SI No. Particulars LE LE Debit Credit RS Rs 1.050 1. 1.000 50 2 800 50 850 850 Ram Dr To Cash Alc To Discount Alc (Being payment made to Ram Rs 1,000. and he allowed Rs 50 as discount) Cash Ale DE Discount Ald Dr To Suresh (Being cash received from Suresh Rs 800. and discount allowed Rs 50) Cash Ale DE Land Alc Dr Furniture Ac Dr Stock A/cDr To Creditors To Bank Overdraft To Capital NC (Being commencement of business by Mohan by taking over a running business) 3 2.000 4.000 1.000 2.000 j36 1.000 2.000 6.000 credited Notes: 1. The total of payment due to Ram was Rs 1,050. A payment of Rs 1,000 has been made to him after he allowed a discount of Rs 50. This means by paying Rs 1,000, a full credit for Rs 1,050 has been obtained. The account of Ram is a Personal Account, and therefore, it has been debited as he is the receiver. The cash has gone out of the business and, therefore, the Cash Account being a Real Account, has been credited the Discount Account is a Nominal Account: getting a discount is a gain to the business and therefore, it has been 2. Suresh was to pay sum of Rs 850. He paid Rs 800 and he was allowed a discount of Rs 50. It means by paying Rs 800 only, Suresh could get a full credit of Rs 850. The Cash Account is a Real Account and, therefore, it has been debited since cash is coming in. Since the Discount Account is a Nominal Account, it has been debited since it is a loss to the business. Suresh is the giver. His account being a Personal Account, it has been credited by Rs 850. 3. It is not necessary that a person should start business only with cash. He may bring the assets into the business or he may purchase a running business. In the present case Mohan has purchased the assets of some other business. The net assets (.e. assets- liabilities taken over) will be Mohan's capital. The business is getting various assets and, therefore, the assets accounts have been debited. The business creates certain liabilities in the form of creditors, bank overdraft, and, therefore, these accounts have been credited. Mohan's Account i.e., his Capital Account has been credited by the balance since it represents the capital brought in by him. Illustration 3.4. Journalise the following transactions. Also state the nature of each account involved in the Journal entry 1. Dec. 1. 2000, Ajit started business with Cash Rs 40,000. 2. Dec. 3, he paid into the Bank Rs 2.000. 3. Dec. 5, he purchased goods for cash Rs 15,000. 4. Dec. 8, he sold goods for cash Rs 6,000 5. Dec. 10, he purchased furniture and paid by cheque Rs 5,000. 6. Dec. 12, he sold goods to Arvind Rs 4,000. 7. Dec. 14. he purchased goods from Amrit Rs 10,000. 8. Dec. 15, he returned goods to Amrit Rs 5,000 9. Dec. 16, he received from Arvind Rs 3.960 in full settlement. 10. Dec. 18. he withdrew goods for personal use Rs 1,000. 11. Dec. 20, he withdrew cash from business for personal use Rs 2.000. 12. Dec. 24, he paid telephone charges Rs. 1,000. 13. Dec. 26. cash paid to Amrit in full settlement Rs 4.900. 14. Dec. 31. paid for stationary Rs 200. rent Rs 500 and salaries to staff Rs 2.000. 15. Dec. 31. goods distributed by way of free samples Rs 1,000