Example: How to Journalise? Video Lecture | Accountancy Class 11 - Commerce

so let's take the same example where we
had identified what it be identified we
had seen that assets minus liabilities
were always equal to capital now we will
see the roots we will see what is
debited and what this credited how are
we going to do that we will first see
what is the transaction which is given
to us here capital e introduced
deposited cash into bank bought
furniture bought goods sold goods etc
etc etcetera so we love the transaction
identify the transaction then what do we
have to do identify the accounts
involved like in our previous example it
was furniture and cash once you identify
the accounts involved the items in one
then we have to decide whether we have
to we have to identify whether that is a
I said this account is the asset is a
liability is an income or an expense
once we know it is an asset if we think
it is an asset increase in asset we will
debit decrease we will credit if it is a
liability we are talking about then
increase in liability we will credit and
decrease in liability we will debit
similarly with respect to expense we
have the rules what was it the same as
in case of an asset it doesn't increase
in expense we will debit it and if there
is a decrease in expense degrees and
expense then we were and we will credit
similarly with respect to income what do
we do income is just the same as
liability so what do we do if there is
an increase in income it is credit
increase in income is credit and
decrease in the come in via decrease in
income will via debt will be a debit
okay with this let us consider the
transaction is given to us very clearly
capital introduced five lakhs so what
are the accounts involved when capital
is introduced first money comes in so
cash comes next what happens who brings
in the money the owner
writer so now once the proprietor has
given money it is as if the proprietor
is lending money to the business so in
the books of the business remember they
are two separate entities
the owner is separate business is
separate we are recording transactions
in the books of the business we are
going to pass accounting entries in the
books of the business so now the
business owes this money to the
proprietor the liability of the business
to the proprietor is called
capital L is called capital so what are
the two accounts involved one is cash
and one is owners account owners account
actually is represented as capital what
is cash cash is an asset what is this
owners account liability to the owner
right it's capital like I said this is
actually called capital liability of the
business to the owner is called capital
cash has come into the business there is
an increase in cash increase in cash
therefore we debit cash therefore we
debit cash what about the owners account
now money is poured to the owner the
business has a liability to the owner
liability has increased as it has
increased liability has increased
therefore we credit owners account we
actually credit capital account owners
account is represented by capital
account let us try this again deposited
cash in to back there positive cash into
back so what are the two things involved
and you deposit cash into bank one
amount of cash comes down so one is cash
the other is we are giving this money to
the bank you are giving this money to
the bank so tomorrow if the business
needs this money they can take it back
from the back it is a receivable so let
us see the two accounts involved are
cash and bank accounts involved what is
cash cash is an asset what is bank what
is back bank we have given money to the
bank
therefore this is
just like when the proprietor gave money
to the business the business now has a
liability to the proprietor similarly
when the business gives money and the
business gives money to the bank the
bank is an asset it's an asset
receivables are asset tomorrow I can
collect this money from the back it is
receivable I can take it from the bank
the bank owes me this money and lend it
to the bank so to say so bank is also
called an asset now what has happened to
cash my cash has come down so cash there
is a decrease back there is an increase
so I credit cash and I will debit bye
so basically that accounting equation is
just being represented with debits and
credits because that is how I will frame
an accounting entry an accounting entry
has a debit side or 1 and the credit
side on the other so this is debit bank
credit cash why do we credit cash
because cash has come down cash is an
asset and it has come why do we debit
bank because bank is also an asset and
bank Mullins has it exists next bought
furniture and issued cheque so we got
the transaction what are the accounts
involved what furniture issue check
therefore comes in vault should be bank
and furniture bank and furniture we
bought furniture for nature is an asset
for nature asset is increased therefore
we debit furniture there for me then
with furniture
what about Bank Bank is also an asset
but the bank balance has come down bank
balance has come down therefore we
credit and therefore we credit back one
more example we buy goods bought goods
issued chip so bought goods and paid by
a check so what happens with goods one
of the accounts involved goods and back
goods and back we bought goods it's an
asset which is
increase gone up there for your debit
codes remember assets are Devils
you should check so the bank balance has
it's an asset and has come down there
for me credit back we credit bought
goods on credit from Oz up bought goods
on credit from aza
so there is goods and there is Azad
right goods has increased goods is an
asset goods has increased therefore we
debit goods goods bought on credit from
Azad means we have purchased the goods
from Assad should not get paid and
therefore we have a liability to Azad
'no we have a liability to pay azad now
therefore this is a liability increase
in liability is a credit increase in
liabilities similarly we pay the rent
pay rent of 20,000 and you pay rent what
are the expense what are the accounts
involved the accounts involved here are
rent and cash we should be a little
alert here when we make a rent payment
we pay money to the landlord but it is
not the landlord's account which comes
in but it is the rent account which
comes why is this because if we say it
is landlord account it would actually
mean that we you have to get this money
from the landlord that is not the case
rent is something we are we are making a
payment for maybe use of the promises
which has been given to us by the
landlord so when we make payment of an
expense payment of an expense to a
particular person it is not the person
who comes into the accounts the account
in word is actually the particular
expense we are paying to the landlord on
account
friend so what is the what is the
account involved here
not not landlord account but expense
account or rent account so what is rent
it's an expense increase in expense
increase in asset are debit so we debit
rent what happens to cash cash is an
asset but cash has come down because
we've paid the money
therefore we credit cash decrease in
asset is sold all goods and receive
cheque of 4.2 we sold goods so goods is
affected we got cheque
therefore Bank is affected the only
problem here is that we received a check
for 4.2 lakhs but the value of our goods
was only 3 lakhs you remember we bought
goods for one like here and we bought
hoods here for in the previous example
not given here this was actually for 2
lakhs
this was actually per tunics so we got
goods for 3 left but we are selling for
4.2 we are straight away making a profit
of 1.2 so we now have a bank account we
have a good account and we have a profit
account profit belongs to whole to the
proprietor therefore I have just said
capital here capital here so Bank is an
asset money has come into the bank
increase bank increase bank bank balance
has come up by 4.2 you've sold all the
goods goods have gone asset has gone
decrease in his head we credit goods for
an amount of free because the cost of
our booth was only three and this 1.2 is
profit of the business profit of the
business belongs to the proprietor and
the business makes profit it big it's
liability to its owner increases
liability to the owner
increases so its capital is liability
increase the credit capital for 1.2 so
you have 3 plus 1 point 2 equal to 4
point 2 this is how we go about passing
accounting entries deciding which
account is to be debited and got H to be
credited identify the transaction
identify the accounts involved once you
know what are the accounts involved so
what is the nature of the account is it
an asset or a liability is it an income
or L expense then apply the rules what
was the road increase in asset debit
therefore decrease in asset correct
increase in liability is credit increase
in liability is credit decrease in
liability is debit