Accounting Equation & Golden Rules : Accounting Equation & Golden Rules
Accounting Equation : Accounting Equation Assets = Sources of finance
Assets = Liabilities + Equity
Slide 3 : 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.
Slide 4 : Ershad 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.
Slide 5 :
Classification of Accounts : 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
Slide 7 : 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!!! : Test Your knowledge!!! Salary prepaid
Rent account
Salary outstanding A/c
Bank account
Capital account
Goodwill account
Patents account
Purchases account
Investments
Freehold Premises
Corporation Bank Ltd.
Brokerage Account Personal A/c
Nominal A/c
Representative Personal A/c
Artificial Personal A/c
Artificial Personal A/c
Intangible Real A/c
Intangible Real A/c
Nominal A/c
Tangible Real A/c
Tangible Real A/c
Artificial Personal A/c
Nominal A/c
Slide 9 : 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 : 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.
Rent paid.
Salaries paid.
Interest received.
Dividends received.
Furniture purchased for cash.
Machinery sold.
Outstanding for salaries.
Telephone charges paid.
Paid to Suresh.
Received from Mohan (the proprietor)
Lighting expense paid
Slide 11 :
Slide 12 : Will that be all for the day??