I85PREP
⌘ K
UPMSP Vocational Accountancy & Auditing study materials
UPMSP Vocational Accountancy & Auditing study resources

UPMSP Vocational Accountancy & Auditing: Accounting Fundamentals and Journal

UPMSP Vocational Accountancy & Auditing · Work through your exam, one topic at a time.

All guide sections

Accounting Fundamentals and Journal

What this domain tests

Accounting Fundamentals and Journal is the foundation domain: the accounting equation, classification of accounts, the rules of debit and credit, journal format with narration, and treatment of GST, trade discount, drawings and capital versus revenue expenditure. Expect short numerical entries and 'journalise the following' questions.

Core rules

  • Dual aspect: every transaction affects at least two accounts, so total debits always equal total credits.
  • Golden rules: personal - debit the receiver, credit the giver; real - debit what comes in, credit what goes out; nominal - debit expenses and losses, credit incomes and gains.
  • Journal format: date, particulars (debit account first, credit account prefixed 'To'), L.F., debit amount, credit amount, then a narration in brackets.
  • Trade discount is deducted on the invoice and never journalised; cash discount is recorded.
  • GST: input CGST/SGST/IGST is debited (a credit asset), output CGST/SGST/IGST is credited (a liability). GST itself is never an expense.
  • Capital expenditure creates an asset; revenue expenditure is charged against profit.

Worked example

(a) Commenced business with cash ₹5,00,000: Cash A/c Dr 5,00,000; To Capital A/c 5,00,000. (b) Purchased goods ₹40,000 plus CGST 9% and SGST 9%, paid in cash: Purchases A/c Dr 40,000; Input CGST Dr 3,600; Input SGST Dr 3,600; To Cash A/c 47,200. (c) Sold goods ₹60,000 plus CGST 9% and SGST 9% for cash: Cash A/c Dr 70,800; To Sales A/c 60,000; To Output CGST 5,400; To Output SGST 5,400. Reasoning: tax paid on purchases is a credit, not a cost, so it is debited separately; tax collected on sales is held for the government, so it is credited. Only ₹40,000 and ₹60,000 reach Purchases and Sales.

Traps

Deducting trade discount inside the Purchases account; charging GST to Purchases or Sales; omitting the narration; writing 'To' on the debit line; treating the owner's drawings of cash as an expense; using a wrong L.F. so the entry cannot be traced to the ledger.