illustrate different kinds of events, three more transactions have been added · Part 2

debit to Purchases account and credit to Sumit Traders account. . Goods costing Rs. , sold to Rajani Enterprises for Rs. , Analysis of transaction : This transaction increases sales (Revenue) and increases assets (Rajani Enterprises as debtors). Increases in assets are debited and increases in revenue are credited. Therefore record the entry with credit to Sales account and debit to Rajani Enterprises account. . Paid the monthly store rent Rs. , in cash Analysis of transaction : The payment of rent is an expense which decreases capital thus, are recorded as debits. Credit cash to record decrease in assets. . Paid Rs. , as salary to the office employees Analysis of transaction : The payment of salary is an expense which decreases capital thus, are recorded as debits. Credit Cash to record decrease in assets. Cash Account ( ) ( ) , , ( ) , Plant and Machinery Account ( ) , , Ramjee Lal’s Account ( ) , , Purchases Account ( ) , Sumit Traders Account ( ) , Sales Account ( ) , Rajani Enterprises Account ( ) , Rent Account ( ) , Cash Account ( ) , , ( ) , , ( ) , ( ) , . Received cheque as full payment from Rajani Enterprises and deposited same day into bank Analysis of transaction : This transaction increase assets( Bank) on the one hand and decreases assets(Rajani Enterprises as debtors) on the other hand. Increase in assets is debited whereas decrease in assets is credited. Therefore record the entry with debit to Bank account and credit to Rajani Enterprises account. Test Your Understanding - I . Double entry accounting requires that : All transactions that create debits to asset accounts must create credits to liability or capital accounts; A transaction that requires a debit to a liability account require a credit to an asset account; (iii) Every transaction must be recorded with equal debits equal total credits. . State different kinds of transactions that increase and decrease capital. . Does debit always mean increase and credit always mean decrease? . Which of the following answers properly classifies these commonly used accounts: ( ) Building ( ) Wages ( ) Credit sales ( )