Page 27 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes The meaning of the transaction should be made explicit for easier understanding through brief
and catchy narration to follow as well as evade the ambiguity in near future.

Example: Mr. Sundar is a debtor who has paid 1,500 in the bank A/c

1. Transaction is identified which is in between two different persons under the personal
A/c, they are nothing but persons of nature.
2. The benefits are shared in between two persons, viz. Mr. Sundar and Banker who are
nothing but giver and receiver of the benefits respectively.
3. It means that Sundar is the giver of 1,500 to Banker who is the receiver of the same 1,500

Debit the Receiver Banks Debit the Melvin A/c
Credit the Giver Sundar Credit the Sundar A/c
Final step is to pass the journal entry

Bank A/c Dr 1,500

To Sundar A/c 1,500
(Being cash is paid by Sundar to Bank A/c)

2.6 Journal Entries in between the Accounts of Two Different
Categories

Transactions are in between the Real A/c and Personal A/c

This type of the transaction is mainly governed by one important principle that future relationship.
It major focuses on the maintenance of future relationship among the parities involved, till the
realization of the transaction is over.

Example: Goods sold to Gopal 15,000/-

Meaning: The goods were sold on credit to Gopal amounted 15,000.
In the given transaction, there are two different A/cs, viz. Real A/c and Personal A/c
During the sales, irrespective of nature, goods are moving out of the firm, which finally will
reach the individual Gopal. The goods, which are sold out to Gopal led to movement of goods
out of the firm. Any movement of asset should be referred only to the tune of Real A/c. The
goods which are going out of the firm could be recorded as transaction under the Real A/c, i.e.
“Credit what goes out”.

While recording the transaction, it should not be entered as Goods A/c. The reason for goods
going out of the firm is only due to sales which have to be registered in the books of accounts at
the time of entering the journal entries.

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