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Topic to be tested:

  • Rules for Debiting & Crediting

 Learning Objectives:

  • To develop an understanding of accounting rules by analyzing nature of an account
  • To express the effects of business transactions in terms of debits and credits to different types of transactions.

 CONSTRUCT:

During a financial year, a business may experience thousands of transactions. It is the responsibility of an accountant to classify and record these transactions as well as to summarize the data in these transactions to create useful information. Every business transaction has two aspects. One aspect is debited while the other is credited. Both of the aspects have to be recorded in accounts appropriately. Accountants use the term debit for the entry to be placed on left side of an account and the term credit for entry on the right side of the same account. 

DISCUSSION QUESTIONS:

Being a student of accounting, you are required to:

1)     Recognize business transactions from the following mentioned events.

2)     Analyze the business transactions thoroughly and determine its increasing or decreasing effects on the assetsliabilities, equity,revenues, or expenses of the business.

3)     Explain these increasing or decreasing effects into debits and credits

 

Report on Business and non-business events of ABC Company

During XXX financial year

 

1

ABC company sold goods of RS.10, 000 on account, agreeing to receive payment within 10 days after delivering the items.

2

Expenses incurred for the renovation of the new office of Rs.2, 000

3

Paid Rs.1,000 for the office equipment purchased on account

4

Expenses incurred by partner A on birthday party of his son worth Rs.20, 000

5

Laundry expenses by wife of  partner B for Rs.1,500

6

The company borrowed Rs.60,000 from Partner A’s father and promised to repay the amount borrowed within one year

7

company issued shares of capital stock for Rs.30,000 cash to Partner B, his wife and son

8

Rs.95,900 is a revenue earned by the business during the year

9

Paid Rs.4, 000 cash for office rent.

10

Expenses incurred on foreign official trip by partner A Rs.35,000

 Note: It is compulsory to follow the given format for answering the discussion questions (one is done for you):

 

Transaction #

 

Nature

Analysis

Recording

Purchased office equipment of RS.10, 000 on account

Business transaction

Increased assets (office equipment) and liabilities (accounts payable

Dr. Asset and Cr. Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Important Instructions:

 Your discussion must be based on logical facts.

  1. Solution must be provided in the recommended table / format
  2. Do not copy or exchange your answer with other students. Two identical / copied comments will be marked Zero (0) and may damage your grade in the course.
  3. Obnoxious or ignoble answer should be strictly avoided.
  4. Questions / queries related to the content of the GDB, which may be posted by the students on MDB or via e-mail, will not be replied till the due date of GDB is over.

Views: 11114

Replies to This Discussion

Transaction #                      Nature                  Analysis                                Recording

Purchased office               Business        Increased assets                  Dr. Asset and 

equipment of RS.10, 000     transaction   (office equipment) and                Cr. Liabilities

                                                        liabilities (accounts payable

Sold goods of RS.10, 000 

renovation of the new

office of Rs.2, 000


Rs.1,000 for the office

equipment purchased

Rs.20, 000 expenses

incurred by partner A 

Rs.1,500 expenses by

wife of  partner B

The company borrowed

Rs.60,000 from

Partner A’s father


company issued

shares of capital stock

for Rs.30,000


Rs.95,900 revenue earned

 

Paid Rs.4, 000 cash

for office rent

Rs.35,000 expenses incurred

on foreign official trip by

partner A 


 



how to add answer in column format I cannot see any file uploading option or cannt copy paste in tht form even

 

sir plz let me know k apny jo solution dala hai us may sirf transaction di hoe hai. nature, analysis and recording are not mentioned in it. is k baray may kuch explain krden plz. need your help and guidance.

take care

 nimra tariq sis, this is not the solution. It is just format which we have to follow. Its compulsory. 

Rules for Debiting & Crediting

In financial accounting debit and credit are simply the left and right side of a T-Account respectively. They are used to indicate the increase or decrease in certain accounts. When there is a change in an account, that change is indicated by either debiting or crediting that account according to following rules:

Assets and Expenses 
An increase is recorded as debit (left side) 
A decrease is recorded as credit (right side) 
Liabilities, Equities and Revenues 
A decrease is recorded as debit (left side) 
An increase is recorded as credit (right side) 
Contra-accounts 
Contra-accounts behave exactly in opposite way to the respective normal accounts.
Examples

The owner brings cash from his personal account into the business 
Analysis: 
Cash (an asset) is increased thus debit Cash 
Owner capital (an equity) is increased thus credit Owners' Capital
Office supplies are purchased on account 
Analysis: 
Office Supplies (an asset) is increased thus debit Office Supplies 
Accounts Payable (a liability) is increased thus credit Accounts Payable
Wages payable are paid 
Analysis: 
Wages Payable (a liability) is decreased thus debit Wages Payable 
Cash (an asset) is decreased thus credit Cash
Revenue is earned but not yet received 
Analysis: 
Accounts Receivable (an asset) is increased thus debit Accounts Receivable
Revenue (a revenue) is increased thus credit Revenue

Please Discuss here about this GDB.Thanks

Our main purpose here discussion not just Solution

We are here with you hands in hands to facilitate your learning and do not appreciate the idea of copying or replicating solutions.

can't understand this at all can any one help me in identifying the nature, analysis and recording of the given scenario. please.

nimra tariq sis, please read the lessons 3 to 6 very carefully.

For each activity of a business, there are minimum two accounts involved in that activity. Remember , firstly , there is a need to identify the two accounts. Then according the rules of accounting 

Debit : the account which is receiving benefit

Credit : the account which is providing benefit

one identify the Dr/(Cr) cases.

In the given scenarios of our GDB, lets take the first event.

1.  ABC company sold goods of RS.10, 000 on account, agreeing to receive payment within 10 days after delivering the items.


In this case sales account and Customer-1 are the two accounts. Sales account is providing benefit so it will be (Cr) and Customer-1 account is receiving benefit so it will be Dr.

The nature is business transaction.

Thanks for explanation, i guess, in your example, customer will be debit for liability, right?

Assalamualikum!

I am confused to solve case no 2, 7 and 8. Shares walay case ki bilkul samajh nae lg rahe! same is the case for revenue earned and expenses for renoation of new office.

Please help

2. Expenses incurred for the renovation of the new office of Rs.2, 000

This case is representing the increase in the expenses and is also increasing the liability of the firm which it has to payback.  

Dr. Asset and

Cr. Liabilities

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