Journal (Recording of transactions)

1
Accounting Process

1. Identifying
2. Recording
3. Classifying
4. Summarizing
5. Interpretating
6. Communicating

2
Recording

• Noting down the business Transactions/events
• Book of Primary/initial Record ( Journal)
• Process called as Journalizing
• In a Chronological sequence

3
Types of Accounts (Traditional approach)

• Impersonal Accounts
• Real Accounts Nominal Accounts
• Personal Accounts
• Natural Artificial Representative

4
Personal Accounts

• Focuses on a person
• Natural Persons Representative personal
• (Ram, Shyam) (Debt, Capital A/c,
  Bank A/c)
• Artificial persons
• (like Companies, Partnerships)

5
Real Accounts

• Relates to The Assets
• Fixed Assets Current Assets
  Fictitious
• Capital Expenditures - Revenue
  expenditures Assets
• Non Current Assets - smooth running the
  business - Notional
• e.g. Furniture, Building - e.g. Stock,
  Debtors, Cash assets
• not meant for resale
• growing the business

6
Nominal Accounts

• Expenses Losses
• (Purchases Salaries, Rent) (on sale of asset)
• Incomes Gains
• (Sales,Interest,Commission) (on sale of asset)

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Golden Rules

• Personal Accounts ( Person)
• Debit The Receiver
• Credit The Giver
• Nominal Account
• Debit All Expenses, Losses
• Credit All Incomes, Gains
• Real Accounts (Asset)
• -
  Debit What comes in
• 
  - Credit What goes out

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Examples

• 1) Cash paid to Shyam
• Debit Shyam (the receiver)
• Credit Cash (what goes out)
• 2) Furniture purchased
• Debit Furniture (What Comes in)
• Credit Cash (What goes out)
• 3) Salaries paid
• Debit Salaries (Expenses)
• Credit Cash (What goes out)

9
Journal

• The format of journal Book is as
• Narration of an entry A brief explanation of
  the entry
• Ledger Folio A page number in the ledger (of the
  transaction)

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Practical Question

• Journalize the following
• Mohan started the business with Cash 2 Lacs
  Furniture 5 Lacs.
• Purchased goods of 50,000
• Purchases from Shyam 25,000
• Sales done of 30,000
• Sales to Rahim of 15,000
• Rahim could not pay 2,500
• Remaining amount accepted from Rahim after
  discount of 500
• Depreciation charged on furniture _at_ 10
• Cash deposited in Bank 20,000
• Personal expenses made of 2,000.
• Paid Rent of 15,000.

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Solution

• Particulars Debit Credit

12
Solution

• Particulars Debit Credit

13
Solution

• Particulars Debit Credit

14
Solution

• Particulars Debit Credit

15
Solution

• Particulars Debit Credit

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Types of Entries

1. Simple Entry Entry involving only two accounts.
2. Compound Entry having more than two accounts.
3. Contra Entry having Cash Bank involved.
4. Closing Entry Entries for transferring the
   expenses, income to Final accounts(Trading, PL)
5. Transfer Entry Entry Transferring amount from
   one account to another.

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Accounting equation approach

• Increase in Assets Debit
• Decrease in Assets Credit
• Increase in Liabilities/Capital Credit
• Decrease in Liabilities/Capital Debit

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MCQs

• Q.1. Amount Recovered from Ramesh , which was
  earlier written off as Bad Debt is debited to
  Cash A/c Credited to ______ A/c

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MCQs

• Q.2. Rent paid to Landlord is credited to

20
MCQs

• Q.3. Proprietor a/c is

21
MCQs

• Q.4. Which of the following is a credit
  transaction?

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MCQs

• Q.5. Process of recording a transaction in
  journal is called

23
MCQs

• Q.6. On purchase of a machine, Rs.200 was paid to
  workers as wages for installing the machine

24
MCQs

• Q.7. Which of the following A/c has a debit
  balance?

25
MCQs

• Q.8. Mohan Stationers will debit stationery
  purchases in

26
MCQs

• Q.9. Journal records the transactions in a/an

27
MCQs

• Q.10. Ram purchased car for Rs 10,000 paid Rs
  3,000 as cash as balance amount will be paid in
  three equation installments. Due to this