Analysis of transaction (traditional Approach) 1 Mr Rajkumar started business with cash Rs 75,000
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❒ Given transaction :-
- Mr Rajkumar started business with cash Rs 75,000.
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❒ Analysis of the transaction :-
- ✎ Step 1 : Identification of accounts :↦ In the given transaction, the business has received cash from the owner, Mr Rajkumar to start and carry out its operation. Such amount brought in by the owner is termed as capital and recorded in Capital A/C. Again, the amount has been bought in in the form of cash. Therefore, the other account involved in the transaction is Cash A/C. Thus, the two accounts affected the transaction are — Capital A/C and Cash A/C.
- ✎ Step 2 : Classification of accounts :↦ According to Traditional Approach of accounts classification, Capital A/C is a Personal Account and Cash A/C is a Real Account.
- ✎ Step 3 : Application of rules of Debit and Credit :↦ Capital A/C is a Personal Account for which the rule to be applied is "Debit the receiver, Credit the giver". The giver of the capital is the owner who is represented the business by his Capital A/C. Thus, Capital A/C is credited. Again, Cash A/C is a Real Account for which the rule to be applied is "Debit what comes in, Credit what goes out". As cash comes in the business in the form of capital; thus Cash A/C is debited.
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❒ Journal Entry of the transaction is :-
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