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Commenced Business with a Capital of Rs. 2,00,000. Capital a/c ↓ Person ↓ Personal a/c ↓ Giving benefit ↓ Credit [Credit the benefit giver] Cash a/c ↓ Tangible aspect/Asset ↓ Real a/c ↓ Coming in ↓ Debit [Debit what comes in] Bought Furniture for cash Rs. 20,000. Furniture a/c ↓ Tangible aspect/Asset ↓ Real a/c ↓ Coming in ↓ Debit [Debit what comes in] Cash a/c ↓ Tangible aspect/Asset ↓ Real a/c ↓ Going out ↓ Credit [Credit what goes out] Paid Rent to the shop owner Mr. Murugan Rs. 5,000. Rent Paid a/c ↓ Expenditure ↓ Nominal a/c ↓ Expenditure ↓ Debit [Debit all expenses and losses] Cash a/c ↓ Tangible aspect/Asset ↓ Real a/c ↓ Going out ↓ Credit [Credit what goes out] • Payee name irrelevant in Recording Expenses Incurred The amount paid to Mr. Murugan is towards the rent of the shop and therefore it would result in the organisational expenditure on rent increasing by Rs. 2,000. Though it is given to Mr. Murugan, the shop owner, it should not be interpreted as cash paid to Mr. Murugan. The information relating to the expenditure on account of rent is normally recorded using the account head Rent Paid a/c. However, the payee name would be considered where an outstanding amount has been recorded earlier Paid cash into bank Rs. 1,50,000 Cash a/c ↓ Tangible aspect/Asset ↓ Real a/c ↓ Going out ↓ Credit [Credit what goes out] Bank a/c ↓ Organisation ↓ Personal a/c ↓ Receiving ↓ Debit [Debit the benefit receiver] Bought Goods for cash Rs. 10,000 from M/s Shamir Jain & Co., Cash a/c ↓ Tangible aspect/Asset ↓ Real a/c ↓ Going out ↓ Credit [Credit what goes out] Goods/Stock a/c ↓ Tangible aspect/Asset ↓ Real a/c ↓ Coming in ↓ Debit [Debit what comes in] Bought Goods on credit from M/s Ramdas & Bros. for Rs. 10,000. M/s Ramdas & Bros. a/c ↓ Organisation ↓ Personal a/c ↓ Giving benefit ↓ Credit [Credit the benefit giver] Goods/Stock a/c ↓ Tangible aspect/Asset ↓ Real a/c ↓ Coming in ↓ Debit [Debit what comes in] Sold goods for cash Rs. 12,000 to Mr. Naryan Tiwari. Cash a/c ↓ Tangible aspect/Asset ↓ Real a/c ↓ Coming in ↓ Debit [Debit what comes in] Goods/Stock a/c ↓ Tangible aspect/Asset ↓ Real a/c ↓ Going out ↓ Credit [Credit what goes out] Bought Machinery from M/s Boolani Machinery and paid by cheque Rs. 25,000. Bank a/c ↓ Organisation ↓ Personal a/c ↓ Giving benefit ↓ Credit [Credit the benefit giver] Machinery a/c ↓ Tangible aspect/Asset ↓ Real a/c ↓ Coming in ↓ Debit [Debit what comes in] • Cash Purchase of Machinery Machinery being a tangible aspect is an asset. The information relating to machinery is identified using the account head Machinery a/c. Since it is an asset/tangible aspect it is a Real account. The fact that Machinery has been purchased from M/s Boolani Machinery is irrelevant here since there is no time gap between the transactions of purchase of machinery and payment for it. Since a cheque is issued, the amount available in the bank is reduced and not cash. Therefore Bank a/c is affected by the transaction. Sold goods on credit to Mr. Natekar for Rs. 8,000. Goods/Stock a/c ↓ Tangible aspect/Asset ↓ Real a/c ↓ Going out ↓ Credit [Credit what goes out] Mr. Natekar a/c ↓ Person ↓ Personal a/c ↓ Taking benefit ↓ Debit [Debit the benefit receiver] Paid weekly wages to workers Rs. 5,000 Cash a/c ↓ Tangible aspect/Asset ↓ Real a/c ↓ Going out ↓ Credit [Credit what goes out] Wages Paid a/c ↓ Expenditure ↓ Nominal a/c ↓ Expenditure ↓ Debit [Debit all expenses and losses] • Wages Paid » Recording the Expenditure Wages paid is expenditure. Generally, the information relating to this expenditure is maintained using the accounting head Wages Paid a/c. Paid M/s Ramdas and Brothers by cheque Rs. 5,000. M/s Ramdas & Bros. a/c ↓ Organisation ↓ Personal a/c ↓ Taking benefit ↓ Debit [Debit the benefit receiver] Bank a/c ↓ Organisation ↓ Personal a/c ↓ Giving benefit ↓ Credit [Credit the benefit giver] • Cheque Payment Since the payment is made by cheque the amount available in the bank would be reduced i.e. Bank a/c would be affected and not Cash a/c. Received from Mr. Natekar Rs. 2,000 Cash a/c ↓ Tangible aspect/Asset ↓ Real a/c ↓ Coming in ↓ Debit [Debit what comes in] Mr. Natekar a/c ↓ Person ↓ Personal a/c ↓ Giving the benefit ↓ Credit [Credit the benefit giver] Received commission from M/s Orion Traders for giving a trade lead Rs. 500. Commission Received a/c ↓ Income ↓ Nominal a/c ↓ Income ↓ Credit [Credit all Incomes and Gains] Cash a/c ↓ Tangible aspect/Asset ↓ Real a/c ↓ Coming in ↓ Debit [Debit what comes in] • Recording Income Received Commission received is income. Generally, the information relating to this income is maintained using the accounting head Commission Received a/c.

Author Credit : The Edifier

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