• Transactions are in between the Real A/c and Personal A/c:

This type of the transaction is mainly governed by one important principle that future relationship. It major focus on the maintenance of future relationship among the parties involved, till the realization of the transaction is over.
Goods sold to Gopal Rs.15,000.
Meaning: The goods were sold on credit to Gopal amounted Rs.15,000.
First, what are the various A/cs involved in the transaction ?
There are two different A/cs viz Real A/c and Personal A/c
How Real A/c and Personal A/c are considered for journalizing the entries?

During the sales, irrespective of nature, Goods are moving out of the firm, which finally will reach the individual Gopal. The goods, which are sold out to Gopal led to movement of goods out of the firm. Any movement of asset should be referred only to the tune of Real A/c. The goods which are going out of the firm could be recorded as transaction under the Real A/c i.e."Credit what goes out". While recording the transaction, it should not be entered as Goods A/c, Why ? Instead of recording as Goods A/c, which are going out of the firm should be mentioned only with reason of going out. The reason for goods going out of the firm is only due to sales; has to registered in the books of accounts at the time of entering the journal entries.

The second account which gets affected is the personal A/c of representations. The goods sold out on credit led to register the receiver of goods who has not paid at the moment of sale. Gopal is the individual received the goods on credit during the sales expected to make the payment as per the terms of credit period. Till the maturity of the credit period agreed, the firm should wait and collect the amount from the individual who is nothing but the receiver of goods.


Next step is to record the journal entry
Gopal A/c Dr Rs.15,000
To Sales A/c Cr Rs.15,000
(Being goods sold on credit to Gopal)

  • Transaction in between the Real A/c and Nominal A/c
  • Office Rent paid Rs.10,000

What are the two different accounts involved in the above illustrated transaction?
First one is the Rent A/c and another is Cash A/c only due to cash payment at the moment of making the payment of rent.
What is the nature of Rent A/c?
The Rent which is paid to the owner is an expense out of the benefits derived out of the asset during the previous month. In accordance with the Nominal A/c all the expenses are to be recorded, i.e. "Debit all the expenses and losses."
The second is in relevance with the cash payment which finally led to the movement of cash resources from the firm to the owner of the Asset. This mobility of the assets leads to movement - out which in connection with the Real A/c is the account for the assets.


Illustration 1

Pass the following various journal entries.

  1. Jan 1, 2006 Mr. Sundar has started business with a capital of Rs 50,000
  2. Jan 2,2006 Goods purchased Rs 10,000
  3. Jan 5, 2006 Goods sold Rs 5,000
  4. Jan 10, 2006 Goods purchased from Mittal & Co Rs 10,000
  5. Jan 11, 2006 Goods sold to Ganesh & Co Rs 10,000
  6. Jan 12,2006 Goods returned to Mittal & Co Rs 1,500
  7. Jan 20,2006 Goods returned from Ganesh Rs 2,000
  8. Jan 31,2006 Office Rent paid Rs 500
  9. Feb 2,2006 Interim Cash Dividend paid Rs 3000
  10. Feb 8, 2006 Cash withdrawn from bank Rs 2,000

various journal entries.

various journal entries.

Classification of transactions is being done only on the basis of preparing the ledger accounts. The accounts are classified on the basis of nature and characteristics.
How the account transactions are classified ?
The accounts are classified through the preparation of ledger.

What is meant by Ledger?

Ledger is nothing but preliminary book of accounting transactions at which, each account is separately maintained through the allotment of various pages for exclusive recording. The exclusive allotment of pages for every account to finalize their balances. Finally, ledger can be understood that is a document of grouping the transactions under one heading .
It is a fundamental book of accounts which mainly highlights the status of the accounts.

Example: Plant & Machinery’s ledger A/c should reveal the transactions of the sale & purchase of the plant and machinery.
How the transactions are recorded in the ledger ?

The journal entries which are recorded nothing but posting of the entries in the ledger book of accounts. Posting / entering the journal entries are routinely carried out immediately after the transactions.
Prior to discuss the posting of journal entries into the ledger accounts, every body should know the contents of the ledger. The ledger is segmented into two different categories.

Proforma of the Ledger Account Financial Account

Proforma of the Ledger Account Financial Account

Journal entries are divided into two categories viz

  1. Debit item of the transaction
  2. Credit item of the transaction

Once the journal entries are identified for classification, the entries should be recorded in accordance with the date order of the transactions in the respective pages.
While recording a transaction, normally a journal entry has got an impact on two or even three different accounts.


It is a process of recording the transactions under one group from the early process of journalizing. Without journalizing, ledgering is not meaningful. The process of ledgering involves with various steps. The process commences from only at the completion of journalizing and ends at the end of balancing of journal accounts.


Next step is to Balance the individual Ledger A/c:
How to balance the ledger A/c?
The individual ledger A/c may have more than two transactions during the specified period.

  • The first step is to find out the totals of debit and credit side of the ledger account.
  • The second step is to compare the totals of the two different sides
  • The third step is to find out the total of which side is greater over the other
  • The fourth step is to identify the difference among the two different side balances
  • i.e., debit and credit side totals.
  • The fifth step is most important step which balances the difference on the total of the side which bears lesser total over the greater.
  • If the balance of the debit side of the ledger is more than the credit side of the ledger is called as Debit balance ledger and vice versa in the case of Credit balance ledger
  • The closing balance of one ledger account will become automatically a opening balance of the same ledger account for next accounting period.

Post the journal entries into respective ledger accounts. And list out their accounting balances.

journal entries into respective ledger accounts

journal entries into respective ledger accounts

List out the various accounts which are involved in the enterprise during the year?

  1. Cash Account
  2. Sundar Capital Account
  3. Purchase Account
  4. Sales Account
  5. Mittal & Co Account
  6. Ganesh & Co Account
  7. Sales Return Account
  8. Purchase Return Account
  9. Office Rent Account
  10. Interim Dividend Account
  11. Bank Account

cash-accountcash-accountcash-accountGanesh and co accountInterim dividend amount

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