GOLDEN RULES - WAY OF WORKING EXAMPLE

We can take the following transactions and mention which accounts are involved in each case and which of them is to be debited and credited

April 2 Bought goods from AJAY Rs 8000

10 Paid cash to AJAY Rs 5000

21 Sold goods to vikram Rs 3000

25 Received cash from vikram Rs 2000

30 Paid salaries to employees Rs 500

30 Received commission Rs 250

 In the following table, we show the accounts to be debited and credited in the case of each transaction.

Date of transaction	Account to be debited	Account to be credited	Type of account	Reason for debit or credit
Apr - 02	Goods A/c ...................	.................... Ajay A/c	Real Personal	Good come in Ajay is the giver
Apr - 10	Ajay A/c ...............	.................. Cash A/c	Personal Real	Ajay is the receiver. cash goes out
Apr - 21	Vikram A/c ..................	................. Goods A/c	Personal Real	Vikram is the receiver. Goods goes out
Apr - 25	Cash A/c .................	............... Vikram A/c	Real Personal	Cash comes in vikram is the giver
Apr - 30	Salaries A/c ..................	................. Cash A/c	Nominal Real	Expense Cash goes out
Apr - 30	Cash A/c ..................	................. Commission A/c	Real Nominal	Cash come in Income

QUIZ 1 BASIC ACCOUNTING CONCEPTS

http://www.daypo.net/test-basic-accounting-concept.html

CASH BOOK MEANING

Every business receives cash and pays cash practically every day, all the receipts and payment of cash are recorded in a separate book called the cash book.

In modern times cash includes not only legal tender money likes notes and coins but also other form of money like cheques, bank drafts etc.

The business man derives the following advantages by maintaining separate  cash book .

It shows owner how much he has received and how much he has paid.

It shows the owner how much money there should be left his cash box at any given time

it receives the owner of the trouble of counting his money whenever he wants to know how much money he has in hand.

Features of Trial Balance

The main features of the trial balance are

It is tabulation of balances of all accounts.

It classifies accounts into two classes

a) Accounts having debit balances

b) Accounts having credit balances

It refers to a specified date

GOLDEN RULES AND SIGNIFICANCE OF OF DEBIT AND CREDIT BALANCES

SIGNIFICANCE OF OF DEBIT AND CREDIT BALANCES(GOLDEN RULES)

All accounts fall into three categories

1 Personal accounts

2 Real accounts

3 Nominal accounts

Personal accounts:

if a personal account shows debit balance

the person is a debtor to the business concern

if a personal account shows credit balance

the person is the creditor to the business concern

Real accounts

Real accounts show debit balance. If at any time, there is credit balance in a real account, it represents profit on sale of asset. The profit should be transferred to profit and loss account.

Nominal accounts

if a nominal accounts shows debit balance,it relates to an item of expenditure or loss

if a nominal accounts shows credit balance . it relates to an item of gain or income.

difference between inland and foreign bills of exchange

INLAND BILLS OF EXCHANGE	FOREIGN BILLS OF EXCHANGE
Only one copy is prepared	Three copies are prepared
Stamps are affixed only once	Stamps are affixed two times of the time of acceptence and at time of making payments
Written in common and local language of the country	Written in English OR in the language ofthe country of the drawer
It is noted after dishonour	Its is noted and protested after dishonour
Its is written on judicial stamp paper	Its is written on palin paper