Passing Journal entries by understanding three golden accounting principles part-1

Three accounting golden principles

 Here we are going to learn how to pass journal entries by understanding three golden principles.

Let us begin with introduction of business. Business is treated as separate entity so, while passing the journal entry you should treat it as artificial person. some simple techniques are sufficient to pass entry. Here you have to assume you as business that’s it.

Entry 1:-

Cash Bought into business of Rs.100000/- by raj

SL.NO
PARTICULAR
DEBIT
CREDIT
1
Cash A/c      Dr
         To Raj capital  A/c
100000

100000

 (Being Capital introduced into business)

Rule for passing entry
On business side:- It is receiving cash and liable to pay back to the person who invested.
Debit
Cash is treated as asset. The real account rule is applicable:-Debit what comes into business, here cash is coming into business.So, it is debited.
Credit
Raj is person. The personal account rule is applicable:-Credit the giver account ,here raj is giving cash he is a giver.So, it is credited. 


Entry 2:-

Goods purchased of worth Rs. 10000/- by paying cash


SL.NO
PARTICULAR
DEBIT
CREDIT
1
Purchase A/c      Dr
         To Cash  A/c
10000

10000

(Being goods purchased on cash)

Rule for passing entry
On business side:- It is receiving goods and paying cash.
Debit
Goods are treated as asset. The real account rule is applicable:-Debit what comes into business, here goods are coming into business. So, it is debited.
Credit
Cash is treated as asset. The real account rule is applicable:-Credit what goes out of business, here cash is going out of business. So , it is credited.

Entry 3:-

Goods sold on cash of worth Rs.30000/-


SL.NO
PARTICULAR
DEBIT
CREDIT
1
Cash A/c      Dr
         To Sales  A/c
30000

30000
                 
(Being goods sold on cash)

Rule for passing entry
On business side:- It is receiving cash and goods are going out of business.
Debit
Cash is treated as asset. The real account rule is applicable:-Debit what comes into business, here Cash is coming into business. So, it is debited.
Credit
Goods are treated as asset. The real account rule is applicable:- Credit what goes out of business, here goods are going out of business. So, it is credited.

Entry 4:-

Rent paid of Rs.5000/-


SL.NO
PARTICULAR
DEBIT
CREDIT
1
Rent A/c      Dr
         To Cash  A/c
5000

5000
              
(Being rent paid by cash)

Rule for passing entry
On business side:- It is incurring rent expense and paying cash.
Debit
As rent paid is treated as Expense. The Nominal account rule is applicable:-Debit all expense or loss, here rent paid is expense. So, it is debited.
Credit
Cash is treated as asset. The real account rule is applicable:-Credit what goes out of business, here cash is going out of business. So , it is credited.


Entry 5:-

Commission received of Rs.3000/-


SL.NO
PARTICULAR
DEBIT
CREDIT
1
Cash A/c      Dr
         To Commission income  A/c
3000

3000
                
(Being Commission received)

Rule for passing entry
On business side:- It is receiving cash from commission income .
Debit
Cash is treated as asset. The real account rule is applicable:-Debit what comes into business, here Cash is coming into business. So, it is debited.
Credit
Commission Income are treated as income. The Nominal account rule is applicable:- Credit all income or gains, here commission income is received by business. So , it is credited.


Entry 6:-

Salary payable Rs.15000/-

SL.NO
PARTICULAR
DEBIT
CREDIT
1
Salary A/c      Dr
         To Salary payable  A/c
15000

15000
                  
(Being salary for the previous month is payable)

Rule for passing entry
On business side:- It is receiving cash and goods are going out of business.
Debit
Salary paid is treated as Expense. The Nominal account rule is applicable:-Debit all expense or loss, here salary paid is expense. So, it is debited.
Credit
Salary payable is representative person. The personal account rule is applicable:- Credit the giver account, here salary payable is treated as representative person because it represents salary of many persons. So, it is credited.

In above we covered six entries. 
The remaining entries will be covered in part- 2
link to the 2nd part of this topic

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