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MECHANISMS &
FINANCIAL STATEMENTS
Prepare the
Financial
Statements
Business
transactions are
created
Analyze &
Record the
Transaction
Post the
information
from the Journal
to the Ledger
Prepare a
Post-Closing
Trial Balance
Post closing
Entries from the
Journal to the
Ledger
Journalize
Closing
Entries
Prepare a Trail
Balance
Prepare an
Adjusted
Trial
Balance
Post
Adjustments
from the
Journal to the
Ledger
Journalize
Adjusting
Entries
The word Journal has been derived from the French word Jour meaning
daily records.
The Journal records all daily transactions of a business in the order in which
they occur.
Performa of Journal
Date Particulars L.F.
CLASSIFICATION OF ACCOUNTS
Personal account
Real account
Nominal account
PERSONAL ACCOUNTS
Golden Rule:
REAL ACCOUNTS
Tangible real account: it can be touched felt and measured. E.g. cash
account, building account, furniture account.
Golden Rule:
NOMINAL ACCOUNTS
These accounts are opened in the books of accounts to simply explain the
nature of the transactions.
Golden Rule:
Rent paid
Dr
Cr
Salaries paid
Salaries A/c
Cash A/c
Nominal A/c
Dr
Real A/c
Cr
Interest Received
Cash A/c
Real A/c
Dr
Furniture purchased
Dr
Cr
Nominal A/c
Dr
Dr
Cr
2.
3.
4.
5.
1.
Cash A/c
Dr
1,00,000
To Capital A/c
1,00,000
Purchases A/c
Dr 5,000
To Cash A/c
5,000
Purchases A/c
Dr
20,000
To As A/c
20,000
Mr. Xs A/c
Dr
100
100
Cash A/c
Dr
To Sales A/c
(Being goods sold for cash)
7,000
7,000
2.
3.
4.
5.
1.
Mr. Ys A/c
Dr
4,000
To Sales A/c
4,000
Dr
100
To Mr. Zs A/c
100
Cash A/c
Dr
12,000
To Machinery A/c
12,000
Salaries A/c
Dr
3,200
To Cash A/c
3,200
Cash A/c
Discount A/c Dr
To Mr. Zs A/c
Dr
990
10
1,000
2.
3.
4.
5.
1.
Mr. Ks A/c
Dr
2,000
To Cash A/c
1,980
To Discount A/c
20
Depreciation A/c
Dr
2,000
To Furniture A/c
2,000
Dr
To Capital A/c
1,000
1,000
Drawing A/c
Dr
To Cash A/c
3,000
3,000
Dr
To purchases A/c
(Being distribution of goods as free samples)
100
100
Shalini Arora set up Ace Marketing Ltd to provide consultancy. During a short period,
the company completed the following transactions:
a)
b)
c)
d)
e)
f)
g)
h)
i)
Sum 1.xlsx
Journalize the following transactions. Also state the nature of each account involved in the Journal entry.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Dec. 20, he withdrew cash from business for personal use Rs 2,000.
12.
13.
14.
Dec. 31, paid for stationery Rs 200, rent Rs 500 and salaries to staff Rs 2,000
15.