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ACCOUNTS

REAL A/C

PERSONAL A/C

NOMINAL A/C

Dr- What Comes in

Cr- What Goes out

Dr- The Receiver

Cr- The Giver

Dr- All Expenses & Losses

Cr- All Incomes & Gains

Real A/c Land & building Plant & Machinery Furniture Goodwill Cash Goods Investments Live stock Copy Rights

Personal A/c All Names ABC Ltd. Soni Ltd. Bank of India Capital A/C Drawing

Nominal A/c Rent Commission Interest Printing & stationary Discount Salary Wages Travelling Expenses Advertisements Sales Expenses

Important Points: Business Started / Commenced Capital A/C Withdrawn from business for personal use Drawing A/C

Transaction

A/C Involved
Rent Cash Rent Cash Commission Cash Commission Cash Interest Cash Purchase/ Goods Cash Purchase/ Goods Tia

Type of A/C
Nominal Real Nominal Real Nominal Real Nominal Real Nominal Real Nominal Real Real Nominal/ Real Personal Real Nominal/ Real Personal Nominal/ Real Real Personal Real Real Real Real Real Personal Personal Real

How each aspect affect


Rent is expense Cash is going out Rent is expense Cash is going out Commission is income Cash is coming in Commission is income Cash is coming in Interest is an expense Cash is Going Out Purchase is expense/ Goods are coming in Cash is going out Purchase is expense/ Goods are coming in Tia is giver Cash is coming in Sales is income/ Goods are going out Tia is Receiver Sales is Income/ Goods are going out Cash is coming in Ramu is giver Machinery is coming in Cash is going out Cash is coming in Furniture is going out Cash is coming in Businessman is giving Cash Businessman is Receiver Cash is going out

Rules Applicable

A/C to be Dr.
Rent

A/c to be Cr.

Rent paid Rs 100 Rent paic to Tia Rs 100 Commission Received Rs 50 Commission received from Tia Rs 50 Paid Interest Rs 500 Purchased Goods of Rs 100

Dr. all expenses Cr. What is goes out Dr. all expenses Cr. What is goes out Cr, all incomes Dr. What is comes in Cr, all incomes Dr. What is comes in Dr. all expenses Cr. What is goes out Dr. all expense/ Dr. what comes in Cr. What goes out Dr. all expense/ Dr. what comes in Cr. The giver Dr. what comes in Cr. All incomes/ Cr. What goes out Dr. the Receiver Cr. All incomes/ Cr. What goes out Dr. what comes in Cr. The giver Dr. what comes in Cr. What goes out Dr. what comes in Cr. What goes out Dr. what comes in Cr. The giver Dr. the receiver Cr. What goes out

Cash Rent Cash Commis sion Commis sion

Cash

Cash Interest

Cash Purchase /Goods Cash Purchase /Goods Tia Cash Sales/ Goods Tia Sales/ Goods Cash Ramu Machiner y Cash Cash Furnitur e Cash Capital Drawing Cash

Purchased Goods from Tia on credit Sold Goods of Rs 200

Cash Sales Goods Sold goods to Tia Tia on credit Sales Goods Cash Received from Ramu Machinery Purchased Furniture sold for Rs 5000 Business commenced with Cash Cash Withdrawn from business Cash Ramu Machinery Cash Cash Furniture Cash Capital Drawing Cash

Journal Entries
1. Rent paid Rs 100 Rent A/c To Cash A/c (Being Rent paid) 2. Rent paid to Tia Rs 100 Rent A/c To Cash A/c (Being Rent paid) 3. Commission Received Rs 50 Cash A/c To Commission A/c (Being Commission received) 4. Commission received from Tia Rs 50 Cash A/c To Commission A/c (Being Commission received) 5. Paid interest Rs 150 Interest A/c To Cash A/c (Being interest paid) 6. Purchased Goods of Rs 5000 Purchase/ Goods A/c To Cash A/c (Being Goods purchased) 7. Purchased Goods of Rs 500 From Tia on credit Purchase/ Goods A/c To Tia (Being goods purchased on credit) Dr 100 100

Dr

100 100

Dr

50 50

Dr

50 50

Dr

150 150

Dr

5000 5000

Dr

5000 5000

8. Goods of Rs 100 purchased from Tia were defective Therefore returned Tia Dr 100 To Purchase Return A/c (Being goods returned to Tia) 9. Cash purchases Rs 15000 off 10% T.D. (Trade Discount) Purchase/Goods A/c To Cash A/c (Being goods purchased with 10% T.D.)

100

Dr 13450 13450

10. Goods purchased for Rs 20000 with 5%T.D. & 10% C.D.(Cash Discount) Goods/purchase A/c Dr 19000 To cash A/c To Discount A/c (Being goods purchased with 5% T.D. & 10% C.D.) 11. Sold Goods of Rs 5000 Cash A/c To Sales/ Goods A/c (Being goods sold) 12. Goods sold to Jai for Rs 20000 with 5% T.D. Jai To Sales/Goods A/c (Being goods sold for T.D.)

17100 1900

Dr 5000 5000

Dr 19000 19000

13. Goods sold to Tia for Rs 20000 with 5% T.D. & 10% C.D. Amount received on the spot Cash A/c Dr 17100 Discount A/c Dr 1900 To Goods/Sales 19000 (Being goods sold for 5% T.D. & 10% C.D.) 14. Sold goods of Rs 5000 to Tia on credit Tia To Sales/ Goods A/c (Being goods sold on credit)

Dr 5000 5000

15. Tia returned goods of Rs 100 sold to her Sales Return A/c To Tia (Being goods returned by Tia) 16. Cash received from Tia Rs 800 Cash A/c To Tia (Being cash received from Tia) 17. Purchased machinery of Rs 10000 Machinery A/c To cash A/c (Being machinery purchased) 18. Sold furniture for Rs 4000 Cash A/c To Furniture A/c (Being furniture sold) 19. Business started/commenced with cash Rs 100000 Cash A/c To Capital A/c (Being business started) 20. Rs 5000 withdrawn from business Drawing A/c To Cash A/c (Being Cash withdrawn from business for personal use)

Dr

100 100

Dr

800 800

Dr 10000 10000

Dr 4000 4000

Dr 100000 100000

Dr 5000 5000

21. Goods of Rs 5000 destroyed by fire & insurance company admitted claim of Rs3000 Insurance Claim A/c Dr 3000 Loss by Fire A/c Dr 2000 To Goods A/c 5000 (Being goods lost by fire & Insurance company admitted claim)

22. Goods lost by theft Rs 10000 & insurance company admitted claim Rs 7000 Insurance Claim A/c Dr Loss by theft A/c Dr To Goods A/c (Being goods lost by theft & Insurance company admitted claim) 23. Goods lost by fire Rs 6000 Loss by fire A/c To Goods A/c (Being goods lost by fire)

7000 3000 10000

Dr 6000 6000

24. Purchased machinery of Rs 7000 & paid Rs 3000 for its installation Machinery A/c Dr 10000 To Cash A/c 10000 (Being machinery purchased & installation charges paid) Note: Installation Charges of the asset are included in the cost of the asset. 25. Paid installation charges on machinery Rs 3000 Machinery A/c To Cash A/c (Being installation charges paid) 26. Paid erection charges Rs 4000 on building Building A/c To Cash A/c (Being erection charges paid for building)

Dr

3000 3000

Dr 4000 4000

27. Machinery lost by fire of Rs 10000 & insurance company paid claim of Rs 8000 Insurance claim A/c Dr 8000 Loss by fire A/c Dr 2000 To machinery A/c 10000 (Being machinery lost by fire & insurance company admitted claim) 28. Received Rs 2000 from Mr. Joy, our debtor whose A/c was written off as bad debt last year Bad debt A/c Dr 2000 To Mr. Joy 2000 (Being money received from debtor)

29. Paid to Joy Rs 3700 in full settlement of his account of Rs 4000 Joy To cash A/c To discount A/c (Being cash paid to Joy) 30. Received from Tia 1760 in full settlement of Rs 2000 Cash A/c Discount A/c To Tia (Being cash received from Tia) 31. Dividend received Rs 500 Bank A/c To Dividend A/c (Being dividend received) 32. Cash deposited in the bank Rs 1000 Bank A/c To Cash A/c (Being cash deposited in the bank) 33. Goods distributed as free samples of Rs 750. Advertisement A/c To Goods A/c (Being goods distributed as free samples)

Dr 4000 3700 300

Dr 1760 Dr 240 2000

Dr

500 500

Dr

1000 1000

Dr 750 750

34. Life insurance premium paid Rs 500 Drawing A/c Dr 500 To Cash A/c 500 (Being life insurance premium paid) Note: Life insurance premium is personal expense of businessman. Therefore included in drawing.

35. Cheque of Rs 5000 received from Tia. Bank A/c To Tia (Being cheque received from Tia) 36. Cheque received from Tia dishonoured Tia To Bank A/c (Being Tias cheque dishonoured) 37. Amount of Rs 1000 paid by cheque to Mr. Joy Mr. Joy A/c To Bank A/c (Being amount paid to Joy by cheque) 38. Cheque paid to Joy dishonoured Bank A/c To Joy (Being cheque paid to Joy dishonoured)

Dr 5000 5000

Dr

5000 5000

Dr

1000 1000

Dr

1000 1000

ACCOUNTING ENTRIES FOR DEPRECIATION


1. For purchase of asset by cash/ cheque/ or on credit. Asset A/c Dr To Cash / Bank / Partys A/c (Being asset purchased) 2. For payment of incidental expenses like erection / fixation charges. Asset A/c Dr To Cash / Bank A/c (Being the carriage / Freight / Erection / Installation / Legal expenses paid on the new asset) 3. For recording depreciation at the end of the year. Depreciation A/c Dr To Asset A/c (Being depreciation provided @ ____ % on ____ Rs for the period of ____ on _____ method) 4. For sale of asset on cash or credit. Cash / Bank / Partys A/c To Asset a/c (Being asset sold)

Dr

5. For profit on the sale of the asset. Asset A/c Dr To Profit & loss A/c (Being the profit on the sale asset transferred to Profit & Loss A/c) 6. For Loss on the sale of asset. Profit & Loss A/c Dr To Asset A/c (Being Loss on the sale of the asset transferred to profit & Loss A/c) 7. For transfer of depreciation to Profit & Loss A/c Profit & Loss A/c Dr To Depreciation A/c (Being depreciation A/c closed & balance transferred to Profit & Loss A/c)

BILLS OF EXCHANGE
Bills Of Exchange: It is an unconditional order in writing to the debtor to pay certain specified amount after expiry of definite period to the drawer or to any other person as per his order. Parties to Bill of exchange: Drawer, Drawee & payee. Drawer is person who draws the Bill. He is creditor or maker or seller. Drawee is person on whom the bill is drawn. He is debtor or acceptor or buyer. Payee is a person to whom amount of bill is paid. Endorser is a person who endorses a bill and endorsee is a person in whose favour a bill is endorsed. Bill of Exchange is classified as : 1. Bill Receivable (B. R.) 2. Bill payable (B. P.) The drawer can make alternate use of the bill: He can retain bill till the due date. He can endorse bill. He can discount bill. He can send bill to the bank for collection. Drawee is liable to pay the amount of bill to the HOLDER of the bill on its due date . If the amount of the bill is paid on due date by drawee to the holder , is called honour of the bill. If the amount is not paid on the due date, is called dishonor of the bill. If the amount is paid before due date, is called retirement of the bill. To extend the period of old bill is called renewal of the bill. In case of renewal, interest is income for drawer and expense for drawee. Drawee does not pass any journal entry for discounting, endorsement and sending the bill to the bank for collection.

JOURNAL ENTRIES
When the retained bill is honoured, dishonoured & in case of insolvency of

the drawee:
Transaction 1. Sale/ Purchase of Goods 2. Receiving/ Accepting Bill 3. If retained bill is honoured 4. If Retained Bill is dishonoured. 5. Dishonoured & noting charges paid If Drawee became insolvent a. Dishonour Books of Drawee Purchase A/c To Creditor A/c Drawers A/c To Bills Payable Bills Payable A/c To Cash/ Bank A/c Bills Payable A/c To Drawers A/c Bills Payable A/c Noting Charges A/c To Drawers A/c Bills Payable A/c To Drawers A/c Drawers A/c To Cash/Bank A/c To Deficiency A/c Books of Drawer Debtor A/c To Sales Bills Receivable A/c To Drawees A/c Cash/ Bank A/c To Bills Receivable Drawees A/c To Bills Receivable Drawees A/c To Bills Receivable A/c To Cash/ Bank A/c

Dr Dr Dr Dr Dr Dr

Dr Dr Dr Dr Dr

Dr Drawees A/c To Bills Receivale Dr Cash/ Bank A/c Bad Debts A/c To Drawees A/c

Dr

b. Cash/Bad debt/ Defiiciency

Dr Dr

When the Bill is endorsed by the drawer in the favour of the creditor/ endorsee,and the bill is honoured, dishonoured,insolvency of the drawee.
Transaction 1. Receiving/ accepting the bill 2. Endorsing bill (From Endorser to Endorsee) 3. On due date endorsed bill is honoured 4. On the due date endorsed bill is dishonoured 5. Endorsed bill dishonoured & noting charges paid by Endorsee 6. When Drawee became insolvent a. Dishonour Bills Payable A/c To Drawers A/c Drawers A/c To Cash/ Bank A/c To Deficiency A/c Dr Drawees A/c To Endorsees A/c Cash/ Bank A/c Bad Debts A/c To Drawees A/c Dr Endorsees A/c Dr To Bills Receivable A/c Books of Drawee Drawers A/c To Bills payable A/c No Entry Bills Payable A/c To Bank/Cash A/c Bills Payable A/c To Drawers A/c Bills Payable A/c Noting Charges A/c To Drawers A/c Dr Dr Dr Dr Dr Books of Drawer/ Endorser Bills Receivable A/c Dr To Drawees A/c Creditors/ Endorsers A/c Dr To Bills Receivable A/c No Entry Drawers A/c To Endorsees A/c Drawees A/c (Bill Amt + N. C.) To Endorsees A/c (Bill Amt + N. C.) Books of Creditor/Endorsee No Entry Bills Receivable A/c To Endorsers A/c Dr

Cash/ Bank A/c Dr To Bills Receivable A/c Dr Endorsers A/c Dr To Bills Receivable A/c Dr Endorsers A/c Dr To Bills Receivable A/c To Cash/ Bank A/c

b. Part Amount paid by Drawee to Drawer

Dr

Dr Dr No Entry

When bill is discounted with the Bank, and the bill is honoured, dishonoured and insolvency of the drawee

Transactions
1. Sale/ Purchase of Goods

2. Drawer draws bill & Drawee accepts it 3. Discounting of bill

Books of Drawee Purchase A/c To Creditor/Drawers A/c Drawers A/c To Bills Payable A/c No Entry

Dr Dr

4. On the due date discounted bill honoured 5. On the due date discounted bill dishonoured 6. On the due date discounted bill dishonoured & noting charges paid

Bills Payable A/c To Cash/Bank A/c Bills Payable A/c To Drawers A/c Bills Payable A/c Noting Charges A/c To Drawers A/c (Bill Amt + Noting Charges) Bills Payable A/c To Drawers A/c Drawers A/c To Cash/Bank A/c To Deficiency A/c

Dr

Dr Dr Dr

Books of Drawer Debtor/Drawees A/c Dr To Sales A/c Bills Receivable A/c Dr To Drawees A/c Bank A/c Dr To Discount A/c To Bills Receivable A/c No Entry (Because drawer is not holder of the Bill) Drawees A/c Dr To Bank A/c Drawees A/c Dr (Bill Amt + Noting Charges) To Bank A/c (Bill Amt + Noting Charges) Dr

7. On the insolvency of the Drawee a. Dishonor

Dr Drawees A/c To Bank A/c Dr Cash/ Bank A/c Bad Debt A/c To Drawees A/c

b. Bad Debts/ Deficiency

Dr Dr

When bill is sent to the bank for collection & the bill is honoured, dishonoured and insolvency of the drawee

Transaction 1. Sale/ Purchase of Goods

Books of Drawee Books of Drawer Purchase A/c Dr Debtors/Drawees A/c Dr To Creditors/Drawers A/c To Sales A/c 2. Accepting the bill Drawers A/c Dr Bills Receivable A/c Dr To Bills PayableA/c To Drawees A/c 3. Drawer sends the bill to the Bank for bank for collection No Entry Collection A/c Dr To Drawees A/c 4. Bill sent to bank for Bills Payable A/c Dr Bank A/c Dr collection honoured To Cash/Bank A/c To Bank For Collection A/c 5. Bill sent to bank for Bills Payable A/c Dr Drawees A/c Dr collection dishonoured To Drawers A/c To Bank For Collection A/c 6. Bill sent to bank for Bills Payable A/c Dr Drawees A/c Dr collection dishonoured & Noting Charges A/c Dr To Bank For Collection A/c noting charges paid To Drawers A/c To Bank A/c (Noting chages) 7. If Drawee became insolvent a. Dishonour Bills Payable A/c To Drawer A/c Drawers A/c To Cash/Bank A/c To Deficiency A/c Dr Drawees A/c Dr To Bank for Collection A/c Cash/Bank A/c Bad Debts A/c To Drawers A/c Dr Dr

b. Amount Received from Drawee

Dr

JOINT VENTURE
Joint means TOGETHER and venture means A RISK UNDER TAKING JOINT VENTURE can be defined as a temporary partnership without name of firm to take on a particular venture (work or job) for short period. It is not continuous partnership, as soon as work/ job gets over it comes to end. Partners of the joint venture are called as Co-ventures. Difference between Joint venture & Partnership Points of Joint Venture Distinction 1. Name Joint venture does not have firm name. 2. Act There is no special Act for governing Joint venture. 3. Owners Owners of joint venture are called co-ventures. 4. Separate set In joint venture books of accounts of books can be maintained separately or jointly. 5. Admission A minor can be admitted as coof Minor venture because he is not competent to enter into contract. 6. Dissolution Joint Venture must be dissolved after completion of a particular work. 7. Period/ It is for a temporary period. Term 8. System of Cash system of accounting is Accounting followed for a joint venture business.

Partnership A Partnership firm always has a firm name. Partnership firm is governed by Indian Partnership Act 1932. Owners of partnership firm are called partners. In partnership firm books of accounts are maintained jointly. A minor can be admitted for benefits of the firm. Partnership is not dissolved automatically , unless partners decide. Generally, it is continuous enterprise with long term business activities. Accrual system of accounting is followed for partnership business.

METHODS OF RECORDING TRANSACTION OF JOINT VENTURE

METHODS

When seperate set of books is maintained OR

When is joint bank Account is opened


(Joint Bank Method)

When seperate set of books is not maintained

WHEN SEPARATE SET OF BOOKS IS MAINTAINED


Under this method, all the joint venture transactions are recorded in separate set of books of accounts maintained for all purpose. Under this method, generally following accounts are to be opened: 1. Joint Venture A/c 2. Co-venture A/c 3. Joint Bank A/c Joint venture Account: It is nominal account. It is just like as Trading and Profit & Loss account. In order to find out Profit & Loss of Joint Venture business this account is prepared. All expenses incurred for business and purchases are to be debited to Joint Venture Account. Sale of goods, sale of assets, sale of scrap or Income are to be credited to Joint Venture Account.

So, Joint Venture Debit Side: All expenses, material / goods / assets purchased for business. Joint venture credit side: Sale of material / goods / assets, contract price, assets or material taken by co-ventures. Profit of Joint Venture: If the total of credit side is greater than total of debit side, then the difference is called profit of joint venture. Therefore, credit balance of this account is known as profit of joint venture. Loss of Joint Venture: If the total of debit side is greater than total of credit side, then the difference is called Loss of Joint Venture. Therefore, debit balance of this account is known as Loss of Joint Venture. Co-venturers Account: It is personal account. All transactions which are related with co-venturer, are to be recorded in this account. This account is to be prepared in order to calculate an amount payable to co-venturers. Transactions such as cash introduced by co-venturer, goods/assets supplied by coventurer, expenditure paid by them. Profit of joint venture account is to be recorded in coventurers account on CREDIT SIDE. Transactions such as assets, goods or material, shares or debentures taken by coventurers. Loss of joint venture account isto be recorded in co-venturers account on DEBIT SIDE. The balance of this account should be transferred to Joint Bank Account. Credit balance of this account is treated as balance amount paid and debit balance of this account is treated as balance received. Joint Bank Account: It is real account by nature. Initial amount contributed by co-venturer is to be deposited in this account. Receipt and payment is to be recorded in this account. It is just like cash account. At the end of the venture this account should be closed. It means, the total of debit side should be equal to the total of credit side.
RECEIVING THE AMOUNT OF CONSIDERATION OF THE JOINT VENYURE IN THE FORM OF CASH/SHARES/DEBERNTURES.

Sometimes, co-venturers enter into joint venture agreement for constructin of building, road bridges, damsetc. Prices of this type of work is called CONTRACT PRICE. Such price is usually received fully in cash or partly in shares /debentures or bonds. In this case it is necessary to open shares/stock/debentures account.

Sometimes, part of the contract price is to be received in terms of shares/ stock / debentures or government securities, then only this account is to be opened. It means, if contract price is not received in terms of shares/ stock/ debentures or government securities etc then it is not necessary to open this account. When shares/ stock / debentures are received against contract price, then it is to be recorded on debit side of this account. When such securities are sold or taken over by co-venturers, then it is to be recorded on the credit side of this account. If any balance of this account,then it should transfer to Joint Venture Account.