Page 58 - DCOM101_FINANCIAL_ACCOUNTING_I

Financial Accounting-I

Notes 6.2 Transactions in between the Real A/c

Real A/c is an account to highlight the movement of the assets. There are two different type of
assets viz. Cash and Plant & Machinery. Among the two assets, cash is one of the current assets
and the Plant & Machinery is one of the fixed assets. In general, these two are brought under the

category of assets or applications of the fi rm.
If the assets are involved in the transaction, Real account should only be referred.

The movement of the assets can be classified into two segments viz. movement in and movement
out.
movement-in: The movement-in is the movement of the assets to the business enterprise.
movement-out: The movement-out is the movement of the assets from the business enterprise.
Next stage is to highlight the movement of the assets during the purchase

Movement-In Plant and Machinery Debit what comes in
Movement-out Cash resources Credit what goes out

Any simultaneous movement is taking place in between two different assets of the enterprise can
be explained with the following example:

Example: Purchase of a Plant and Machinery of ` 15,000/–.
The purchase of a plant and machinery is only through cash payment to the vendor.
There are two different type of assets viz. Cash and Plant & Machinery. Among the two assets,

cash is one of the current assets and the Plant & Machinery is one of the fixed assets. In general,
these two are brought under the category of assets or applications of the firm. If the assets are

involved in the transaction, Real account should only be referred.
How the movement of assets is taking place at the moment of purchase?

The movement of the assets classifi ed into two segments viz. movement in and movement out.
The movement-in is the movement of the assets to the business enterprise. With reference to
above cited example which asset is coming into the business enterprise? Plant & Machinery are
the assets which comes into the business enterprise only at the moment of purchase.
The movement out is the movement of the assets from the business enterprise. From the above
illustrated example, which asset is going out of the firm during the purchase? Cash resources are

going out of the firm in order to make the payment of the purchase to the supplier of the assets.
Cash Resources
Business Enterprise Supplier
Plant and Machinery

Next stage is to highlight the movement of the assets during the purchase
Movement-In Plant and Machinery Debit what comes in
Movement-out Cash resources Credit what goes out
What is coming in?—Plant and Machinery
What is going out?—Cash Resources

Plant and Machinery A/c Dr. `15,000
To Cash resources A/c `15,000
(Being Plant & Machinery is purchased)

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