Page 115 - Office Practice and Accounting -9

On the basis of nature of transactions: This method is known as modern rule. Increase
or decrease in the value of transactions, record is maintained under this method.
Increase in Assets, Losses and Expenses – Debit

Decrease in Assets, Losses and Expenses – Credit
Increase in Capital, Income and Liabilities – Credit
Decrease in Capital, Income and Liabilities – Debit

Journal preparation and explanation of frequently occurring financial
transactions

Investment of Capital
Commenced a business with cash Rs. 80000 and computer of Rs. 20,000

Date Particulars LF Dr (Rs.) Cr (Rs.)
Cash A/c..................... Dr. 80,000
Machinery A/c Dr. 20000
To Capital A/c 100000
(Being Business started with
cash and computer )

While investing different assets in business, all assets are debited and the sum of all
assets are credited as capital.
As per the rule of real account, debit what comes in, Cash and Machinery are debited
because these assets are coming in business. And the capital account is credited
because capital being proprietor’s personal account, it is credited as per the rule of
personal account.

Interest on Capital
Provide interest on capital Rs. 3000

Date Particulars LF Dr (Rs.) Cr (Rs.)
Interest on capital A/c............Dr. 3,000
To capital A/c 3,000
(Being interest provided on
capital)

Here interest is expenses for the business firm. So, interest on capital account is
debited and interest increases the amount of capital and capital is credited.

Office Practice and Accounting 9 111