Bank Reconciliation Statement Test - 8

Expenses which are of business should be debited to the in the books of business. Here Premises are used for personal purpose also so amount of rent whihc should be debited should be = 2/3*1500= Rs 1000., which is actually used by the buisness.

Amount of expenses spent on construction of fixed asset or to make that asset ready for  commercial use will be added to the cost of that asset . so we will debit building account with amount of expenses done for the construction of the building as it is not still ready for its commercial use.

Expenses done for the construction of a fixed assets or to make it ready for use are debited to the cost of the asset that is why building account will be debited with cost of timber and bricks cement, etc and as bank is reducing so we will credit bank account for the same.

Sundry expenses are the expenses which might not repeat in future. We may provide refreshment to the customer in future or not so that is why refresehment expenses are debited to the sundry expenses account.

Insurance co Has paid us the amt of claim accepted by them so We will debit bank account as it is increasing and loss of Rs 200 is to be borne by the firm so again it will be debited and insurance co which pays reduces their liability, therefore we will credit the insurance co account.

Cash account is Tangible real account i.e. it can be seen. Real account are assets and which can be touched and seen is real tangible assets.

According to traditional approach Debit the receiver and credit the giver for the personal account. All personal accounts under traditional appraoch ar ecovered under liabilites and capital.

According to traditional approach Real accounts are debit what comes in and credit what goes out and all accounts under real accounts comes under assets a/c under modern approach.

According to modern approach assets when increases it is debited and when decreases it is credited.

The accounts in traditional approach are divided into three categories Personal, Real and nominal and their specified rules are followed to pass the necessary Journal entry. In modern approach accounts are classified under five heads i.e. assets, liabilities, capital expenses and income.