Procedures-Rules of Debit and Credit
Credit balance
Accounting
6.11
Double Entry Book
6.12
eping-CBsE
Illustration
9.
Write the following transactions in Debtor's Account, Creditor s Acount and Cash A
h Acoun
1. Cash sales
3. Cash received from X
56,000
5. Paid to Y
30,000
50,000
Solution:
Dr
2. Sold
goods
to X on credit
Purchased goods from Yon
6. Cash purchases from Y
4.
credit. 80
44000
16.09
CASH ACCOUNT
Decrease -)
Increase (+)
1. Sales
3. X (Debtor)
50,000
5. Y(Creditor)
56,000
6
3000
Purchases
160
Balance
1,06,000
Dr.
1,06,00
XS (DEBTOR) ACCOUNT
Increase (+)
Decrease (
2 Sales
80,000
3. Cash Received
56.00
24.00
Balance
80,000
Dr
80 0
Ys (CREDITOR) ACCOUNT
Decrease
Increase (+)
5. Cash Paid
30,000
14,000
Balance
4.
Purchases
44,00
44,000
44,000
llustration 10.
From the following particulars, prepare the account of D. Budhiraja, the proprietor of
a business:
() Capital introduced
(i) Drawings made by him
30,000
6,500
(iii) Further Capital introduced
22,000
(iv) Profit for the period
7,500
Balance the same and explain what the closing balance indicates.
Solution:
Dr.
D. BUDHIRAJA'S CAPITAL ACCOUNT
Particulars
To Drawings A/c
To Balance cd
Particulars
6,500
53,000
By Cash A/o-Capital
By Cash A/o-Capital
By Profit and Loss Alc
30,000
22,00
7,500
59,500
59,500
530
By Balance b/d
n e s s
Note: Proprietors Capital Account has a credit balance of
owes him this amount.
53.000 which indicates that the Du