Principles or Rules of Debit and Credit - Accounting - Illustration
Illustration - Problem
Analyse the following transactions to find out the elements affected by the transaction, their nature and the treatment (i.e. which account is to be debited and which credited).
- Ibrahim a sole proprietor Commenced business with a capital of 2,00,000.
- Bought Furniture for cash 20,000.
- Paid Rent to the shop owner Mr. Murugan 5,000.
- Paid cash into bank 1,50,000
- Bought Goods for cash 10,000 from M/s Shamir Jain & Co.,
- Bought Goods on credit from M/s Ramdas & Bros. for 10,000.
- Sold goods for cash 12,000 to Mr. Naryan Tiwari
- Bought Machinery from M/s Boolani Machinery and paid by cheque 25,000.
- Sold goods on credit to Mr. Natekar for 8,000
- Paid weekly wages to workers 5,000
- Paid M/s Ramdas and Brothers by cheque 5,000
- Received from Mr. Natekar 2,000
- Received commission from M/s Orion Traders for giving a trade lead 500.
Illustration - Solution
Commenced Business with a Capital of 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 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 5,000.
Rent Paid a/c
↓
Expenditure
↓
Nominal a/c
↓
Expense
↓
Debit
[Debit all expenses/losses]Cash a/c
↓
Tangible Aspect (Asset)
↓
Real a/c
↓
Going out
↓
Credit
[Credit what goes out]
Paid cash into bank 1,50,000
Bank a/c
↓
Organisation
↓
Personal a/c
↓
Receiver
↓
Debit
[Debit the benefit receiver]Cash a/c
↓
Tangible Aspect (Asset)
↓
Real a/c
↓
Going out
↓
Credit
[Credit what goes out]Bought Goods for cash 10,000 from M/s Shamir Jain & Co.,
Goods/Stock 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]Bought Goods on credit from M/s Ramdas & Bros. for 10,000.
M/s Ramdas & Bros. a/c
↓
Organisation
↓
Personal a/c
↓
Giver
↓
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 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 25,000.
Bank a/c
↓
Organisation
↓
Personal a/c
↓
Giver
↓
Credit
[Credit the benefit giver]Machinery a/c
↓
Tangible Aspect (Asset)
↓
Real a/c
↓
Coming in
↓
Debit
[Debit what comes in]Sold goods on credit to Mr. Natekar for 8,000.
Mr. Natekar a/c
↓
Person
↓
Personal a/c
↓
Receiver
↓
Debit
[Debit the benefit reciever]Goods/Stock a/c
↓
Tangible Aspect (Asset)
↓
Real a/c
↓
Going out
↓
Credit
[Credit what goes out]Paid weekly wages to workers 5,000
Wages Paid a/c
↓
Expenditure
↓
Nominal a/c
↓
Expense
↓
Debit
[Debit all expenses/losses]Cash a/c
↓
Tangible Aspect (Asset)
↓
Real a/c
↓
Going out
↓
Credit
[Credit what goes out]Paid M/s Ramdas and Brothers by cheque 5,000.
M/s Ramdas & Bros. a/c
↓
Organisation
↓
Personal a/c
↓
Receiver
↓
Debit
[Debit the benefit reciever]Bank a/c
↓
Organisation
↓
Personal a/c
↓
Giver
↓
Credit
[Credit the benefit giver]Received from Mr. Natekar 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
↓
Giver
↓
Credit
[Credit the benefit giver]Received commission from M/s Orion Traders for giving a trade lead 500.
Commission Received a/c
↓
Income
↓
Nominal a/c
↓
Income
↓
Credit
[Credit all incomes/gains]Cash a/c
↓
Tangible Aspect (Asset)
↓
Real a/c
↓
Coming in
↓
Debit
[Debit what comes in]