Topic 1

Assignment
Classify following as Assets, Liabilities, Revenues, Expenses or Equity.

1. Building
2. Salary
3. Rent
4. Loan
5. Prepaid rent
6. Outstanding water bill
7. Capital
8. Furniture
9. Electrical fittings
10. Bank account
11. Debtors
12. Creditors
13. Investments
14. Advertisement
15. Repairs
16. Sales
17. Purchase

Solution:

A: Assets

L: Liability

S. No. Accounts R: Revenue Reason

E: Expense

Eq: Equity

1 Building A Will provide future benefits and has resale value.

2 Salary E Will provide benefits in one period (usually a month)

and to be repeated every month.
3 Rent E Will provide benefits in one period (usually a month)
and to be repeated every month.

4 Loan L Owed to lender.

5 Prepaid rent A We paid advance to landlord and benefits to accrue

in next accounting period.

6 Outstanding L Owed to the respective authority, like Jal board, for

water bill the benefits taken in the current period but payment
not yet made.

7 Capital Eq Owner’s investments.

8 Furniture A Will provide future benefits and has resale value.

9 Electrical fittings A/E It can be an asset since it will provide future

benefits for multiple accounting periods and has
resale value.

But, it can also be considered an expense as per

company policy since it might be of small value and
doesn’t have a resale value in some cases.

10 Bank account A Will provide future benefits and has realisable value
in monetary terms.

11 Debtors A Customers who owe money to us since we had

sold goods to them on credit. So, it’s a future
benefit.

12 Creditors L Suppliers/People/Organisations to whom we owe

money since we had purchased some goods from
them on credit.

13 Investments A Will provide future benefits and has resale value.

14 Advertisement E Momentary benefits and to be repeated frequently.

15 Repairs E Momentary benefits and to be repeated frequently.

16 Sales R Main revenue activity realised by sale of goods or

rendering services.
 17 Purchase E Expense incurred for purchasing raw material
production or stock in trade for resale purpose.

Topic 2
Assignment
Show the impact of the following transactions on the accounts involved in the transaction.

For example,

Transaction: Sales made to Ravi

We will mention the following details:

Transaction Accounts Nature of Increase or Debit or Credit

involved account Decrease

Sales made to Ravi’s A/C Asset (Debtors) Increase Debit

Ravi
Sales A/C Revenue Increase Credit

1. Cash sales
2. Rent paid
3. Purchase of land
4. Payment received from customer
5. Credit sales
6. Buying inventory (goods)
7. Taxes paid
8. Paying off an old loan
9. Payment of wages to workers
10. Additional money invested by owner into the business

Solution:

S.no. Transaction Accounts Nature of Increase or Debit or

involved account Decrease credit

1 Cash sales Bank/Cash Asset Increase Debit

A/C

Sales A/C Revenue Increase Credit

2 Rent paid Rent A/C Expense Increase Debit

Bank A/C Asset Decrease Credit

3 Purchase of land Land A/C Asset Increase Debit

Bank A/C Asset Decrease Credit

4 Payment received Cash/Bank Asset Increase Debit

from customer A/C

Customer Asset Decrease Credit

(Debtor) A/C

5 Credit sales Sales A/C Revenue Increase Credit

Customer Asset Increase Debit

(Debtor) A/C

6 Buying inventory Purchase A/C Expense Increase Debit

(goods)

Bank A/C Asset Decrease Credit

7 Taxes paid Taxes A/C Expense Increase Debit

Bank A/C Asset Decrease Credit

8 Paying off an old Loan A/C Liability Decrease Debit

loan

Bank A/C Asset Decrease Credit

9 Payment of wages to Wages A/C Expense Increase Debit

workers

Bank A/C Asset Decrease Credit

10 Additional money Capital A/C Equity Increase Credit

invested by owner
into the business
 Bank A/C Asset Increase Debit

Topic 3

Assignment
Record following transactions in the journal.

1. Radhika started business with Rs. 30,00,000 being deposited in the bank account on
1/4/2020.
2. She purchased machinery costing 5,00,000 from Mukesh by paying cheque on 2/4/2020.
3. She withdrew Rs. 70,000 from the bank for office expenses on 4/4/2020.
4. She paid rent of the shop Rs. 30,000 in cash on 5/4/2020.
5. She purchased raw materials from Rachna Stores for Rs. 12,000 on 5/4/2020.
6. Paid Rs. 10,000 to Rachna Stores on 10/4/2020.

Answer:

Date Particulars LF Debit (Rs.) Credit (Rs.)

1/4/2020 Bank A/C -----Dr 30,00,000

To Radhika’s Capital A/C 30,00,000

2/4/2020 Machinery A/C -----Dr 5,00,000

To Bank A/C 5,00,000

4/4/2020 Cash A/C -----Dr 70,000

To Bank A/C 70,000

5/4/2020 Rent A/C -----Dr 30,000

To Cash A/C 30,000

5/4/2020 Purchase A/C -----Dr 12,000

To Rachna Stores A/C 12,000

10/4/2020 Rachna Stores A/C ------Dr 10,000

 To Bank A/C 10,000

Explanation:

1. Bank is an asset, with the introduction of the capital amount, it is increasing. So, it will be
debited. Capital is part of equity and that is also increasing, so, as per the rules - it will
be credited.
2. Machinery is an asset and increasing so it will be debited. Bank is also an asset but
here, it’s decreasing. So, it will be credited.
3. Since cash is being withdrawn from the bank for office use, the accounts involved will be
Cash A/C and Bank A/C. Cash and bank both are assets. So, we have to debit the
increase and credit the decrease.
4. Here, Rent is being paid. Since rent, an expense, is increasing , it will be debited. Cash
is an asset and when we pay the rent, it is decreasing. So, Cash A/C will be credited.
5. Since Radhika purchased goods from Rachna stores, the accounts involved will be
Purchase A/C and Rachna Stores A/C. Since we purchased goods from Rachna stores,
goods are coming into the business so the purchase account is increasing and since
payment is not mentioned so at present it is a liability for us that is increasing due to
purchase on credit. So, Purchase A/C will be debited and Rachna Stores A/C will be
credited.
6. Rachna stores is a liability that is decreasing for us after the payment. So, Rachna
Stores A/C will be debited. Cash is an asset that is also decreasing. So, Cash A/C will be
credited.