Account 6 Marks Question

Debit Balance:

3. Wages.

4. Land and Building.

6. Commision Paid.

8. Cash in Hand.

10. Drawings.

12. Prepaid Rent.

13. Input IGST.

Credit Balance:

1. Rent Received.

2. Bank Overdraft.

5. ​​​​​​​Commision Received.

7. Rent Outstanding.

9. M/s. Gupta Traders.

11. Capital.

14. Output SGST.

Enterprises close their books of account at the end of each year. In this process nominal accounts are closed by transferring them to Profit and Loss Account. The balances of Personal and Real Accounts (under Traditional Approach for classification of accounts) and Asset, liability and Capital Accounts (under Modern Approach for classification of accounts) are carried forward to the next year. These balances become the opening balances of the next year. The first entry in the Journal is passed to record closing balances of the previous year. It is called Opening Entry. Following example will make it more clear:
Based on the above Balance Sheet, the Opening Entry will be:

Under Double Entry System of accounting each transaction has two aspects. One aspect is debit, i.e., receiving or incoming aspect. Another aspect is credit, i.e., giving or outgoing aspect. Debit and credit aspects of a transaction form the basis of Double Entry System.
Rules of Double Entry or Rules of Debit and Credit are formed on the basis of these two aspects in each of the business transactions. There are two approaches for deciding when to write on the debit side of account and when to write on the credit side of an account, i.e., which account is to be debited and which account is to be credited. The rules on the basis of which such decision is taken are called Rules of Debit and Credit.
Classified on the basis of Accounting Equation:
Under this approach all the accounts are classified into the following five categories:

1. Asset Accounts: Asset accounts are those accounts which relate to the economic resources of an enterprise such as Land and Building, Plant and Machinery, Furniture, Patents, Inventory, Bank and Cash, etc.

2. Liability Accounts: Liability accounts are accounts of lenders, creditors for goods, outstanding expenses, etc.

3. Capital Accounts: These are the accounts of proprietors/ partners who have invested amount in the business. It includes both Capital and Drawings Account.

4. Revenue Accounts: These are accounts of incomes and gains. Examples are: Sales, Discount received, Interest received, commission received, bad debts recovered, etc.

5. Expense Accounts: These are the accounts of expenses or losses incurred n carrying the business. Examples are: Purchases, Wages, salaries, Depreciation, Discount allowed and Rent, etc.

	Types of Account	Accounts to be Debited	Accounts to be Credited
1.	Assets Accounts	Increase	Decrease
2.	Liability Accounts	Decrease	Increase
3.	Capital Accounts	Decrease	Increase
4.	Revenue Accounts	Decrease	Increase
5.	Expenses Accounts	Increase	Decrease

Note for Apr 17: Cheque of ₹ 2,940 dishonoured. Bank charged ₹ 10 (to be recovered from Shiv & Co.). Total due from Shiv & Co. ₹ 2,950. New cheque received for ₹ 3,000, so interest charged should be ₹ 50 (not ₹ 40, as given in the book).

Working Notes:
WN 1:
Calculation of Sales price (point no. x)
Sales Price = (10,000 + 20% = 12,000 - 10%) = ₹ 10,800
WN 2:
Calculation of Purchase price and Sales price (point no. xi)
Purchase Price = (50,000 - 15%) ₹ 42,500
Sales Price = (42,500 + 25% = 53,125 - 10%) = ₹ 47,812.5

Solution is as follows.

Solution is as follows.

Solution is as follows: