Journal (Recording of transactions)

1. Accounting Process Identifying Recording Classifying Summarizing Interpretating 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 PersonsRepresentative personal (Ram, Shyam) (Debt, Capital A/c, Bank A/c) Artificial persons (like Companies, Partnerships)

5. Real Accounts Relates to “The Assets” Fixed AssetsCurrent AssetsFictitious • 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 ExpensesLosses (Purchases Salaries, Rent) (on sale of asset) Incomes Gains (Sales,Interest,Commission) (on sale of asset)

7. 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

8. 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)

10. 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 @ 10% • Cash deposited in Bank ` 20,000 • Personal expenses made of ` 2,000. • Paid Rent of ` 15,000.

11. Solution Particulars Debit Credit

12. Solution Particulars Debit Credit

13. Solution Particulars Debit Credit

14. Solution Particulars Debit Credit

15. Solution Particulars Debit Credit

16. Types of Entries • Simple Entry : Entry involving only two accounts. • Compound Entry : having more than two accounts. • Contra Entry: having Cash & Bank involved. • Closing Entry : Entries for transferring the expenses, income to Final accounts(Trading, P&L) • Transfer Entry : Entry Transferring amount from one account to another.

17. Accounting equation approach Increase in Assets : Debit Decrease in Assets : Credit Increase in Liabilities/Capital : Credit Decrease in Liabilities/Capital : Debit

18. 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

19. 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?

22. 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: