Page 60 - DCOM101_FINANCIAL_ACCOUNTING_I

Financial Accounting-I

Notes The Rent which is paid to the owner is an expense out of the benefits derived out of the asset

during the previous month. In accordance with the Nominal A/c all the expenses are to be
recorded, i.e. “Debit all the expenses and losses”.

The second is in relevance with the cash payment which finally led to the movement of cash

resources from the firm to the owner of the Asset. This mobility of the assets leads to movement-
out which in connection with the Real A/c is the account for the assets.
Rent paid Expense- Office Rent paid Nominal A/c- Debit All expenses and losses

Movement -out Cash – moving out of the firm Real A/c- Credit what goes out
Illustration 1: Pass the following various journal entries.
1. Jan 1,2006 Mr. Sundar has started business with a capital of ` 50,000
2. Jan 2, 2006 Goods purchased ` 10,000
3. Jan 5, 2006 Goods sold ` 5,000
4. Jan, 10, 2006 Goods purchased from Mittal & co ` 10,000
5. Jan, 11, 2006 Goods sold to Ganesh & co ` 10,000

6. Jan, 12, 2006 Goods returned to Mittal & co ` 1,500
7. Jan 20, 2006 Goods returned from Ganesh ` 2,000
8. Jan 31, 2006 Office Rent paid ` 500

9. Feb 2, 2006 Interim Dividend paid ` 3000

10. Feb 8, 2006 Cash withdrawn from bank ` 2,000
Solution:
1. Jan 1, 2006 Mr. Sundar has started business with a capital of ` 50,000
Date Divisions of Transactions A/cs involved Golden Rule Registration
Capital brought-Cash Resources in Real A/c-Movement of Assets- Debit what comes in
the form of capital Cash Resources are coming in, in
the form of capital
Sudar-Introducer of the capital as Personal A/c-Individual-Sundar- Credit the giver
owner- Due to return the amount Giver/contributor of the capital-
at later point of time which should be returned later
Jan 1,2006
–involves with Relationship
This transaction involves with two different accounts viz.Real A/c and Personal A/c:
L.F. ` `
Jan 1, 2006 Cash A/c Dr 50,000
To Sundar’s Capital A/c 50,000
Being capital brought by sundar as cash
2. Jan 2, 2006 Goods purchased ` 10,000:
Date Divisions of Transactions A/cs involved Golden Rule Registration
Goods purchased-Goods Real A/c-Purchase of the goods Debit what comes in
movement in- for trading –stock of Goods- Assets- Move-
ment in-coming in-Reason of com-
ing in-Purchase
Cash resources –movement Real A/c-Cash resources-is paid at Credit what goes out
Jan 2,2006
out-payment of the bill out the point of purchase- Movement
of the purchase out-cash is going out of the fi rm

54 LOVELY PROFESSIONAL UNIVERSITY