1st Puc Accountancy Unit 3 Recording Of Transactions – I Notes | ಪ್ರಥಮ ಪಿಯುಸಿ ಲೆಕ್ಕಶಾಸ್ತ್ರ ಅಧ್ಯಾಯ‌ – 3 ನೋಟ್ಸ್

ಪ್ರಥಮ ಪಿಯುಸಿ ಲೆಕ್ಕಶಾಸ್ತ್ರ ಅಧ್ಯಾಯ‌ – 3 ನೋಟ್ಸ್, 1st Puc Accountancy Unit 3 Recording Of Transactions – I Notes 1st Puc Accountancy Unit 3 Notes Question Answer Pdf Downoad In Kannada And English Medium 2023 Kseeb Solutions For Class 11 Accountancy Chapter 3 Notes 11th Accountancy 3rd Chapter Solutions Recording Of Transactions 1 Solutions


1st Puc Accountancy Chapter 3 Notes

1st Puc Accountancy Unit 3 Recording Of  Transactions - I Notes | ಪ್ರಥಮ ಪಿಯುಸಿ ಲೆಕ್ಕಶಾಸ್ತ್ರ ಅಧ್ಯಾಯ‌ - 3 ನೋಟ್ಸ್
1st Puc Accountancy Unit 3 Recording Of Transactions – I Notes

ACCOUNT:- it is statement containing all debts an credits of business transaction.


Classification of Accounts are:

1.personal accounts :- personal accounts are accounts which are related to persons representative of persons and organization or institute of business.
EXAMPLE:- anand a/c, bharati a/c, chandru a/c , darshan a/c, debtors
a/c, creditors a/c, capital a/c, drawings a/c, iob a/c,

2.Real accounts :- real accounts are accounts ,which are related to assets of the business.

EXAMPLE:- cash a/c, machinery a/c, furniture a/c, investment a/c , loose
tools a/c , computers a/c, land and building a/c.

3.nominal accounts:- nominal accounts are accounts which are related to
income or gains and expenses or loss of business.
EXAMPLE :- salary a/c, wage a/c , rent a/c , interest a/c , discount a/c,
commission a/c, painting a/c, stationary a/c, advertisement a/c, cartage
a/c, sample a/c , sale a/c , purchase a/c , sale return a/c , purchase return a/c,



Debit the receiver

credit the giver


Debit was comes in

Credit was goes out


Debit expenses or loss

credit income or gain


01) Classify the following into personal A/C, real A/C, nominal A/C.
a) Machinery A/C= real A/C
b) Rent A/C= nominal A/C
c) Capital A/C= personal A/C
d) Out standing rent A/C = personal A/C
e) Salary A/C = nominal A/C
f) Pre-paid salary A/C = personal A/C
g) Land & building A/C = real A/C
h) Infosyis company A/C = personal A/C
i) Premises A/C = real A/C
j) Lavanya & sisters company A/C = personal A/C


Journal :- journal is a book of origin entry, containing day to day transaction in chronological order of date

Features of journal

The following are special features of journal
01) journal is consists day to day transaction
02) journal is a book of origin entry / first entry
03) in journal all transaction recorded in chronological order of date
04) it is prepared from financial transactions
05) it is helps to preparation of ledger

Format or specimen of journal.

Dr Cr

DateParticular L/FDebitCredit
  • journalizing :- it is a systematic process of recording of financial transaction in journal
  • journal entry :- when financial transaction is recorded in journal that is become journal entry
  • narration :- narration is a opinion about accountant on financial transaction

Accounting Equation

Accounting equation is one if the most important concept of accounting / accountancy there are as 3 types of accounting equation . there are as follows.
01) capital = assets – liabilities
02) assets = capital + liabilities
03) liabilities = assets – capital

Problems :-

01) write accounting equation find out missing items.

012,00,000 ? 90,000
02 ?90,00075,000
033,00,0001,40,000 ?

Capital = assets – capital
= 2,00,000 – 90,000
= 1,10,000
Assets = capital + liabilities
=90,000+ 75,000
Liabilities = assets – capital
=3,00,000 – 1,40,000

Accounting voucher

It is a document ,contain information about transaction.

Accounting voucher may be classified as follows :-

01) debit voucher
02) credit voucher
03) cash vouche
04) journal voucher
05) transaction voucher

all types of voucher are documentary evidence for transaction voucher must be free served in any case till the audit of accounts .


ledger is a book final entry, containing all personal accounts, real accounts & nominal accounts if business .

Features of ledger

The following are special features of ledger:
1) It is a book if final entry
2) It is containing all personal accounts , real accounts, & nominal accounts of the business
3) It is pre paid from journal
4) It is helps to preparation of trail balance.

Formate of ledger

Dr Cr


Difference between journal & ledger

The following are different between journal and ledger

1st Puc Accountancy Chapter 3 Notes

One Mark Qs

Q 1. Classify the English system of accounts.

A: The three types of accounts under English system are :

  1. Personal account
  2. Real account
  3. Nominal account

Q 2. Classify the account under American system.

A: The important classification of accounts under Amefican system are :

  • Assets A/c
  • Liability A/c
  • Equity or Capital A/c
  • income A/c
  • Expenses A/c

Q 3. What is personal Account

A: Transactions between two persons called personal account. Here one person
give benefits nother one receives benefits.

Q 4. Mention the different types of persons under personal account.

A: The different types of person in personal account are :

  1. Natural person
  2. Artificial person
  3. Representative persons.

Q 5. Who is natural persons under personal account?

A: All living individuals are natural persons. Example: Rama’s a/c, Bhima’s a/c etc.

Q 6. Who is artificial person under personal account?

A: Artificial or legal persons means institutions or body of individuals, which are
considered as person in the eyes of law. example : companies, school, banks,

Q 7. Write the meaning of representative person.

A: The person who represents the artificial person called representative person.
Example : Debtors account, creditors account, capital account.

Q 8. What is real account?

A: The accounts relating to properties and pocessions with which we
carry on business comes under one head of accounts called Real a/c. Example:
Cash, goods, land and mahinery, copy rights etc.

Q 9. Write the meaning of tangible assets.

A: The assets which we can see and touch called tangible assets. Example: Land and Building, machinery, goods, investments, etc.

Q 10. What is nominal account?

A: An account related to incomes or gains and expenses or losses of business
called nominal accounts.

Q 11. Give any four examples for representative persons.

A: Example for representative persons a/c are:

  • Debtors a/c
  • Prepaid expenses a/c
  • Capital a/c
  • O/s salary

Q 12. Give examples for real account.

A: Example for real a/c are

  • Buildings a/c
  • Plant and machinery a/c
  • Stock a/c
  • Cash a/c S
  • Motor car a/c

Q 13.Give any four example for nominal a/c.

A: Example fox nominal a/c are:

  1. salary
  2. Rent received a/c
  3. Printing and stationery a/c
  4. Commission received a/c

Q 14. Give two examples for tangible and intangible fixed assets.

A: Example for Tangible Fixed assets are:

  • Plant a/c
  • Motor vechicle a/c Example for intangible
  • Goodwill a/c
  • Trademarks a/c

Q 15. Define double entry system.

A: Accoding to Eric, I, kohler says “It is a two way expression of each transactions”.

Q 16. What is an accounting voucher?

A: Accounting voucher is a document, which contains the anlysis of a transaction. .

Q 17. Write the meaning of accounting equation

A: It is followed at every stage of accounting. “It means every debit every
transaction as equivalent credit.

Q 18. Write the accounting equation.

A: Assets = liability + Capital

Q 19. Give the meaning of journal.

A: Journal is chief Book, in which all the transactions are recorded in
chronological order (Date- wise).

Q 20. What is journalising?

A: Recording of a transactions in a journal is called journalising.

Q 21. What is compound journal entry? Give on Example.

A: A journal entry which includes more than two or more debit or credit in single
entry called compound Journal entry.

Q 22. What is meant by narration?

A: The brief explanation about transaction after journal entry called narration.

Q 23. What is simple entry? Give Examples.

A: Simple journal entry involve only two accounts of which one account being
debited and another account being credited.

Example : Cash a/c Dr
To Ramesh a/c

Q 24. Mention any one needs of journal.

A: Two needs or i nce of journals are :
Journal provides, transactions in chronological order.

Q 25. Write the meaning of source of documents in the book of a/c.

A: Source of documents mean on which basis the transaction are recorded in the
books of accounts.

Q 26. Mention any two source of document in the books of account.

A: The source of documents for recording transactions are :

  1. Bills
  2. Cash receipts
  3. Invoice
  4. Vouchers

Q 27. Mention two method of recording business transactions.

A: 1. Conventional or theoritical method of recording.

2. English or modem method of recording.

Q 28. What is Ledger?

A: Transferring of entries from journal to the respective head of account as a
group in chronological order called ledger. S

Q 29. What is posting?

A: It is the process of transferring debit and credit entries from the journal to
appropriate group (head of a/c) in ledger.

Q 30. What is debit balances

A: If the debit side total of a ledger account is greater than its credit side total,
the difference is called debit balance.

Q 31. What is credit balance?

A: In the ledger account if the credit side of total is qreater than debit side total,
the difference is called credit balance.

Q 32. What is journal folio?

A: It is the column of journal from where the entry is posted in simple words it is
the page number of journal. The abbreviation of journal folio is ‘JF

Q 33. Write the need of balancing of ledger accounts.

A: Balancing of ledger helps to findout whether a particular account has received
more benefits or given on a particular period.

Q 34. What is debit in ledger a/c?

A: It is a column in ledger. It is meant for recording the amount debited to this account.

Q 35. What is credit in ledger a/c?

A: It is a column in ledger. It is meant for recoding the amount credited to this

Q 36. What is an account?

A: An account is summarised record of all transactions relating to a person, things, income or expens particular period under periodical concept.

Q 37. What is balance brought down?

A: The debit balance or credit balance which we have balanced in previous period /month recording brought down, the abbreviation of brought down is b/d.

Q 38. What is balance carry down?

A: The debit and credit balance which balanced in ledger in the current period / month may forwarded to next period such balance recorded as balance carry down, the abbreviation is c/d.

Two Marks Qs

Q 1. Write the rule of personal account.

A: The rule of personal a/c is


Q 2. Write the rule of real account.

A: The rule of real a/c is

Q 3. Write the rule of Nominal a/c.

A: The nominal a/c rule is


Q 4. Write the mening of liability.

A: Liabilities are obligations of the concern to pay outsiders due to purchase,
funds received, services rendered etc. Example : creditors, O/S salary, Bills payable, etc.

Q 5. Write the rule of capital a/c under American system.

A: Capital a/c rule, under American system is :

“Debit decrease in capital Credit increase in capital”.

Q 6. Write the rule of assets a/c under American system.

A: “Debit increase in the asset

Credit Decrease in the Asset”.

Q 7. Write the rule of liabilities a/c under American system.

A: Liabilities a/c rule is = “Debit Decrease in the liability
Credit increase in the liability”

Q 8. Write the rule of expenses a/c.

A: “Debit increase in expenses

Credit decrease in expenses”.

Q 9. Write the rule of incomes a/c.

A: Income a/c rule are:

“Debit decrease in income
Credit increase in income”.

Q 10. Give any four example for personal a/c.

A: Examples for peronal a/c are:

  1. Vijayagcollege a/c
  2. Rama’s a/c
  3. Prepaid expenses a/c
  4. Vijaya Bank a/c

Q 11. Write any two features of journal.

A: The features of journal are:

  1. Journal is a day book or daily recording transaction book.
  1. Transactions are recorded systematically in chronological order (Date-

Six Marks Qs

Q 1. State the three fundamental steps in the accounting process


Q 2. Why is the evidence provided by source documents important to accounting?

A: The evidené¢ provided by the source document is important in the following

  • It provides evidence that a transaction has actually occurred.
  • It provides important and relevant information about date, amount,
    parties involved and other details of a particular transaction.
  • It acts as a proof in the court of law.
  • It helps in verifying transactions during the auditing process.

Q 3. Should a transaction be first recorded in a journal or ledger? Why?

A: a. A transaction should be recorded first in a journal because journal provides complete details of a transaction in one entry. Further, a journal forms the basis for posting the transactions into their respective accounts into ledger. Transactions are recorded in journal in chronological order, i.e. (Date wise) in the order of occurrence with the help of source documents.

b. Journal is also known as ‘Book of original entry, because with the help of source document, transactions are originally recorded in books. The process of recording the transactions in journal and then in ledger is presented in the below given flow chart.

Q 4. Are debits or credits listed first in journal entries? Are debit or credits indented?

A: a. As per the rule of double entry system, ther two colums of ‘Amount’ in the journal format namely ‘Debit Amount’ and ‘credit Amount’. The way of recording in a journal is quite different from nomimal recording. Journal entry is recoeded in journal format in which the ‘debit Amount’ column is listed before the ‘Credit Amount’ column.

b. credits are indented. indentation is leaving a space before writing any word. Journal entry has its own jargon. While journalizing, in the ‘Particulars’ column of journal format, debited amount is written first and credited account is in the next line leaving some Space, which is indentation.

Q 5. Why some accounting systems are called double accounting systems?

A: Some accounting systems are called double accounting systems because under this system there are two aspects of every transaction, i.e., every transaction has dual effect. Every transaction affects two accounts simultaneously, that is represented by debiting one account and crediting the other account. It is based on the fact that if there is receiver, there should be a giver.

Q 6. Why are the rules of debit and credit same for both liability and capital?

A: a. Every business acquires funds from internal as well as from external sources.
According to the business entity concept, the amount borrowed from the external sources together with the internal sources like, capital invested by the proprietor, it termed as liability to the business. Business entity concept treats business and business owner separately.

b. Capital of the owner is treated as liability to the business because the business has to repay the amount of capital to the owner, in closure of the business. As liability incurred is credited, in the same way, fresh capital introduced and net profit increases the owner’s capital, and so captial is credited.

c. On the other hand, if liability is paid, it reduces liability, and so, it is debited. Similarly, drawings from capital and net loss reduce the capital, and so, capital is debited. Thus the rules of debit and cr same for both liability and capital.

Q 7. What is the purpose of posting J.F numbers that are entered in the Journal at
the time entries are potest accounts?

A: J.F. number is the number that is entered in the ledger at the time of posting
entries into their respective accounts. It helps in determining whether all transactions are properly posted in their accounts. It is recorded at the time of posting and not at the time of recording the transactions.

The puepos of entering J.F. number in the ledger is because of the below given benefits.

  • J.F. number helps in locating the entries of accounts in the journal book. In other words, J.F number helps to locate the position of the related journal entiry and subsidiary book in the journal book.
  • J.F. number in accounts ensures that recording in the books of original entry has been posted or not.

Q 8. What entry (debit or credit) would you make to: (a) increase revenue (b) decrease in expense, (c) record drawings (d) record the fresh capital introduced by the owner.

  1. Increase in revenue: Increase in revenue is credited as it increases the capital. Capital has credit balance and if capital increases, then it is credited.
  2. Decrease in expense: Decrease in expense is credited as all expenses have debit balance. If expense decreases, then it is credited.
  3. Record drawings: Record drawings Capital has credit balance; if the capital increases, then it is credited. If capital decreases, then it is debited. Drawing are debited as they decrease the capital.
  4. Record of fresh capital introduced by the owner: Record of fresh capital introduced by the owner- credit Capital has credit balance, if capital increases, then it is credited. the introduction of fresh capital increases the balance of capital so, it is credited.

Q 9. If a transaction has the effect of decreasing an asset, is the decrease recorded
as a debit or as a credit? If the transaction has the effect of decreasing a liability, is the decrease recorded as a debit or as a credit?

A: 1. If a transaction has a decreasing effect on a asset, then this decrease is recorded as credit. This is because, as all assets have debit balance and if assets decrease, then it is credited. For example, sale of furniture results in decrease in furniture( asset) so, the sale of furniture will be credited.

2. If a transaction has a decreasing effect on a liability, then this decrease is recorded as debit . This is because all liabilities have credit balance. If the liability increases, then it is
debited. For example, payment to the creditors results in a decrease in the creditors (liability); so, the creditors account will be debited.

Q 10. Describe the events recorded in accounting systems and the importance of
source documents in those systems?

A: It is beyond human capabilities to memorise each financial transaction and that is why, source documents have their own importance in accounting system. They are considered as an evidence of transactions and can be presented in the court of law. Transactions supported by evidence can be verified. Source documents also ensure that transactions recorded in the books are free from personal biases.
A few events that are supported by source document are given below.

a. Sale of goods worth Rs 20,000 on credit, supported by sales invoice/bill
b. Purchase of goods worth Rs 5,000 on credit, supported by purchase

c. Cash sales worth Rs 10,000, supported by cash memo

d. Cash purchase of goods worth Rs 400, supported by cash memo

e. Goods worth Rs 1000 returned by customer, supported by credit note

f. Return of goods purchased on credit worth Rs 2000, supported by debit note

g. Payment worth Rs 1,200 through bank, supported by the cheque

h. Deposits into bank worth Rs 500, supported by pay-in’Slips

Out of the above events, only those events ang expressed in monetary tenns, are recorded in the books of account ever, the non-monetary events are not recorded in accounts; for example promotion of manager cannot be recorded but increment in salary can be recorded at the time when salary is paid or due.

Source document in accounting is important because of the below given reasons.

about the date, amount and parties involved and

a. It provides evidence that transaction has actually occurred.
b. It provides information about the date, amount and parties involved and other details of particular transactions.
c. It acts as evidence in the count of law.
d. It help erifying the transaction during the auditing process.

Q 11. Describe how debits and credits are used to analyses transactions.

A: Debit originated from the Italian word debito, which in turn is derived from the
Latin word debeo, which means ‘owed to proprietor’ and credit comes from the Italian word credito, which is derived from the Latin word credo, whic means belief, i.e. ‘owed by proprietor’. According to the dual aspect concept, all the business transactions that are recorded in the books of accounts have two aspects- debit and credit.

The dual aspect can be better understood by the help of an example; bought goods worth Rs 500 on cash. This transaction affects two accounts with the same amount simultaneously. As qoods are brought in exchange of cash, so the cash balances in the business reduce by Rs 500, i.e. why the cash account is credited. Simultaneously, the amount of goods increases . by Rs 500, so purchases account will be debited. Debit and credit depend on the nature of accounts involved; such as assets, expenses, income, liabilities and capital.
There are five types of Accounts.

Two fundamental rules are followed to record the changes in these accounts:

For recording changes in Assets/Expenses (Losses)

a. “Increase in asset is debited, and decrease in asset is credited
b. “Increase in expenses/losses is debited, and decreas -Nebxpenses/ losses is

For recording changes in Liabilities and Capital/reserves (Gains):

a. “Increase in liabilities is credited and decrease in liabilities is debited “
b. “Increase in capital is credited and decrease in capital is debited.”
c. “Increase in revenue / gain is rege decrease in revenue/gain is debited.”

Q 12. Describe how accounts used to record information about the effects of transactions?

A: Every transaction is recorded in the original book of entry (journal) in order of their occurrenc, however, if we want to know that how much we receive from our debtors or how much to pay to the creditors, it is not possible to determine single movement. Hence, we prepare accounts to know the position of business activities in the meantime. There are some steps to record transactions in accounts:

Step 1: Locate the account in ledger,

Step 2: Enter the date of transaction in the date column of the debit side of Account.

Step 3: In the ‘Particulars’ column of the debit side of Account, the name of corresponding account is to be written

Step 4: Enter the page number of the ledger in the Journal Folio U.F.) column of Account.

Step 5: Enter the amount in the ‘Amount’ column.

Step 6: Same steps are to be followed to post entries in the credit side of Account.

Step 7: After entering all the transactions for a particular period, balance the account by totaling both sides and write the difference in shorter side, as ‘Balance c/d’.

Step 8: Total of account is to be written on either side.

Q 13. What is a journal? Give a specimen of journal showing at least five entries.

A: Journal is derived from the French word Jour, means daily s. In this book, transactions are recorded in order of their occurrence in chronological order from the source document. It is also termed as the book of original entry and each transaction is termed journal entry.

Date : Date of transaction is recorded in order of their occurrence.
Particulars: Details, of business trans ike, name of the parties involved and the name of related accounts orded.
L.F: Page number of ledger account when entry is posted.
Debit Amount: Amount of debit“account is written.
Credit Amount: Amount of credit account is written.

Q 15. Record the following Journal Entry book
April 01 Started ess with cash ₹ 4,00,000

April 03 Open a bank account ₹ 80,000
April 04 purchase goods for cash ₹ 1,00,000
April 05 Goods sold for cash ₹ 1,20,000
April 06 Goods sold to Mr. ₹ 8,000

Journal in the Books of Mr. Santhosh

April 1Cash A/c Dr.
To Capital A/c
(Started business with cash)

April 3Bank A/c Dr.
To Cash A/c
(Bank account opened with cash)

April 4Purchase A/c Dr.
To Cash
(Goods purchased for cash)

April 5Cash A/c Dr.
To Sales A/c
(Goods sold for cash)

April 6Mr. X’s A/c Dr.
To Sales
(Goods sold to Mr. X on credit)


Q 15. Differentiate between source documents and vouchers.

Basis of
Source Documents Vouchers
MeaningIt refers to the documents in writing, containing the details of events When source document is considered as evidence of an event ortransaction, Then it is called voucher.
PurposeIt is used for preparing accounting vouchers. It is used for analysing the transactions.
Recording It acts as a basis for preparing voucher that helps in recordingIt acts as a basis for recording accounting transactions.
Preparation It is prepared at the time when An event or a transaction occurs.It can be prepared either when an Event or a transaction occurs, or
later on.
Legality/ Validity It can be used as evidence in the court of law.It can be used for assessing the authenitication of transactions.
Prepared ByIt is prepared, by the’ persons Who are directly involved in the transactions or Who are autho-rized to prepare.It is prepared by the authorized persons or by the accoutants,persons or by the accoutants.
Examples Cash memo, invoice, and pay- in-slip, etc.Cash memo, invoice, pay-in-slip (if used as evidence), debit
note, credit note, cash vouchers,
transfer vouchers, etc.

Q 16. Accounting requation remains intact under all circumstances. Justify the
statement With the help of an example.

A: According to the dual-aspect concept, every transaction simultaneously, has two effects of equal amount, i.e. debit and credit. However, in any case, the equality of total assets with the total claims of business (sum of capital and liabilities) is not disturbed. This equality is algebraically represented as:

Asset = Total Claims
Asset = Liabilities + Capital
Liabilities = Asset — Capital
Capital = Assets — Liabilities

In any circumstance the above equation cannot be changed. For example,
Business started with cash = 3,00,000

Cash A/c Dr.

To Capital A/c

Assets = Liabilities + Capital.

Cash = Liabilities + Capital
(3,00,000) = NIL + 3,00,000

Assets decrease, as cash is invested son and capital increases. Thus the equality between LHS and emains intact.

Goods purchased on credit = 60,000

Purchases a/c Dr

To creditors a/c

Assets = Liabilities + capital

Cash + Stock = liabilities + Capital

3,00,000 + 60,000 = 60,000 + 3,00,000

3,60,000 = 3,60,000

Assets increase as well as liability increses, without disterbing the equality

Goods purchased with cash 50,000

Assets = Liabilities + Capital

Cash + Stock = Liabilities + Capital

(3,00,000 — 50,000) + (60,000 + 50,000) = 60,000 + 3,00,000
3,60,000 = 3,60,000

As goods are purchased for cash, so cash balance reduces by Rs 50,000, but on the other hand, stock balance increases by ₹50,000. Thus the total balance of LHS remains equal to the total claims.

Q 17. What is double entry system? Explain the classification of accounts under
American system.

A: Double entry system is based on the dual aspect concept. It means every transaction has two sided effects, i.e., every debit has its credit. This system is explained by Luca Pacioli in his book Summa de Arithmetica Geometria Proportioniet Proportionalita, 1494. He said if one is receiver, then the other should be the giver.
In double entry system, accounts are classified as shown below.

  1. Personal Accounts: It includes individual persons firms, companies, and
    other institutions, such as Mr. A.M/s ABC & Co. etc.
    Rule of double entry system forpersonal accounts.
  • Debit the receiver
  • Credit the giver

For example:

  1. Cash paid to Mr. A
    A,s A/C dr
    To Cash
  2. Cash received from Mr. X Cash A/c Dr.

To mr.X

2. Impersonal Accounts: It relates to non living things. Impersonal accounts are
further classified as real accounts and nominal accounts.

1.Real Account – It includes all types of asset

Tangible assets that can be seen and touched; for example, machinery,
building, etc. –

  1. Intangible assets that cannot be seen and touched; for example, goodwill,
    patent, etc. Rule of double entry system for real accounts:
  • Debit what comes in.
  • Credit what goes out.

For example:

Furniture purchased for cash.
Furniture A/c Dr.

To Cash A/c

  1. Nominal Account: It includes all Ses, losses, incomes and gains.
    Rule of double entry system for al accounts:
  • Debit all losses and expenses.
  • Credit all gains and incomes.

For example;

  1. Rent paid
    Rent a/c Dr
    To Cash A/c
  2. Co ission received. Cash A/c Dr.
    To Commission A/c

Twelve Marks Qs

Q 1. Use accounting equation and find out missing figures with the following:

(a) Harsha started business with cash ₹ 2,00,000
(b) Purchased goods from Naman for cash ₹ 40,000
(c) Sold goods to Bhanu costing = 10,000/- ₹ 12,000
(d) Bought furniture on credit ₹ 7,000

A: (a)

AssetsLiabilities + Capital
cash = 2,00,000 NIL + 2,00,000
Total = 2,00,000Total = 2,00,000


Assets Liabilities + capital
Cash + stock
(2,00,000 — 40,000) + 40,000
1,60,000 + 40,000
NIL +2,00,000
Total = 2,00,000Total= 2,00,000


AssetsLiabilities + capital
Cash + stock
(1,60,000 + 12,000) + (40,000 — 10,000)
= 1,72,000 + 30,000
NIL + capital + profit
2,00,000 + 2,000
Total = 2,02,000 Total = 2,02,000


AssetsLiabilities + Capital
Cash + stock + Furniture
1,72,000 + 30,000 + 7,000
Creditors + capital
7,000 + 2,02,000
Total = 2,09,000 Total = 2,09,000

Q 2. Explain the classification of accounting under English system of accounting.

A: All financial business transaction have effect on two sides, namely receiving benefit and giving benefit. When this two hold effect is recorded systematically it become double entry- system. This system developed by England.

All the financial transactions can be classified in two groups.
|. personal accounts.
Il. Impersonal accounts.

|. Personal a/c: Transactions between two persons is called personal a/c. Persons means it may be natural persons or firm, govt. Expand Institutions etc.
Accounts relates to persons called personal a/c. There are three types of persons. They are:

(a) Natural persons: The living individuals like me and you comes under natural

(b) Artificial persons: The persons who created by law established as per legal
procedure called Artificial person. Ex : Companies, Firms, Banks, Co-operative
Societies etc.

(c) Representative person: The person’who are represent some”person or groups called Representative person. Accrued expenses a/ xpenses a/c. prepaid expenses. o/s Income, Income received in advance etc . are examples for representative person.

ll. Real a/c : These accounts relate to assets or properties are owned by a
business. Real accounts may be classified as.
(a) Tangible assets: The assets which can be touch called Tangible assets.
Ex: Land and Building, plant and machinery, furniture, stock, Vehicles, etc.

(b) Intangible assets: Assets which can’t be seen or touch called intangible
assets. Assets which do not have physical existence but can be bought and
sold and benefited by business.
Example : Goodwill, Teade mark, copy rights etc.

Ill. Nominal a/c: the account of various expenses or losses and income or gain record ed nominal a/c. They cannot be seen or touched. It is intangible in natura, They are fictitious or not real or nominal. The expense which a business incurs and income earns in the activities of business. Nominal a/c can classified as :

(a) Income or gain a/c: Accounts of gain, revenue, income or profit recorded.
Example : Discount received, rent received, commission received etc.

(b) Expenses a/c: Losses and expenses are recorded.

Example : Salary, bad debts, Travelling expense, Depreciation etc.

Q3. Explain the classifications of accounting under American system.

A: Every business organisation have properties, liabilities capital. For running business it will earn certain income or revenue or has to incur expenses or losses.

As per American approach accounts of a business can classified into five
heads. They are :-

  1. Assets accounts.
  2. Liabilities accounts.
  3. Capital accounts.
  4. Income accounts.
  5. Expenses accounts.

(1) Assets accounts: Assets are properties of Business. The hobs and resources owned by business for running its activities as per objectiwés come under Assets accounts. Example : Land and Building, Magi Furniture etc.

(2) Liabilities accounts: These are the amount of credit or debt owed by business to external persons.
Example : Creditors Bank loan, Bills paybly Outstanding expenses etc.

on assets of the business. Capit, n excess of Assets over liabilities. It
includes fund invested by s, reserves and surplus. Capital is personal
accounts of owner. KS

(3) Capital accounts: It represent owner’s of or internal funds, owners claim on assets of the business. Capital is an excess of Assets over liabilities. It includes fund invested by owner, reserves and surplus. Capital is personal accounts of owner.

(4) Income accounts: Amount received or receivable by business from sale or service of its product ; Example: Commission Discounts, Rent Interests, dividend received etc. These accounts are same as the “Nominal A/c” in Engish system.

(5) Expenses accounts: Amount paid or payable for service obtained by business from outsiders are recorded in these a/c. These Expenses need for carrying out business operations. Example : Salary, Rent, Carriage, Advertising etc.

Q 4. Classify the following into (i) Personal a/c (ii) Real and (iii) Nominal a/c

  1. Land and Building – Real a/c
  2. Rama’s a/c. — Personal a/c
  3. Salary a/c — Nominal a/c
  4. State Bank of India — personal a/c
  5. Machinery’s a/c — Real a/c
  6. Furhiture’s a/c — Real a/c
  7. Wages a/c — Nominal a/c
  8. Capital a/c — personal a/c
  9. Stationery a/c — Nominal a/c
  10. Cash a/c — Real a/c
  11. o/s commission a/c — personal a/c
  12. Mysore mines a/c — Real a/c
  13. Stock a/c — Real a/c
  14. Goodwill a/c — Real a/c
  15. Repairs a/c — Nominal a/c .
  16. Discount paid — Nominal a/c
  17. Loan a/c — personal a/c
  18. Investment a/c — Real a/c
  19. Motor vehicle a/c -Real a/c SY
  20. Bad debts — Nominal a/c
  21. Bank a/c — Real a/c
  22. Purchases a/c — Real a/c
  23. Interest a/c — Nominal
  24. Loose tools a/c — Real a/c
  25. Bank overdraft a/c – personal a/c
  26. Postage a/c – personal a/c
  27. Bills Receivable a/c – Real a/c
  28. provision for bad debts — personal a/c
  29. Bank loan a/c — personal a/c
  30. Sales — Real a/c
  31. Rent received in advance- personal a/c
  32. Depreciation -Nominal a/c
  33. Goods loss on fire — Nominal a/c
  34. National college a/c — personal a/c
  35. Fixed Deposit a/c — Real a/c
  36. Purchase return — Real a/c
  37. Bad debts recovered — Real a/c
  38. Provision for Discount on creditors a/c — personal a/c
  39. Bills payable a/c — Real a/c
  40. Provision for Depreciation a/c — personal a/c
  41. Rent Receivable — personal a/c
  42. Mangalore’s Trading co — personal a/c
  43. Donation — Nominal a/c
  44. Depreciation Fund — Real a/c
  45. Sports club — personal a/c
  46. Sales Returns a/c — Real a/c
  47. Discount Received a/c — Nominal a/c
  48. Debtors a/c — personal a/c

Q 2. journalise the following transaction of anant traders
2021 jan – 01 started business with cash Rs. 80,000
Jan – 03 cash purchases Rs. 25,000

Jan-05 goods sold for cash 20,000
Jan – 08 goods destroyed by fire Rs 3,000
Jan – 10 sold goods for cash (costing Rs 6,000 ) Rs 9,000
Jan – 12 prepaid insurance Rs 2,000
Jan – 15 sold goods to ashu Rs (cost Rs 7,000) Rs 9,000
Jan – 18 cash received from ashu Rs 6,000
Jan – 21 invested in share of tata co. ltd Rs 5,000
Jan- 23 paid cash for household expenses Rs 8,000
Jan – 25 bought computer for office use Rs 10,000
Jan – 28 commission received in advance Rs 7,000


1-1-21Cash A/C ………………………………………………….Dr
To capital A/C
(being business started with cash )

3-1-21Purchase A/C …………………………………………..Dr
To cash A/C
( being purchase goods for cash )

5 -1-21Cash A/C ……………………………………………………Dr
To sale A/C
( being sold goods for cash )

8-1-21Fire A/C …………………………………………………….Dr
To stock A/C
( being destroyed goods by fire)

10-1-21Cash A/C …………………………………………………. Dr
To sale A/C
( being goods sold for cash)

12-1-21Prepaid A/C ………………………………………………Dr
To cash A/C
(being prepaid insurance in cash )

15-1-21ashu A/C …………………………………………………….Dr
to sale A/C
( being goods sold to ashu )

18-1-21Cash A/C …………………………………………Dr
To ashu A/C
( being received cash from ashu )

21-1-21Sales A/C ………………………………………. Dr
To cash A/C
( being invested in shares of tata
co.ltd in cash )

23-1-21Drawing A/C …………………………………..Dr
To cash A/C
( being cash paid household
expenses )

25-1-211Computers A/C……………………………… Dr
To cash A/C
(being purchase computer for office

28-1-21cash A/C………………………………………….Dr
to commission A/C
( being received commission in

Total 1,84,0001,84,000

Q 3. Journalize the following transaction and post them to ledger
1-04-2021: commenced business with cash 1,00,000
5-04-2021 : cash deposited into bank 20,000
9-04-2021 : goods purchased from mithila 10,000
21-04-2021 : sold goods to mitti on credit 15,000
30-04-2021 : paid salary to worker 10,000

1-4-21Cash A/C …………………………………………Dr
To capital A/C
[ being business commenced with cash)

5-4-21Bank A/C ………………………………………….Dr
To cash A/C
[ being deposited cash into bank ]

9-4-21Purchase A/C …………………………………..Dr
To mithila A/C
[ being purchased goods from mithila ]

21-4-21Metti A/C …………………………………………..Dr
To sales A/C
[being sold goods to metti on credit ]

30-4-21Salary A/C …………………………………………Dr
To cash A/C
[ being salary paid to worker ]


Posting ledger

Dr Cash A/c Cr

1-4-21Capital A/C1,00,0005-4-21Bank A/C20,000
30-4-21Salary A/C10,000

Dr Capital A/C Cr

1-4-21Cash A/c1,00,000

Dr Bank A/C Cr

5-4-21Cash A/C20,000

Dr Purchase a/c Cr

9-4-21Mithila A/c10,000

Dr Capital A/c Cr

1-4-21Cash A/c1,00,000


1. What is account?

it is statement containing all debts an credits of business transaction.

2. What is personal Account?

personal accounts are accounts which are related to persons representative of persons and organization or institute of business.

3. What is Real Account?

Real accounts are accounts ,which are related to assets of the business.

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