from the following transactions state which account will be debited and which will be credited by filling up.
S.No. Transactions Accounts
involved
Application Reason with respect to
Rules of Debit and credit
Sample
Example Mr. X started business
with cash of Rs.100,000
Cash
Capital
Debit
Credit
Increased in asset
Increased in Owners Equity
1 Bought machinery for
cash Rs.50,000
2 Payment made to XYZ
Store Rs. 10,000 by
cheque.
3 Purchased office
furniture on credit for
Rs. 15,000
4 Rs. 1,000 received as a
rent for the portion of
office building rented
out.
5 Paid salaries of
Rs.40,000 by cheque
1. Debit - Machinery
Credit - Cash
2. Debit - XYZ Store
Credit - Cash
3. Debit - Office Furniture
Credit - Accounts Payable
4. Debit - Cash
Credit - Rent Income
5. Debit - Salaries Expense
Credit - Cash
To determine which account will be debited and which will be credited for each transaction, we need to apply the basic principles of debit and credit.
1. Transaction: Bought machinery for cash Rs.50,000
Accounts involved: Cash, Machinery
Explanation:
- Cash is an asset account and represents the cash being paid out.
- Machinery is an asset account and represents the machinery being acquired.
Debit: Cash (Decreased in asset)
Credit: Machinery (Increased in asset)
2. Transaction: Payment made to XYZ Store Rs. 10,000 by cheque
Accounts involved: Cash, XYZ Store
Explanation:
- Cash is an asset account and represents the cash being paid out.
- XYZ Store is an expense account and represents the amount being paid for purchases.
Debit: XYZ Store (Increased in expense)
Credit: Cash (Decreased in asset)
3. Transaction: Purchased office furniture on credit for Rs. 15,000
Accounts involved: Office Furniture, Accounts Payable
Explanation:
- Office Furniture is an asset account and represents the furniture being acquired.
- Accounts Payable is a liability account and represents the amount owed to the supplier.
Debit: Office Furniture (Increased in asset)
Credit: Accounts Payable (Increased in liability)
4. Transaction: Rs. 1,000 received as rent for the portion of office building rented out
Accounts involved: Cash, Rent Revenue
Explanation:
- Cash is an asset account and represents the cash being received.
- Rent Revenue is a revenue account and represents the income earned from rent.
Debit: Cash (Increased in asset)
Credit: Rent Revenue (Increased in revenue)
5. Transaction: Paid salaries of Rs.40,000 by cheque
Accounts involved: Salaries Expense, Cash
Explanation:
- Salaries Expense is an expense account and represents the amount being paid for employee salaries.
- Cash is an asset account and represents the cash being paid out.
Debit: Salaries Expense (Increased in expense)
Credit: Cash (Decreased in asset)
Remember, the rule of debit and credit is based on the accounting equation (Assets = Liabilities + Equity). Debits increase assets and expenses, while credits increase liabilities, equity, and revenues.