FUNDAMENTALS OF ACCOUNTING

Module 2 – Recording Of Transactions

Rules for Debit and Credit –
Traditional Approach (Golden Rules)
Types Of Accounts Debit Credit
Personal Account Debit the receiver Credit the Giver
Real Account Debit what comes in Credit what goes out
Nominal Account Debit all expenses & Credit all incomes &
losses gains

Modern Approach (Accounting Equations Approach)

Types Of Accounts Debit Credit
Asset Account Increase Decrease
Liabilities Account Decrease Increase
Capital Account Decrease Increase
Income Account Decrease Increase
Expenses Account Increase Decrease

Questions for Practice

Topic: Journal, Ledger, Trial Balance
Q.) The following balances appeared in the Ledger of M/s Marble Traders on 1st April,
2023:

Cash in hand ₹6,000; Cash at bank ₹12,000; Bills Receivable ₹7,000; Stock (Goods)
₹5,400; Bills Payable ₹2,000; Creditors – Ramesh ₹3,000; Debtors – Rahul ₹9,700;
Himanshu ₹10,000.
Transactions during the month were:
April ₹
1 Goods sold to Manish 3,000
2 Purchased goods from Ramesh 8,000
3 Received Cash from Rahul in full settlement 9,200
5 Cash received from Himanshu on account 4,000
6 Paid to Ramesh by cheque 6,000
8 Rent paid by cheque 1,200
10 Cash received from Manish 3,000
12 Cash Sales 6,000
14 Goods returned to Ramesh 1,000
15 Cash paid to Ramesh in full settlement (Discount received ₹300) 3,700
18 Sold goods to Kushal 10,000
20 Paid trade expenses 200
21 Drew for personal expenses 1,000
22 Goods returned by Kushal 1,200
24 Cash received from Kushal 6,000
26 Paid for stationery 100
 FUNDAMENTALS OF ACCOUNTING
27 Postage charges 60
28 Salary paid 2,500
29 Goods purchased from Sheetal Traders 7,000
30 Sold goods from Kirti 6,000
30 Goods purchased from Handa Traders 5,000
Journalise the above transactions, post them to Ledger, balance the accounts, and
prepare a Trial Balance.
Solution:
In the books of M/s Marble Traders
JOURNAL
Debit Credit
Date Particulars L.F. Amount Amount
(₹) (₹)
2023
April 1 Cash A/c …Dr. 6,000
Bank A/c …Dr. 12,000
Bills Receivable A/c …Dr. 7,000
Stock A/c …Dr. 5,400
Rahul …Dr. 9,700
Himanshu …Dr. 10,000
To Bills Payable A/c 2,000
To Ramesh A/c 3,000
To Capital A/c (Balancing Figure) 45,100
(Opening account balances recorded in
journal; Capital is ascertained by deducting
the Cr. total from the Dr. total i.e.
6,000+12,000+7,000+5,400+9,700+10,000-
2,000-3,000)
April 1 Manish …Dr. 3,000
To Sales A/c 3,000
(Being goods sold to Manish on credit)
April 2 Purchases A/c …Dr. 8,000
To Ramesh 8,000
(Being goods purchased from Ramesh on
credit)
April 3 Cash A/c …Dr. 9,200
Discount Allowed A/c …Dr. 500
To Rahul 9,700
(Cash received from Rahul in full settlement)
April 5 Cash A/c …Dr. 4,000
To Himanshu 4,000
(Cash received from Himanshu)
April 6 Ramesh A/c …Dr. 6,000 6,000
To Bank A/c
(Paid to Ramesh by Cheque)
April 8 Rent A/c …Dr. 1,200
To Bank A/c 1,200
(Rent paid by cheque)
Balance c/f 82,100 82,100
 FUNDAMENTALS OF ACCOUNTING

Balance b/f 82,100 82,100

April Cash A/c …Dr. 3,000
10 To Manish 3,000
(Cash received from Manish)
April Cash A/c …Dr. 6,000
12 To Sales A/c 6,000
(Goods sold for cash)
April Ramesh …Dr. 1,000
14 To Purchase Return A/c 1,000
(Goods returned to Ramesh)
April Ramesh …Dr. 4,000
15 To Cash A/c 3,700
To Discount Received A/c 300
(Paid to Ramesh in full settlement)
April Kushal …Dr. 10,000
18 To Sales A/c 10,000
(Sold goods to Kushal on credit)
April Trade Expenses A/c …Dr. 200
20 To Cash A/c 200
(Trade Expenses paid)
April Drawings A/c …Dr. 1,000
21 To Cash A/c 1,000
(Being cash taken for personal use)
April Sales Return A/c …Dr. 1,200
22 To Kushal 1,200
(Goods returned from Kushal)
April Cash A/c …Dr. 6,000
24 To Kushal 6,000
(Cash received from Kushal)
April Stationery A/c …Dr. 100
26 To Cash A/c 100
(Paid for stationery)
April Postage A/c …Dr. 60
27 To Cash A/c 60
(Paid for postage)
April Salary A/c …Dr. 2,500
28 To Cash A/c 2,500
(Salary paid)
April Purchases A/c. …Dr. 7,000
29 To Sheetal Traders 7,000
(Being goods purchased from Sheetal
Traders on credit)
April Kirti …Dr. 6,000
30 To Sales A/c 6,000
(Sold goods on credit)
April Purchases A/c …Dr. 5,000
30 To Handa Traders 5,000
(Being goods purchased on credit)
Total 1,35,060 1,35,060
 FUNDAMENTALS OF ACCOUNTING
LEDGER
Cash Account
Dr. Cr.
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr1 To Balance b/d 6,000 Apr15 By Ramesh 3,700
3 To Rahul 9,200 20 By Trade Exp.A/c 200
5 To Himanshu 4,000 21 By Drawings A/c 1,000
10 To Manish 3,000 26 By Stationery A/c 100
12 To Sales A/c 6,000 27 By Postage A/c 60
24 To Kushal 6,000 28 By Salary A/c 2,600
30 By Balance c/d 26,640

34,200 34,200

May1 To Balance b/d 26,640

Bank Account
Dr. Cr.
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr1 To Balance b/d 12,000 Apr6 By Ramesh 6,000
8 By Rent A/c 1,200
30 By Balance c/d 4,800

12,000 12,000

May1 To Balance b/d 4,800

Bills Receivable Account

Dr. Cr.
Date Particulars J.F Amoun Date Particulars J.F Amoun
. t . t
2023 ₹ 2023 ₹
Apr1 To Balance b/d 7,000 Apr By Balance c/d 7,000
30

7,000 7,000

May1 To Balance b/d 7,000

Stock Account
Dr. Cr.
Date Particulars J.F Amoun Date Particulars J.F Amoun
. t . t
 FUNDAMENTALS OF ACCOUNTING
2023 ₹ 2023 ₹
Apr1 To Balance b/d 5,400 Apr By Balance c/d 5,400
30

5,400 5,400

May1 To Balance b/d 5,400

Rahul
Dr. Cr.
Date Particulars J.F Amoun Date Particulars J.F Amoun
. t . t
2023 ₹ 2023 ₹
Apr1 To Balance b/d 9,700 Apr3 By Cash A/c 9,200
Apr3 By Discount 500
Allowed A/c

9,700 9,700

HImanshu
Dr. Cr.
Date Particulars J.F Amoun Date Particulars J.F Amoun
. t . t
2023 ₹ 2023 ₹
Apr1 To Balance b/d 10,000 Apr5 By Cash A/c 4.000
30 By Balance c/d 6,000

10,000 10,000

May1 To Balance b/d 6,000

Ramesh
Dr. Cr.
Date Particulars J.F Amoun Date Particulars J.F Amoun
. t . t
2023 ₹ 2023 ₹
Apr6 To Bank A/c 6,000 Apr1 By Balance b/d 3,000
14 To Purchase 1,000 2 By Purchases 8,000
Return A/c A/c
15 To Cash A/c 3,700
15 To Discount 300
Received A/c

11,000 11,000
 FUNDAMENTALS OF ACCOUNTING
Bills Payable Account
Dr. Cr.
Date Particulars J.F Amoun Date Particulars J.F Amoun
. t . t
2023 ₹ 2023 ₹
Apr 30 To Balance c/d 2,000 Apr1 By Balance b/d 2,000

2,000 2,000

May1 By Balance b/d 2,000

Capital Account
Dr. Cr.
Date Particulars J.F Amoun Date Particulars J.F Amoun
. t . t
2023 ₹ 2023 ₹
Apr 30 To Balance c/d 45,100 Apr1 By Balance b/d 45,100

45,100 45,100

May1 By Balance b/d 45,100

Manish
Dr. Cr.
Date Particulars J.F Amoun Date Particulars J.F Amoun
. t . t
2023 ₹ 2023 ₹
Apr1 To Sales A/c 3,000 Apr 10 By Cash A/c 3,000

3,000 3,000

Sales Account
Dr. Cr.
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr30 To Balance b/d 25,000 Apr1 By Manish 3,000
12 By Cash A/c 6,000
18 By Kushal 10,000
30 By Kirti 6,000

25,000 25.000

May1 By Balance b/d 25,000

Purchases Account
 FUNDAMENTALS OF ACCOUNTING
Dr. Cr.
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr2 To Ramesh 8,000 Apr30 By Balance c/d 20,000
29 To Sheetal Traders 7,000
30 To Handa Traders 5,000

20,000 20,000

May1 To Balance b/d 20,000

Discount Allowed Account

Dr. Cr.
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr3 To Rahul 300 Apr30 By Balance c/d 300

300 300

May1 To Balance b/d 300

Rent Account
Dr. Cr.
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr8 To Bank A/c 1,200 Apr30 By Balance c/d 1,200

1,200 1,200

May1 To Balance b/d 1,200

Purchase Return Account

Dr. Cr.
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr30 To Balance c/d 1,000 Apr14 By Ramesh 1,000

1,000 1,000

May1 By Balance b/d 1,000

Discount Received Account

Dr. Cr.
 FUNDAMENTALS OF ACCOUNTING
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr30 To Balance c/d 300 Apr15 By Ramesh 300

300 300

May1 By Balance b/d 300

Kushal Account
Dr. Cr.
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr To Sales A/c 10,000 Apr By Sales Return 1,200
18 22 A/c
24 By Cash A/c 6,000
30 By Balance c/d 2,800

10,000 10,000

May1 To Balance b/d 2,800

Trade Expenses Account

Dr. Cr.
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr20 To Cash A/c 200 Apr30 By Balance c/d 200

200

May1 To Balance b/d 200

Drawings Account
Dr. Cr.
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr21 To Cash A/c 1,000 Apr30 By Balance c/d 1,000

1,000 1,000

May1 To Balance b/d 1,000

Sales Return Account

Dr. Cr.
 FUNDAMENTALS OF ACCOUNTING
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr22 To Kushal 1,200 Apr30 By Balance c/d 1,200

1,200 1,200

May1 To Balance b/d 1,200

Stationery Account
Dr. Cr.
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr26 To Cash A/c 100 Apr30 By Balance c/d 100

100 100

May1 To Balance b/d 100

Postage Account
Dr. Cr.
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr27 To Cash A/c 60 Apr30 By Balance c/d 60

60 60

May1 To Balance b/d 60

Salary Account
Dr. Cr.
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr28 To Cash A/c 2,500 Apr30 By Balance c/d 2,500

2,500 2,500

May1 To Balance b/d 2,500

Sheetal Traders Account

Dr. Cr.
 FUNDAMENTALS OF ACCOUNTING
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr30 To Balance c/d 7,000 Apr29 By Purchases A/c 7,000

7,000 7,000

May1 By Balance b/d 7,000

Kirti
Dr. Cr.
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr30 To Sales A/c 6,000 Apr30 By Balance c/d 6,000

6,000 6,000

May1 To Balance b/d 6,000

Handa Traders Account

Dr. Cr.
Date Particulars JF Amoun Date Particulars J Amoun
t F t
2023 ₹ 2023 ₹
Apr30 To Balance c/d 5,000 Apr30 By Purchases A/c 5,000

5,000 5,000

May1 By Balance b/d 5,000

TRIAL BALANCE
As on 30th April, 2023
Name of Account LF Dr. Cr.
Balances Balances
₹ ₹
Cash A/c 26,640
Bank A/c 4,800
Bills Receivable A/c 7,000
Stock A/c 5,400
Himanshu 6,000
Bills Payable A/c 2,000
Capital A/c 45,100
Sales A/c 25,000
Purchases A/c 20,000
Discount Allowed A/c 500
Rent A/c 1,200
 FUNDAMENTALS OF ACCOUNTING
Purchase Return A/c 1,000
Discount Received A/c 300
Kushal 2,800
Trade Expenses A/c 200
Drawings A/c 1,000
Sales Return A/c 1,200
Stationery A/c 100
Postage A/c 60
Salary A/c 2,500
Sheetal Traders 7,000
Kirti 6,000
Handa Traders 5,000

Total 85,400 85,400

Topic: Company Accounts

Q.) Alpha Company Ltd. issued 1,00,000 equity shares of ₹10 each, payable as ₹3 on
application, ₹4 on allotment and the remaining on first and final call. Applications were
received for 90,000 shares and the allotment and calls were duly made and all moneys
were received respectively. Pass necessary journal entries.
Solution:
In the books of Alpha Company Ltd.
JOURNAL
Debit Credit
Date Particulars L.F. Amount Amount
(₹) (₹)
2023
Bank A/c …Dr. 2,70,000
To Share Application A/c 2,70,000
(Application money received on 90,000
shares @₹3 each)
Share Application A/c …Dr. 2,70,000
To Share Capital A/c 2,70,000
(Application money transferred to share
capital account)
Share Allotment A/c …Dr. 3,60,000
To Share Capital A/c 3,60,000
(Allotment money due on 90,000 shares
@₹4 each)
Bank A/c …Dr. 3,60,000
To Share Allotment A/c 3,60,000
(Allotment money received)
Share First & Final Call A/c 2,70,000
…Dr. 2,70,000
To Share Capital A/c
(First and final call money due on 90,000
shares @₹3 each)
 FUNDAMENTALS OF ACCOUNTING
Bank A/c …Dr. 2,70,000
To Share First & Final Call A/c 2,70,000
(Call money received)
Total 18,00,000 18,00,000

Q.) Beta Company Ltd. issued 1,00,000 equity shares of ₹10 each at a premium of ₹2
each, payable as ₹3 on application, ₹5 on allotment (including premium) and the
remaining on first and final call. Applications were received for 90,000 shares and the
allotment and calls were duly made and all moneys were received respectively. Pass
necessary journal entries.
Solution:
In the books of Beta Company Ltd.
JOURNAL
Debit Credit
Date Particulars L.F. Amount Amount
(₹) (₹)
2023
Bank A/c …Dr. 2,70,000
To Share Application A/c 2,70,000
(Application money received on 90,000
shares @₹3 each)
Share Application A/c …Dr. 2,70,000
To Share Capital A/c 2,70,000
(Application money transferred to share
capital account)
Share Allotment A/c …Dr. 4,50,000
To Share Capital A/c 2,70,000
To Securities Premium A/c 1,80,000
(Allotment money due on 90,000 shares
@₹5 each also including the premium of ₹2)
Bank A/c …Dr. 4,50,000
To Share Allotment A/c 4,50,000
(Allotment money received)
Share First & Final Call A/c 3,60,000
…Dr. 3,60,000
To Share Capital A/c
(First and final call money due on 90,000
shares @₹4 each)
Bank A/c …Dr. 3,60,000
To Share First & Final Call A/c 3,60,000
(Call money received)
Total 21,60,000 21,60,000

Q.) Gamma Company Ltd. issued 1,00,000 equity shares of ₹10 each, payable as ₹3 on
application, ₹4 on allotment and the remaining on first and final call. Applications were
received for 1,10,000 shares. Extra applications were rejected and excess application
 FUNDAMENTALS OF ACCOUNTING
money was refunded. The allotment and calls were duly made and all moneys were
received respectively. Pass necessary journal entries.
Solution:
In the books of Gamma Company Ltd.
JOURNAL
Debit Credit
Date Particulars L.F. Amount Amount
(₹) (₹)
2023
Bank A/c …Dr. 3,30,000
To Share Application A/c 3,30,000
(Application money received on 1,10,000
shares @₹3 each)
Share Application A/c …Dr. 3,30,000
To Share Capital A/c 3,00,000
To Bank A/c (10,000x3) 30,000
(Application money transferred to share
capital account and excess application
money on 10,000 shares refunded)
Share Allotment A/c …Dr. 4,00,000
To Share Capital A/c 4,00,000
(Allotment money due on 1,00,000 shares
@₹4 each)
Bank A/c …Dr. 4,00,000
To Share Allotment A/c 4,00,000
(Allotment money received)
Share First & Final Call A/c 3,00,000
…Dr. 3,00,000
To Share Capital A/c
(First and final call money due on 1,00,000
shares @₹3 each)
Bank A/c …Dr. 3,00,000
To Share First & Final Call A/c 3,00,000
(Call money received)
Total 20,60,000 20,60,000

Q.) Delta Company Ltd. issued 1,00,000 equity shares of ₹10 each, payable as ₹3 on
application, ₹4 on allotment and the remaining on first and final call. Applications were
received for 1,10,000 shares. Allotment was done on pro-rata basis and excess
application money was adjusted towards allotment money. All calls were duly made and
all moneys were received respectively. Pass necessary journal entries.
Solution:
In the books of Delta Company Ltd.
JOURNAL
Debit Credit
Date Particulars L.F. Amount Amount
(₹) (₹)
 FUNDAMENTALS OF ACCOUNTING
2023
Bank A/c …Dr. 3,30,000
To Share Application A/c 3,30,000
(Application money received on 1,10,000
shares @₹3 each)
Share Application A/c …Dr. 3,30,000
To Share Capital A/c 3,00,000
To Share Allotment A/c (10,000x3) 30,000
(Application money transferred to share
capital account and excess application
money on 10,000 shares refunded)
Share Allotment A/c …Dr. 4,00,000
To Share Capital A/c 4,00,000
(Allotment money due on 1,00,000 shares
@₹4 each)
Bank A/c …Dr. 3,70,000
To Share Allotment A/c 3,70,000
(Allotment money received)
Share First & Final Call A/c 3,00,000
…Dr. 3,00,000
To Share Capital A/c
(First and final call money due on 1,00,000
shares @₹3 each)
Bank A/c …Dr. 3,00,000
To Share First & Final Call A/c 3,00,000
(Call money received)
Total 20,60,000 20,60,000

Q.) Theta Company Ltd. Issued 1,00,000 equity shares of ₹10 each at a premium of ₹2
each, payable as ₹3 on application, ₹5 on allotment (including premium) and the
remaining on first and final call. Applications were received for 1,20,000 shares.
Allotment was done on pro-rata basis, and the excess application money was adjusted
towards allotment money. All calls were duly made and all moneys were received
respectively. Pass necessary journal entries.
Solution:
In the books of Theta Company Ltd.
JOURNAL
Debit Credit
Date Particulars L.F. Amount Amount
(₹) (₹)
2023
Bank A/c …Dr. 3,60,000
To Share Application A/c 3,60,000
(Application money received on 1,20,000
shares @₹3 each)
Share Application A/c …Dr. 3,60,000
To Share Capital A/c 3,00,000
To Share Allotment A/c (20,000x3) 60,000
 FUNDAMENTALS OF ACCOUNTING
(Application money transferred to share
capital account and excess application
money on 10,000 shares refunded)
Share Allotment A/c …Dr. 5,00,000
To Share Capital A/c 3,00,000
To Securities Premium A/c (1L 2,00,000
shares x2)
(Allotment money due on 1,00,000 shares
@₹5 each, including a premium of ₹2)
Bank A/c …Dr. 4,40,000
To Share Allotment A/c 4,40,000
(Allotment money received)
Share First & Final Call A/c 4,00,000
…Dr. 4,00,000
To Share Capital A/c
(First and final call money due on 1,00,000
shares @₹4 each)
Bank A/c …Dr. 4,00,000
To Share First & Final Call A/c 4,00,000
(Call money received)
Total 24,00,000 24,00,000

Topic: Financial Statements

Q.) Pass closing entries for the following account balances:
Salaries A/c ₹35,000; Purchases ₹1,00,000; Carriage Inwards ₹2,200; Sales ₹1,20,000;
Factory Heating & Lighting ₹6,600; Rent ₹15,000; Fire Insurance Premium ₹4,800; Bank
Interest ₹2,400; Works Expenses ₹14,200; Telephone Expenses ₹3,000; Advertisement
Expenses ₹5,200; & Audit Fees ₹1,500.
Solution:
In the books of …..
JOURNAL
Debit Credit
Date Particulars L.F. Amount Amount
(₹) (₹)
2023
March31 Trading A/c …Dr. 1,23,000
To Purchases A/c 1,00,000
To Carriage Inwards A/c 2,200
To Factory Heating & Lighting A/c 6,600
To Work Expenses A/c 14,200
(Paid to Ramesh in full settlement)
March31 Sales …Dr. 1,20,000
To Trading A/c 1,20,000
(Sold goods to Kushal on credit)
March31 Profit & Loss A/c …Dr. 64,500
To Salaries A/c 35,000
To Rent A/c 15,000
 FUNDAMENTALS OF ACCOUNTING
To Fire Insurance Premium A/c 4,800
To Telephone Expenses A/c 3,000
To Advertisement Expense A/c 5,200
To Audit Fees A/c 1,500
(Trade Expenses paid)
March31 Bank Interest …Dr. 2,400
To Profit & Loss A/c 2,400
(Sold goods on credit)
Total 3,09,900 3,09,900

NOTE: Students are NOT expected to resort to rote learning of these questions. These
questions are only for practice.