Scope of Account:

Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.
Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/-

100000/-

Debtors
40000

Term Loan :
Loan can be Short Term or Long Term.
Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:

Liabilities that are to be paid with in a year i.e. payment to be made to

Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

:
:
:
:
:
:
:
:
:
:
:

Furniture A/c Debit

Building A/c Debit
Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit

Example:
Furniture Purchased
Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid

Salary Due, but not Paid

Salary Payable - Credit

Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Total

210000

Example
1.
Cash
75000

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities
=

Capital

75000

+
+

Capital
75000

75000

Liabilities
0

+
+

Capital
75000

75000

Capital

+
+
+

75000
0
75000

2.

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0
3.

Goods purchased for Cash for Rs. 20000

Assets
=
Cash + Furniture + Stock
=
70000 + 5000
+ 0
-20000 + 0
+ 20000
=
50000 + 5000
+ 20000
=
4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
Cash + Furniture +
50000 + 5000
+
+15000
+
65000 + 5000
+

=
=
=
=
=

Stock
36000
-12000
24000

Liabilities
Creditor
16000
0
16000

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

6.

7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

For
1.
2.
3.
4.
5.
6.
7.
8.
9.

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash
Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

80000
28000
20000
6000
2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.

Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/Term Loan :

100000/-

Debtors
40000

Loan can be Short Term or Long Term.

Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:
Liabilities that are to be paid with in a year i.e. payment to be made to
Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

Furniture A/c Debit

Example:
Furniture Purchased

Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid
Salary Due, but not Paid

:
:
:
:
:
:
:
:
:
:
:

Building A/c Debit

Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit
Salary Payable - Credit

Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Total

210000

Example
1.
Cash
75000

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities
=

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0

Capital

75000

+
+

Capital
75000

75000

Capital

2.

3.

Goods purchased for Cash for Rs. 20000

Assets
=

Liabilities

Cash +
70000 +
-20000 +
50000 +

Furniture + Stock
5000
+ 0
0
+ 20000
5000
+ 20000

75000

=
=

75000

Capital

+
+
+

75000
0
75000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 36000
=
16000
+15000
+ -12000
=
0
65000 + 5000
+ 24000
=
16000
6.

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000
7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

For
1.
2.
3.
4.

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash

80000
28000
20000
6000

5.
6.
7.
8.
9.

Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.
Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Capital
=
All Assets =

Machinery 50000/Creditors 30000/-

Stock

All Assets External Liabilities

Cash+
Machinery+
Stock+

100000/-

Debtors

=
20000+
50000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/-

100000+

40000

Term Loan :
Loan can be Short Term or Long Term.
Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:
Liabilities that are to be paid with in a year i.e. payment to be made to
Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited

If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

:
:
:
:
:
:
:
:
:
:
:
:

Furniture A/c Debit

Building A/c Debit
Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit
Salary Payable - Credit

Example:
Furniture Purchased
Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid
Salary Due, but not Paid
Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Example
1.

Gopal Started business with Rs. 75000 as Capital

Total

210000

Assets
Cash
75000

Liabilities

Capital

75000

+
+

Capital
75000

75000

Liabilities
0

+
+

Capital
75000

75000

Capital

+
+
+

75000
0
75000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

2.

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0
3.

Goods purchased for Cash for Rs. 20000

Assets
=
Cash + Furniture + Stock
=
70000 + 5000
+ 0
-20000 + 0
+ 20000
=
50000 + 5000
+ 20000
=
4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 36000
=
16000
+15000
+ -12000
=
0
65000 + 5000
+ 24000
=
16000
6.

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000
7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock

64000
5000
12000

Total

For

96000

Debtors

15000

Total

96000

Home Work

1.
2.
3.
4.
5.
6.
7.
8.
9.

Mukesh started business with Cash.

Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash
Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

80000
28000
20000
6000
2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets

Machinery, Building, Furniture, Cash, Bank Balance

Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:

Creditors, Capital, Loan

Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.
Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.

Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/-

100000/-

Debtors
40000

Term Loan :
Loan can be Short Term or Long Term.
Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:
Liabilities that are to be paid with in a year i.e. payment to be made to
Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

:
:
:
:
:
:
:
:
:
:
:
:

Furniture A/c Debit

Building A/c Debit
Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit
Salary Payable - Credit

Example:
Furniture Purchased
Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid
Salary Due, but not Paid
Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Capital

180000

Cash

Amount
20000

Creditors

Total

30000

Machinery
Stock
Debtors

210000

50000
100000
40000

Total

210000

Example
1.

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities

Cash
75000

Capital

75000

+
+

Capital
75000

75000

Liabilities
0

+
+

Capital
75000

75000

Capital

+
+
+

75000
0
75000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

2.

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0
3.

Goods purchased for Cash for Rs. 20000

Assets
=
Cash + Furniture + Stock
=
70000 + 5000
+ 0
-20000 + 0
+ 20000
=
50000 + 5000
+ 20000
=
4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 36000
=
16000
+15000
+ -12000
=
0
65000 + 5000
+ 24000
=
16000
6.

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000
7.

Paid for 1000 for Rent

Assets
Cash +
65000 +
-1000 +
64000 +

For
1.
2.
3.
4.
5.
6.
7.
8.
9.

Furniture +
5000
+
0
+
5000
+

Stock
12000
0
12000

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Capital

+
+
+

81000
-1000
80000

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash
Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

80000
28000
20000
6000
2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.
Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/-

100000/-

Debtors
40000

Term Loan :
Loan can be Short Term or Long Term.
Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:

Liabilities that are to be paid with in a year i.e. payment to be made to

Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

:
:
:
:
:
:
:
:
:
:
:

Furniture A/c Debit

Building A/c Debit
Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit

Example:
Furniture Purchased
Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid

Salary Due, but not Paid

Salary Payable - Credit

Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Total

210000

Example
1.
Cash
75000

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities
=

Capital

75000

+
+

Capital
75000

75000

Liabilities
0

+
+

Capital
75000

75000

Capital

+
+
+

75000
0
75000

2.

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0
3.

Goods purchased for Cash for Rs. 20000

Assets
=
Cash + Furniture + Stock
=
70000 + 5000
+ 0
-20000 + 0
+ 20000
=
50000 + 5000
+ 20000
=
4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
Cash + Furniture +
50000 + 5000
+
+15000
+
65000 + 5000
+

=
=
=
=
=

Stock
36000
-12000
24000

Liabilities
Creditor
16000
0
16000

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

6.

7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

For
1.
2.
3.
4.
5.
6.
7.
8.
9.

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash
Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

80000
28000
20000
6000
2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.

Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/Term Loan :

100000/-

Debtors
40000

Loan can be Short Term or Long Term.

Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:
Liabilities that are to be paid with in a year i.e. payment to be made to
Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

Furniture A/c Debit

Example:
Furniture Purchased

Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid
Salary Due, but not Paid

:
:
:
:
:
:
:
:
:
:
:

Building A/c Debit

Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit
Salary Payable - Credit

Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Total

210000

Example
1.
Cash
75000

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities
=

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0

Capital

75000

+
+

Capital
75000

75000

Capital

2.

3.

Goods purchased for Cash for Rs. 20000

Assets
=

Liabilities

Cash +
70000 +
-20000 +
50000 +

Furniture + Stock
5000
+ 0
0
+ 20000
5000
+ 20000

75000

=
=

75000

Capital

+
+
+

75000
0
75000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 36000
=
16000
+15000
+ -12000
=
0
65000 + 5000
+ 24000
=
16000
6.

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000
7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

For
1.
2.
3.
4.

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash

80000
28000
20000
6000

5.
6.
7.
8.
9.

Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.
Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Capital
=
All Assets =

Machinery 50000/Creditors 30000/-

Stock

All Assets External Liabilities

Cash+
Machinery+
Stock+

100000/-

Debtors

=
20000+
50000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/-

100000+

40000

Term Loan :
Loan can be Short Term or Long Term.
Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:
Liabilities that are to be paid with in a year i.e. payment to be made to
Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited

If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

:
:
:
:
:
:
:
:
:
:
:
:

Furniture A/c Debit

Building A/c Debit
Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit
Salary Payable - Credit

Example:
Furniture Purchased
Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid
Salary Due, but not Paid
Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Example
1.

Gopal Started business with Rs. 75000 as Capital

Total

210000

Assets
Cash
75000

Liabilities

Capital

75000

+
+

Capital
75000

75000

Liabilities
0

+
+

Capital
75000

75000

Capital

+
+
+

75000
0
75000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

2.

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0
3.

Goods purchased for Cash for Rs. 20000

Assets
=
Cash + Furniture + Stock
=
70000 + 5000
+ 0
-20000 + 0
+ 20000
=
50000 + 5000
+ 20000
=
4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 36000
=
16000
+15000
+ -12000
=
0
65000 + 5000
+ 24000
=
16000
6.

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000
7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock

64000
5000
12000

Total

For

96000

Debtors

15000

Total

96000

Home Work

1.
2.
3.
4.
5.
6.
7.
8.
9.

Mukesh started business with Cash.

Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash
Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

80000
28000
20000
6000
2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets

Machinery, Building, Furniture, Cash, Bank Balance

Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:

Creditors, Capital, Loan

Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.
Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.

Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/-

100000/-

Debtors
40000

Term Loan :
Loan can be Short Term or Long Term.
Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:
Liabilities that are to be paid with in a year i.e. payment to be made to
Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

:
:
:
:
:
:
:
:
:
:
:
:

Furniture A/c Debit

Building A/c Debit
Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit
Salary Payable - Credit

Example:
Furniture Purchased
Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid
Salary Due, but not Paid
Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Capital

180000

Cash

Amount
20000

Creditors

Total

30000

Machinery
Stock
Debtors

210000

50000
100000
40000

Total

210000

Example
1.

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities

Cash
75000

Capital

75000

+
+

Capital
75000

75000

Liabilities
0

+
+

Capital
75000

75000

Capital

+
+
+

75000
0
75000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

2.

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0
3.

Goods purchased for Cash for Rs. 20000

Assets
=
Cash + Furniture + Stock
=
70000 + 5000
+ 0
-20000 + 0
+ 20000
=
50000 + 5000
+ 20000
=
4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 36000
=
16000
+15000
+ -12000
=
0
65000 + 5000
+ 24000
=
16000
6.

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000
7.

Paid for 1000 for Rent

Assets
Cash +
65000 +
-1000 +
64000 +

For
1.
2.
3.
4.
5.
6.
7.
8.
9.

Furniture +
5000
+
0
+
5000
+

Stock
12000
0
12000

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Capital

+
+
+

81000
-1000
80000

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash
Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

80000
28000
20000
6000
2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.
Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/-

100000/-

Debtors
40000

Term Loan :
Loan can be Short Term or Long Term.
Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:

Liabilities that are to be paid with in a year i.e. payment to be made to

Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

:
:
:
:
:
:
:
:
:
:
:

Furniture A/c Debit

Building A/c Debit
Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit

Example:
Furniture Purchased
Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid

Salary Due, but not Paid

Salary Payable - Credit

Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Total

210000

Example
1.
Cash
75000

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities
=

Capital

75000

+
+

Capital
75000

75000

Liabilities
0

+
+

Capital
75000

75000

Capital

+
+
+

75000
0
75000

2.

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0
3.

Goods purchased for Cash for Rs. 20000

Assets
=
Cash + Furniture + Stock
=
70000 + 5000
+ 0
-20000 + 0
+ 20000
=
50000 + 5000
+ 20000
=
4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
Cash + Furniture +
50000 + 5000
+
+15000
+
65000 + 5000
+

=
=
=
=
=

Stock
36000
-12000
24000

Liabilities
Creditor
16000
0
16000

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

6.

7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

For
1.
2.
3.
4.
5.
6.
7.
8.
9.

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash
Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

80000
28000
20000
6000
2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.

Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/Term Loan :

100000/-

Debtors
40000

Loan can be Short Term or Long Term.

Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:
Liabilities that are to be paid with in a year i.e. payment to be made to
Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

Furniture A/c Debit

Example:
Furniture Purchased

Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid
Salary Due, but not Paid

:
:
:
:
:
:
:
:
:
:
:

Building A/c Debit

Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit
Salary Payable - Credit

Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Total

210000

Example
1.
Cash
75000

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities
=

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0

Capital

75000

+
+

Capital
75000

75000

Capital

2.

3.

Goods purchased for Cash for Rs. 20000

Assets
=

Liabilities

Cash +
70000 +
-20000 +
50000 +

Furniture + Stock
5000
+ 0
0
+ 20000
5000
+ 20000

75000

=
=

75000

Capital

+
+
+

75000
0
75000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 36000
=
16000
+15000
+ -12000
=
0
65000 + 5000
+ 24000
=
16000
6.

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000
7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

For
1.
2.
3.
4.

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash

80000
28000
20000
6000

5.
6.
7.
8.
9.

Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.
Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Capital
=
All Assets =

Machinery 50000/Creditors 30000/-

Stock

All Assets External Liabilities

Cash+
Machinery+
Stock+

100000/-

Debtors

=
20000+
50000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/-

100000+

40000

Term Loan :
Loan can be Short Term or Long Term.
Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:
Liabilities that are to be paid with in a year i.e. payment to be made to
Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited

If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

:
:
:
:
:
:
:
:
:
:
:
:

Furniture A/c Debit

Building A/c Debit
Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit
Salary Payable - Credit

Example:
Furniture Purchased
Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid
Salary Due, but not Paid
Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Example
1.

Gopal Started business with Rs. 75000 as Capital

Total

210000

Assets
Cash
75000

Liabilities

Capital

75000

+
+

Capital
75000

75000

Liabilities
0

+
+

Capital
75000

75000

Capital

+
+
+

75000
0
75000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

2.

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0
3.

Goods purchased for Cash for Rs. 20000

Assets
=
Cash + Furniture + Stock
=
70000 + 5000
+ 0
-20000 + 0
+ 20000
=
50000 + 5000
+ 20000
=
4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 36000
=
16000
+15000
+ -12000
=
0
65000 + 5000
+ 24000
=
16000
6.

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000
7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock

64000
5000
12000

Total

For

96000

Debtors

15000

Total

96000

Home Work

1.
2.
3.
4.
5.
6.
7.
8.
9.

Mukesh started business with Cash.

Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash
Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

80000
28000
20000
6000
2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets

Machinery, Building, Furniture, Cash, Bank Balance

Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:

Creditors, Capital, Loan

Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.
Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.

Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/-

100000/-

Debtors
40000

Term Loan :
Loan can be Short Term or Long Term.
Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:
Liabilities that are to be paid with in a year i.e. payment to be made to
Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

:
:
:
:
:
:
:
:
:
:
:
:

Furniture A/c Debit

Building A/c Debit
Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit
Salary Payable - Credit

Example:
Furniture Purchased
Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid
Salary Due, but not Paid
Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Capital

180000

Cash

Amount
20000

Creditors

Total

30000

Machinery
Stock
Debtors

210000

50000
100000
40000

Total

210000

Example
1.

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities

Cash
75000

Capital

75000

+
+

Capital
75000

75000

Liabilities
0

+
+

Capital
75000

75000

Capital

+
+
+

75000
0
75000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

2.

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0
3.

Goods purchased for Cash for Rs. 20000

Assets
=
Cash + Furniture + Stock
=
70000 + 5000
+ 0
-20000 + 0
+ 20000
=
50000 + 5000
+ 20000
=
4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 36000
=
16000
+15000
+ -12000
=
0
65000 + 5000
+ 24000
=
16000
6.

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000
7.

Paid for 1000 for Rent

Assets
Cash +
65000 +
-1000 +
64000 +

For
1.
2.
3.
4.
5.
6.
7.
8.
9.

Furniture +
5000
+
0
+
5000
+

Stock
12000
0
12000

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Capital

+
+
+

81000
-1000
80000

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash
Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

80000
28000
20000
6000
2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.
Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/-

100000/-

Debtors
40000

Term Loan :
Loan can be Short Term or Long Term.
Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:

Liabilities that are to be paid with in a year i.e. payment to be made to

Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

:
:
:
:
:
:
:
:
:
:
:

Furniture A/c Debit

Building A/c Debit
Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit

Example:
Furniture Purchased
Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid

Salary Due, but not Paid

Salary Payable - Credit

Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Total

210000

Example
1.
Cash
75000

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities
=

Capital

75000

+
+

Capital
75000

75000

Liabilities
0

+
+

Capital
75000

75000

Capital

+
+
+

75000
0
75000

2.

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0
3.

Goods purchased for Cash for Rs. 20000

Assets
=
Cash + Furniture + Stock
=
70000 + 5000
+ 0
-20000 + 0
+ 20000
=
50000 + 5000
+ 20000
=
4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
Cash + Furniture +
50000 + 5000
+
+15000
+
65000 + 5000
+

=
=
=
=
=

Stock
36000
-12000
24000

Liabilities
Creditor
16000
0
16000

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

6.

7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

For
1.
2.
3.
4.
5.
6.
7.
8.
9.

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash
Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

80000
28000
20000
6000
2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.

Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/Term Loan :

100000/-

Debtors
40000

Loan can be Short Term or Long Term.

Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:
Liabilities that are to be paid with in a year i.e. payment to be made to
Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

Furniture A/c Debit

Example:
Furniture Purchased

Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid
Salary Due, but not Paid

:
:
:
:
:
:
:
:
:
:
:

Building A/c Debit

Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit
Salary Payable - Credit

Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Total

210000

Example
1.
Cash
75000

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities
=

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0

Capital

75000

+
+

Capital
75000

75000

Capital

2.

3.

Goods purchased for Cash for Rs. 20000

Assets
=

Liabilities

Cash +
70000 +
-20000 +
50000 +

Furniture + Stock
5000
+ 0
0
+ 20000
5000
+ 20000

75000

=
=

75000

Capital

+
+
+

75000
0
75000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 36000
=
16000
+15000
+ -12000
=
0
65000 + 5000
+ 24000
=
16000
6.

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000
7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

For
1.
2.
3.
4.

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash

80000
28000
20000
6000

5.
6.
7.
8.
9.

Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.
Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Capital
=
All Assets =

Machinery 50000/Creditors 30000/-

Stock

All Assets External Liabilities

Cash+
Machinery+
Stock+

100000/-

Debtors

=
20000+
50000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/-

100000+

40000

Term Loan :
Loan can be Short Term or Long Term.
Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:
Liabilities that are to be paid with in a year i.e. payment to be made to
Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited

If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

:
:
:
:
:
:
:
:
:
:
:
:

Furniture A/c Debit

Building A/c Debit
Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit
Salary Payable - Credit

Example:
Furniture Purchased
Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid
Salary Due, but not Paid
Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Example
1.

Gopal Started business with Rs. 75000 as Capital

Total

210000

Assets
Cash
75000

Liabilities

Capital

75000

+
+

Capital
75000

75000

Liabilities
0

+
+

Capital
75000

75000

Capital

+
+
+

75000
0
75000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

2.

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0
3.

Goods purchased for Cash for Rs. 20000

Assets
=
Cash + Furniture + Stock
=
70000 + 5000
+ 0
-20000 + 0
+ 20000
=
50000 + 5000
+ 20000
=
4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 36000
=
16000
+15000
+ -12000
=
0
65000 + 5000
+ 24000
=
16000
6.

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000
7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock

64000
5000
12000

Total

For

96000

Debtors

15000

Total

96000

Home Work

1.
2.
3.
4.
5.
6.
7.
8.
9.

Mukesh started business with Cash.

Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash
Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

80000
28000
20000
6000
2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets

Machinery, Building, Furniture, Cash, Bank Balance

Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:

Creditors, Capital, Loan

Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.
Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.

Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/-

100000/-

Debtors
40000

Term Loan :
Loan can be Short Term or Long Term.
Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:
Liabilities that are to be paid with in a year i.e. payment to be made to
Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

:
:
:
:
:
:
:
:
:
:
:
:

Furniture A/c Debit

Building A/c Debit
Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit
Salary Payable - Credit

Example:
Furniture Purchased
Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid
Salary Due, but not Paid
Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Capital

180000

Cash

Amount
20000

Creditors

Total

30000

Machinery
Stock
Debtors

210000

50000
100000
40000

Total

210000

Example
1.

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities

Cash
75000

Capital

75000

+
+

Capital
75000

75000

Liabilities
0

+
+

Capital
75000

75000

Capital

+
+
+

75000
0
75000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

2.

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0
3.

Goods purchased for Cash for Rs. 20000

Assets
=
Cash + Furniture + Stock
=
70000 + 5000
+ 0
-20000 + 0
+ 20000
=
50000 + 5000
+ 20000
=
4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 36000
=
16000
+15000
+ -12000
=
0
65000 + 5000
+ 24000
=
16000
6.

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000
7.

Paid for 1000 for Rent

Assets
Cash +
65000 +
-1000 +
64000 +

For
1.
2.
3.
4.
5.
6.
7.
8.
9.

Furniture +
5000
+
0
+
5000
+

Stock
12000
0
12000

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Capital

+
+
+

81000
-1000
80000

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash
Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

80000
28000
20000
6000
2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.
Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/-

100000/-

Debtors
40000

Term Loan :
Loan can be Short Term or Long Term.
Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:

Liabilities that are to be paid with in a year i.e. payment to be made to

Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

:
:
:
:
:
:
:
:
:
:
:

Furniture A/c Debit

Building A/c Debit
Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit

Example:
Furniture Purchased
Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid

Salary Due, but not Paid

Salary Payable - Credit

Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Total

210000

Example
1.
Cash
75000

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities
=

Capital

75000

+
+

Capital
75000

75000

Liabilities
0

+
+

Capital
75000

75000

Capital

+
+
+

75000
0
75000

2.

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0
3.

Goods purchased for Cash for Rs. 20000

Assets
=
Cash + Furniture + Stock
=
70000 + 5000
+ 0
-20000 + 0
+ 20000
=
50000 + 5000
+ 20000
=
4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
Cash + Furniture +
50000 + 5000
+
+15000
+
65000 + 5000
+

=
=
=
=
=

Stock
36000
-12000
24000

Liabilities
Creditor
16000
0
16000

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

6.

7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

For
1.
2.
3.
4.
5.
6.
7.
8.
9.

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash
Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

80000
28000
20000
6000
2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.

Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/Term Loan :

100000/-

Debtors
40000

Loan can be Short Term or Long Term.

Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:
Liabilities that are to be paid with in a year i.e. payment to be made to
Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

Furniture A/c Debit

Example:
Furniture Purchased

Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid
Salary Due, but not Paid

:
:
:
:
:
:
:
:
:
:
:

Building A/c Debit

Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit
Salary Payable - Credit

Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Total

210000

Example
1.
Cash
75000

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities
=

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0

Capital

75000

+
+

Capital
75000

75000

Capital

2.

3.

Goods purchased for Cash for Rs. 20000

Assets
=

Liabilities

Cash +
70000 +
-20000 +
50000 +

Furniture + Stock
5000
+ 0
0
+ 20000
5000
+ 20000

75000

=
=

75000

Capital

+
+
+

75000
0
75000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 36000
=
16000
+15000
+ -12000
=
0
65000 + 5000
+ 24000
=
16000
6.

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000
7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

For
1.
2.
3.
4.

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash

80000
28000
20000
6000

5.
6.
7.
8.
9.

Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.
Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Capital
=
All Assets =

Machinery 50000/Creditors 30000/-

Stock

All Assets External Liabilities

Cash+
Machinery+
Stock+

100000/-

Debtors

=
20000+
50000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/-

100000+

40000

Term Loan :
Loan can be Short Term or Long Term.
Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:
Liabilities that are to be paid with in a year i.e. payment to be made to
Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited

If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

:
:
:
:
:
:
:
:
:
:
:
:

Furniture A/c Debit

Building A/c Debit
Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit
Salary Payable - Credit

Example:
Furniture Purchased
Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid
Salary Due, but not Paid
Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Example
1.

Gopal Started business with Rs. 75000 as Capital

Total

210000

Assets
Cash
75000

Liabilities

Capital

75000

+
+

Capital
75000

75000

Liabilities
0

+
+

Capital
75000

75000

Capital

+
+
+

75000
0
75000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

2.

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0
3.

Goods purchased for Cash for Rs. 20000

Assets
=
Cash + Furniture + Stock
=
70000 + 5000
+ 0
-20000 + 0
+ 20000
=
50000 + 5000
+ 20000
=
4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 36000
=
16000
+15000
+ -12000
=
0
65000 + 5000
+ 24000
=
16000
6.

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000
7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock

64000
5000
12000

Total

For

96000

Debtors

15000

Total

96000

Home Work

1.
2.
3.
4.
5.
6.
7.
8.
9.

Mukesh started business with Cash.

Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash
Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

80000
28000
20000
6000
2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets

Machinery, Building, Furniture, Cash, Bank Balance

Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:

Creditors, Capital, Loan

Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.
Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.

Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/-

100000/-

Debtors
40000

Term Loan :
Loan can be Short Term or Long Term.
Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:
Liabilities that are to be paid with in a year i.e. payment to be made to
Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

:
:
:
:
:
:
:
:
:
:
:
:

Furniture A/c Debit

Building A/c Debit
Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit
Salary Payable - Credit

Example:
Furniture Purchased
Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid
Salary Due, but not Paid
Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Capital

180000

Cash

Amount
20000

Creditors

Total

30000

Machinery
Stock
Debtors

210000

50000
100000
40000

Total

210000

Example
1.

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities

Cash
75000

Capital

75000

+
+

Capital
75000

75000

Liabilities
0

+
+

Capital
75000

75000

Capital

+
+
+

75000
0
75000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

2.

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0
3.

Goods purchased for Cash for Rs. 20000

Assets
=
Cash + Furniture + Stock
=
70000 + 5000
+ 0
-20000 + 0
+ 20000
=
50000 + 5000
+ 20000
=
4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 36000
=
16000
+15000
+ -12000
=
0
65000 + 5000
+ 24000
=
16000
6.

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000
7.

Paid for 1000 for Rent

Assets
Cash +
65000 +
-1000 +
64000 +

For
1.
2.
3.
4.
5.
6.
7.
8.
9.

Furniture +
5000
+
0
+
5000
+

Stock
12000
0
12000

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Capital

+
+
+

81000
-1000
80000

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash
Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

80000
28000
20000
6000
2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.
Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/-

100000/-

Debtors
40000

Term Loan :
Loan can be Short Term or Long Term.
Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:

Liabilities that are to be paid with in a year i.e. payment to be made to

Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

:
:
:
:
:
:
:
:
:
:
:

Furniture A/c Debit

Building A/c Debit
Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit

Example:
Furniture Purchased
Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid

Salary Due, but not Paid

Salary Payable - Credit

Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Total

210000

Example
1.
Cash
75000

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities
=

Capital

75000

+
+

Capital
75000

75000

Liabilities
0

+
+

Capital
75000

75000

Capital

+
+
+

75000
0
75000

2.

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0
3.

Goods purchased for Cash for Rs. 20000

Assets
=
Cash + Furniture + Stock
=
70000 + 5000
+ 0
-20000 + 0
+ 20000
=
50000 + 5000
+ 20000
=
4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
Cash + Furniture +
50000 + 5000
+
+15000
+
65000 + 5000
+

=
=
=
=
=

Stock
36000
-12000
24000

Liabilities
Creditor
16000
0
16000

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

6.

7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

For
1.
2.
3.
4.
5.
6.
7.
8.
9.

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash
Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

80000
28000
20000
6000
2000
500
3000
40000
15000

Scope of Account:
Book Writing, Balancing Ledgers, Find out Cash in hand, make a correct
Trial Balance, Prepare Trading and Profit & Loss Account to ascertain the
Profit or loss and at last finalizing the Balance Sheet.
Terms mostly used in Book Keeping:
Assets
Liabilities
Sale
Purchase
Expenses
Income

:
:
:
:
:
:

Machinery, Building, Furniture, Cash, Bank Balance

Creditors, Capital, Loan
Sale of Material, Sale of Finished Goods
Purchase of Material, Purchase of Finished Goods
Rent, Salary, Wages, Telephone Exps, etc.
Commission, Rent Recd., Interest Recd.
Assets

Fixed Assets

Current Assets

Machinery
Land & Building
Furniture
Car, Scooter
Instruments

Cash
Stock in hand
Advances
Debtors
Bank Balance

Fixed Assets are those assets, which are purchased to run the business
smoothly and remain fixed for a business. There is no sale or purchase of
these items on a regular basis.

Current Assets are those assets that are by their nature can be converted
into cash with in a year or from those cash can be generated in a short
period.
Liabilities

Capital

Term Liabilities

Current Liabilities

Secured Loans
Unsecured Loans

Creditors
Expenses Payable

Day -2
Capital :
Amount Deposit From Owner side.
Capital =

All Assets External Liabilities

For Example suppose that the following balance appeared in the books of a
firm:
Cash
Debtors

20000/40000/-

Machinery 50000/Creditors 30000/-

Stock

Capital
=
All Assets External Liabilities
All Assets =
Cash+
Machinery+
Stock+
=
20000+
50000+
100000+
=
210000/External Liabilities
=
Creditors
=
30000/Capital
=
210000- 30000
=
180000/Term Loan :

100000/-

Debtors
40000

Loan can be Short Term or Long Term.

Short Term : For Less Than One year & this is called Current Liab.
Long Term : For More Than One year
Loan Can be Secured or Unsecured.
Secured Loans :
Against Security of Property, etc.
Unsecured Loans:
Without Security
Current Liabilities:
Liabilities that are to be paid with in a year i.e. payment to be made to
Creditors, Payment to be made to workers, Rent payable, etc.
Conclusion :
From the above we can find out the conclusion that:
Capital

= All Assets Or
All Assets
= Capital
+
Or
External Liab.= All Assets -

External Liab.
External Liab.
Capital.

Nature of Assets And Liabilities:

All the Assets have Debit Balances
All the Liabilities have Credit Balance
All the Expense Should be Debited
All the Incomes Should be Credited
If Assets Increase
If Assets Decrease

:
:

It Should be Debited
It Should be Credited

If Liabilities Increase
If Liabilities Decrease

:
:

It Should be Credited
It Should be Debited

Furniture A/c Debit

Example:
Furniture Purchased

Construction of Building
Cycle Sold
Car Sold
Goods Purchased
Sale Made
Rent Expenses
Salary Expenses
Commission Recd.
Interest Recd.
Rent Due, but not Paid
Salary Due, but not Paid

:
:
:
:
:
:
:
:
:
:
:

Building A/c Debit

Cycle A/c Credit
Car A/c Credit
Purchase A/c Debit
Sale A/c - Credit
Rent A/c Debit
Salary A/c Debit
Commission Credit
Interest Recd. A/c Credit
Rent Payable Credit
Salary Payable - Credit

Balance Sheet:
It is easier to understand the nature of assets and liabilities if we
understand a Balance sheet Performa. A simple balance sheet is as:Balance Sheet
Liabilities

Amount

Assets

Amount

Capital
Creditors

180000
30000

Cash
Machinery
Stock
Debtors

20000
50000
100000
40000

Total

210000

Total

210000

Example
1.
Cash
75000

Gopal Started business with Rs. 75000 as Capital

Assets
=
Liabilities
=

Gopal purchased furniture for Cash for Rs. 5000

Assets
=
Liabilities
Cash
+ Furniture
=
0
-5000 + 5000
70000 + 5000
=
0

Capital

75000

+
+

Capital
75000

75000

Capital

2.

3.

Goods purchased for Cash for Rs. 20000

Assets
=

Liabilities

Cash +
70000 +
-20000 +
50000 +

Furniture + Stock
5000
+ 0
0
+ 20000
5000
+ 20000

75000

=
=

75000

Capital

+
+
+

75000
0
75000

Capital

+
+
+

75000
3000
78000

Capital

+
+
+

78000
+3000
81000

Capital

+
+
+

81000
-1000
80000

4.

Gopal purchased goods on credit for Rs. 16000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 20000
=
0
0
+ 0
+ 16000
=
+16000
50000 + 5000
+ 36000
=
16000
5.

Goods costing of Rs. 12000 sold for Rs. 15000

Assets
=
Liabilities
Cash + Furniture + Stock
=
Creditor
50000 + 5000
+ 36000
=
16000
+15000
+ -12000
=
0
65000 + 5000
+ 24000
=
16000
6.

Goods costing of Rs. 12000 sold on Credit to Ram for Rs. 15000
Assets
=
Liabilities
Cash + Furniture + Stock + Debtors =
Creditor
65000 + 5000
+ 24000
=
16000
0
+ 0
+ -12000 + 15000
=
0
65000 + 5000
+ 12000 + 15000
=
16000
7.
Paid for 1000 for Rent
Assets
Cash + Furniture + Stock
65000 + 5000
+ 12000
-1000 + 0
+ 0
64000 + 5000
+ 12000

For
1.
2.
3.
4.

+
+
+
+

=
Liabilities
Debtors =
Creditor
15000
=
16000
0
=
0
15000
=
16000
Balance Sheet

Liabilities

Amount

Assets

Amount

Capital
Creditors

80000
16000

Cash
Furniture
Stock
Debtors

64000
5000
12000
15000

Total

96000

Total

96000

Home Work
Mukesh started business with Cash.
Purchased goods for Cash.
Purchased goods on Credit.
Purchased furniture for Cash

80000
28000
20000
6000

5.
6.
7.
8.
9.

Rent Paid
Commission Recd.
Withdraw Cash for personal use
Sold goods on credit (Cost Rs. 30000)
Paid to Creditors

2000
500
3000
40000
15000