Mohit has the following transactions prepare accounting equation Business start with cash. 175000 Purchase goods from rohit. 50000 Sold goods on credit to Manish costing 17500. 20000
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cash...a/c dr 175000
to capital a/c. 175000
purchasesa/c....dr 50000
to casha/c. 50000
manish a/c.................dr. 17500
discount allowed a/c.....dr 2500
to sales a/c. 20000
to capital a/c. 175000
purchasesa/c....dr 50000
to casha/c. 50000
manish a/c.................dr. 17500
discount allowed a/c.....dr 2500
to sales a/c. 20000
RohitSaketi:
last entry is wrong. he sold goods worth 17500 for 20000..not 20000 worth goods for 17500
Answered by
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Given "Mohit has the following transactions prepare accounting equation Business start with cash. 175000 Purchase goods from rohit. 50000 Sold goods on credit to Manish costing 17500. 20000"
First transaction affects two accounts, Capital account (business is commenced) ,cash account(cash is brought in as capital). Where capital and cash accounts are Real accounts (all the assets and Liabilities come under Real account). Note - Capital is a liability
Second Transaction affects twoaccounts Purchases a/c(goods are Purchased) , Rohit a/c (Goods are Purchased from Rohit).. Where Purchases a/c is a nominal account (all expenses losses Gains income come under it) and Rohit a/c is a Personal account..
Third Transaction affects Two accounts.. sales a/c (goods are sold) ,Manish a/c (Goods are Sold to Manish)..Sales a/c is a nominal account (all expenses losses Gains income come under it) and Manish a/c is a Personal account..
The Three golden rules of accounting are
Personal Account - Debit the receiver ,credit the giver
Real Account - Debit what comes in ,credit what goes out
Nominal Account - Debit All expenses and losses, credit All incomes and gains
In contention with above rules...
1)Cash comes in ,so should be debited whereas capital is Going out(liability is created) so should be credited...
2) Purchases is an expense,so it should be debited,rohit is the giver..so he should be credited to that extent..
3) Sales is an income ..so It should be credited and Manish being the receiver should be debited to that extent
so the Journal Entries will be
Cash a/c Dr 175000
To Capital a/c. 175000
(Being Cash brought in as capital)
Purchases a/c Dr 50000
To Rohit a/c. 50000
(Being goods Purchased from Rohit)
Manish a/c Dr. 20000
To Sales a/c 20000
(Being Goods Sold to Manish)
First transaction affects two accounts, Capital account (business is commenced) ,cash account(cash is brought in as capital). Where capital and cash accounts are Real accounts (all the assets and Liabilities come under Real account). Note - Capital is a liability
Second Transaction affects twoaccounts Purchases a/c(goods are Purchased) , Rohit a/c (Goods are Purchased from Rohit).. Where Purchases a/c is a nominal account (all expenses losses Gains income come under it) and Rohit a/c is a Personal account..
Third Transaction affects Two accounts.. sales a/c (goods are sold) ,Manish a/c (Goods are Sold to Manish)..Sales a/c is a nominal account (all expenses losses Gains income come under it) and Manish a/c is a Personal account..
The Three golden rules of accounting are
Personal Account - Debit the receiver ,credit the giver
Real Account - Debit what comes in ,credit what goes out
Nominal Account - Debit All expenses and losses, credit All incomes and gains
In contention with above rules...
1)Cash comes in ,so should be debited whereas capital is Going out(liability is created) so should be credited...
2) Purchases is an expense,so it should be debited,rohit is the giver..so he should be credited to that extent..
3) Sales is an income ..so It should be credited and Manish being the receiver should be debited to that extent
so the Journal Entries will be
Cash a/c Dr 175000
To Capital a/c. 175000
(Being Cash brought in as capital)
Purchases a/c Dr 50000
To Rohit a/c. 50000
(Being goods Purchased from Rohit)
Manish a/c Dr. 20000
To Sales a/c 20000
(Being Goods Sold to Manish)
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