Accounting Equation & Golden Rules

Acknowledgement We are, student of PGGCG-11, hereby, acknowledging our sincere thanks to our supervisor MRS. MEENU VERMA, prof. of accounting …. for providing me with the best of her knowledge to fulfill my project report. We would also like to thank our CR for suggesting us the topic of our study….and our parents who had helped us throughout the process of collection and organizing the data of our research…last but not the least thanks to our group while deriving conclusions of the project report. THANKS TO ALL THANKS TO ALL

Accounting Equation Assets = Sources of finance Assets = Liabilities + Equity

Give one transaction for each of the following that will (a) increase an asset and decrease another asset. (b) increase an asset and increase a liability. (c) decrease an asset and decrease a liability. (d) increase an asset and increase capital. (e) decrease an asset and decrease capital.

Kershaw has the following transactions. Draw accounting equation to show the effect of these transactions on his assets, liabilities and capital. Also show his final Balance Sheet. (a) Commenced business with cash Rs. 20,000. (b) Purchased goods for cash Rs. 5,000 and credit Rs. 6,000. (c) Purchased office equipment for cash Rs. 8,000. (d) Paid office rent Rs. 1,000. (e) Sold goods for cash Rs. 10,000 (costing Rs. 7,000) if) Sold goods on credit for Rs. 6,000 (costing Rs. 3000) (g) Withdrew cash for personal use RS. 2,000.

Classification of Accounts  Personal Accounts Natural persons Artificial persons Representative personal accounts  Real Accounts Tangible Real A/c Intangible Real A/c  Nominal Accounts Incomes & Gains Expenses & Losses

Class Activity Class Activity : Let’s give it a short!!! Cash A/c Rent A/c Shah Rukh A/c Salary A/c Tuition Fees Machinery A/c Bank A/c Pre-Paid Expenses A/c Furniture A/c Sales A/c Outstanding Salary A/c Goodwill A/c Loose Tools A/c Investments A/c Purchases A/c

Test Your knowledge!!! 1. Salary prepaid 2. Rent account 3. Salary outstanding A/c 4. Bank account 5. Capital account 6. Goodwill account 7. Patents account 8. Purchases account 9. Investments 10. Freehold Premises 11. Corporation Bank Ltd. 12. Brokerage Account 1. Personal A/c 2. Nominal A/c 3. Representative Personal A/c 4. Artificial Personal A/c 5. Artificial Personal A/c 6. Intangible Real A/c 7. Intangible Real A/c 8. Nominal A/c 9. Tangible Real A/c 10. Tangible Real A/c 11. Artificial Personal A/c 12. Nominal A/c

Recording of Transactions:  Rule for Personal Accounts: Debit the Receiver Credit the Giver  Rule for Real Accounts: Debit what Comes in Credit what goes out  Rule for Nominal Accounts: Debit all expenses & Losses Credit all incomes & gains.

Class- Problem Illustration From the following transactions find out the nature of account and also state which account should be debited and which should be credited. a) Rent paid. b) Salaries paid. c) Interest received. d) Dividends received. e) Furniture purchased for cash. f) Machinery sold. g) Outstanding for salaries. h) Telephone charges paid. i) Paid to Suresh. j) Received from Mohan (the proprietor) k) Lighting expense paid

Question S no. ParticularsAmount 1 Hitesh started business with cash 2,50,000 2 Purchased goods on credit 24,000 24,000 3 Purchased goods for cash 4,000 4,000 4 Purchased furniture for cash 1,500 1,500 5 Withdraw for private use 1,000 1,000 6 Paid Rent 3,000 3,000 7 Received interest 1,000 1,000 8 Sold goods on credit 1,700 1,700 9 Paid to creditors 4,000 4,000

S no. Particulars Assets =Liabilities+ Capital 12 Hitesh started business with cash Rs. 2,50,000 Purchased goods on credit for Rs.24, = = = NEW EQUQTION Purchased goods for cash for Rs = (+)4000 (-)4000= NEW EQUATION Purchase furniture for cash for Rs.1, = (+)1500 (-)1500= NEW EQUATION Withdraw cash for private use = (-)1000= 0 + (-)1000 NEW EQUATION =

6 Paid rent Rs.3,000 (-) 3000= 0 + (-) NEW EQUATION Received interest Rs.1, = (+)1000= 0 +(+) NEW EQUATION Sold goods costing Rs.1500 for Rs on credit = (-)1500 (+)1700= 0 + (+)200 9 NEW EQUATION Paid to creditors Rs = (-)4000= (-) NEW EQUATION =