Applicability of Rules of Debit & Credit in Railway Transactions
By M Nageswara Rao, 9492432160
Accounting
“The art of recording, classifying and summarizing in a significant manner and in terms of money transactions and events which are, in part at least, of a financial character, and interpreting the results thereof”
The above definition in detail:
Recording of the Journal entries
Classifying the transactions as Revenue & Capital and different Heads in Ledger
Summarising the Accounts in a significant manner i.e., Trading Account, Profit & Loss Account, Balance Sheet.
Transactions and events of financial nature only. That means events of promotion of an Executive, clash between Directors cannot be recorded.
Interpreting the results i.e., various ratios and information to various stakeholders.
Luca Pacioli:
Golden Rules of Accounting
Personal Account Rule -Debit the receiver.Credit the Giver.
Real Account Rule - Debit what comes in. Credit what goes out.
Nominal Account Rule - Debit all the expenses & losses. Credit all the incomes & gains
Type | Examples | Debit Rule | Credit Rule |
Personal Account | Natural persons like Raja A/c, Krishna A/c. Artificial persons like Partnership firms, companies etc. Representative Personal A/c like Prepaid expenses, Outstanding expenses | Receiver | Giver |
Real Account | Tangible Properties like Buildings, Machinery, Inventory, Cash etc. Intangible properties like Goodwill, Patents, Copyrights etc | What comes in | What goes out |
Nominal Account | Expenses like Salaries, Office expenses, Rent, Commission paid, Interest paid. Incomes like Commission received, Interest received etc | All expenses & Losses | All incomes & gains |
Example 1
Mr Krishna Started business with Rs. 5000 |
Accounts involved | Capital ( Krishna A/c) | Cash |
Type of A/c | Personal | Real |
Rule of the Account | Debit the Receiver Credit the Giver | Debit what comes in Credit what goes out |
Debit or Credit | Credit | Debit |
Journal Entry | Cash A/c Dr Rs.5000 To Capital A/c Rs.5000 (Being the Capital provided by the Proprietor) |
Example 2
Withdrew Rs. 1000 from Bank for personal use of Proprietor |
Accounts involved | Bank | Drawings (Proprietor) |
Type of A/c | Personal A/c | Personal |
Rule of the Account | Debit the Receiver Credit the giver | Debit the receiver Credit the giver |
Debit or Credit | Credit | Debit |
Journal Entry | Drawings A/c Dr 1000 To Bank A/c Rs. 1000 (Being the amount withdrew for personal use Of proprietor) |
Example 3
Paid Salary Rs. 5000 to Mr Krishna |
Accounts involved | Salaries | Cash |
Type of A/c | Nominal | Real |
Rule of the Account | Debit all the expenses & Losses Credit all the Incomes & gains | Debit what comes in Credit what goes out |
Debit or Credit | Debit | Credit |
Journal Entry | Salaries A/c Dr Rs. 5000 To Cash A/c Rs.5000 (Being the salary paid to Mr Krishna) |
Example 4
Sold goods for Cash Rs. 300 |
Accounts involved | Goods (Sales) | Cash |
Type of A/c | Real | Real |
Rule of the Account | Debit what comes in Credit what goes out | Debit what comes in Credit what goes out |
Debit or Credit | Credit | Debit |
Journal Entry | Cash A/c Dr Rs. 300 To Sales Rs. 300 (Being Cash sales) |
Now Check Railway Transactions:
Example 1
Paid the Salary of PFA Office Staff Shri Venkat – Rs. 50,000 |
Accounts involved | Salaries (erstwhile DN 03) | Bank (Cheques& Bills) |
Type of A/c | Nominal | Real |
Rule of the Account | Debit all Expenses & Losses Credit all Incomes & gains | Debit what comes in Credit What goes out |
Debit or Credit | Debit | Credit |
Journal Entry | Erstwhile Demand No. 03 A/c Dr Rs.50,000 To Cheques& Bills A/c Rs. 50,000 (Being paid the Salaries of Accounts Staff) |
Note: Here, Venkat A/c is not recorded. Because the Railways pays salary to him in lieu of his services. If venkat A/c is entered in records, He is supposed to repay the salary to Railways.
Example 2
Paid HBA to Staff Shri Venkat – Rs. 50,0000 |
Accounts involved | HBA / Venkat | Bank (Cheques& Bills) |
Type of A/c | Personal | Real |
Rule of the Account | Debit the Receiver Credit the Giver | Debit what comes in Credit What goes out |
Debit or Credit | Debit | Credit |
Journal Entry | HBA (Venkat) A/c Dr Rs.500,000 To Cheques & Bills A/c Rs. 500,000 (Being paid the HBA to StaffShriVenkat) |
Example 3
Cash Received in Station Booking Office in respect of Passenger Earnings – Rs. 500 |
Accounts involved | Passenger Earnings (Abstract X) | Cash (Remittance Into Bank) |
Type of A/c | Nominal | Real |
Rule of the Account | Debit all Expenses & Losses Credit all Incomes & gains | Debit what comes in Credit What goes out |
Debit or Credit | Credit | Debit |
Journal Entry | Remittance Into Bank A/c Dr Rs.500 To Abstract X A/c Rs.500 (Being accounted the Passenger Earnings) |
Example 4
Shortage of Stock noticed during physical verification of ASV – Rs.1000 |
Accounts involved | Stock Adjustment | Stores in Stock |
Type of A/c | Nominal | Real |
Rule of the Account | Debit all Expenses & Losses Credit all Incomes & Gains | Debit what comes in Credit what goes out |
Debit or Credit | Debit | Credit |
Journal Entry | Stock Adjustment A/c Dr Rs.1000 To Stores in Stock A/c Rs. 1000 (Being loss of stock accounted into the SA A/c) |
Example 5
Raised Bill on MrGovind for Rent charges of Railway Building - Rs. 500 |
Accounts involved | Demands Recoverable / Debtors | Sundry Earnings / Income |
Type of A/c | Personal | Nominal |
Rule of the Account | Debit the Receiver Credit the Giver | Debit all expenses & losses Credit all incomes & gains |
Debit or Credit | Debit | Credit |
Journal Entry | Demands Recoverable A/c (Mr Govind) Dr Rs.500 To Abstract Z Earnings A/c Rs. 500 (Being the Rent charges due from MrGovind ) |
Example 6
On Receipt of Rent on Railway Buildings from Mr Govind – Rs. 500 |
Accounts involved | Demands Recoverable / Govind | Cash |
Type of A/c | Personal | Real |
Rule of the Account | Debit the Receiver Credit the Giver | Debit What comes in Credit What goes out |
Debit or Credit | Credit | Debit |
Journal Entry | Remittance Into Bank A/c DrRs. 500 To Demands Recoverable (Govind) A/c Rs. 500 (Being the receipt of Rent charges from MrGovind) |
Contra JV – Journal Voucher
Transaction: On 01.01.2021, Clearance of WMS duly debiting the POH of Coaches – Rs.1000
Involved: Revenue JV and Capital JV
Revenue JV
Date | Particulars | Debit |
| Date | Particulars | Credit |
01.01.2021 | Erstwhile Demand No 06 (POH of Coaches) | 1000 |
| 01.01.2021 | Transfer Capital (00878291) | 1000 |
Capital JV
Date | Particulars | Debit |
| Date | Particulars | Credit |
01.01.2021 | Transfer Revenue (00878292) | 1000 |
| 01.01.2021 | WMS | 1000 |
|
| Transfer (008782) |
|
| Debit | Credit |
01.01.2021 | Transfer Capital (91) |
| 1000 |
01.01.2021 | Transfer Revenue (92) | 1000 |
|
| Total | 1000 | 1000 |
Note:
1. Minus transactions not allowed in the Heads Transfer Capital and Transfer Revenue.
2. By nullifying Transfer Railways – One Debit and One Credit, the net journal entry recorded in Books is
Erstwhile Demand No.06 A/c Dr 1000
To WMS A/c 1000
(Being clearance of WMS duly charging to Demand NO.06)
Debit and Minus Credit
Minus Credit:
When an employee goes on transfer, one unit transfers the Civil Grant of an employee to another unit.
In this case, Minus Debit is operated in the Journal entries instead of Credit. The object is to avoid budgeting effect. Let's check the transactions
Example: Unit 'A' transfer the HBA Debit balance Rs.1,00,000/- of employee X to Unit 'B' on his transfer.
Journal entry in the books of Outward Unit 'A':
Credit - HBA head - Rs. 1,00,000
Minus Credit - Transfer Divisional Unit 'B' - Rs. 1,00,000
(Transferring employee X's HBA Debit balance Rs. 1,00,000 to unit B)
Journal entry in the books of Inward Unit 'B'
Credit - Transfer Divisional Unit 'A' - Rs. 1,00,000
Minus Credit - HBA head - Rs. 1,00,000
(Accepting the Debit balance of HBA of Mr X in his books)
Some More examples of operation of Minus Debit and Minus Credit
Clearance of Cheques & Bills - Minus Credit
Clearance of Remittance Into Bank - Minus Debit
Intra Railway Transfer Transactions among Divisions in a Zonal Railway - Transfer Divisional head operated - Minus Debit and Minus Credit
***
Accounting Cycle (From Transactions to Final Accounts)
Five Stages
Transactions
Journal Entries
Ledger
Trial Balance
Final Accounts (Trading A/c, Profit & Loss A/c and Balance Sheet)
Transactions in ABC Ltd.
Started Business with Rs. 100
Cash Purchases – Rs. 50 (50 units)
Cash Sales - Rs. 60 (40 units)
Wages – Rs. 5
Salaries – Rs. 5
Furniture purchased – Rs. 20
Depreciation on Furniture – Rs. 5
Loan from Krishna – Rs. 20
Interest on Loan – Rs. 2
Adjustments: Closing Stock –Rs. 10
Journal Entries
Date | Particulars | LF | Dr | Cr |
- | Cash A/c Dr To Capital |
| 100 |
100 |
- | Purchases A/c Dr To Cash |
| 50 |
50 |
- | Cash A/c Dr To Sales |
| 60 | 60 |
- | Wages A/c Dr To cash |
| 5 |
5 |
- | Salaries A/c Dr To Cash |
| 5 |
5 |
- | Furniture A/c Dr To cash |
| 20 |
20 |
- | Depreciation A/c Dr To Furniture |
| 5 |
5 |
- | Cash A/c Dr To Krishna |
| 20 |
20 |
- | Interest A/c Dr To Cash |
| 2 |
2 |
Ledger
Capital A/c
Dr |
| Cr |
Date | Particulars | JF | Amount |
| Date | Particulars | JF | Amount |
| To Balance c/d |
| 100 |
|
| By Cash |
| 100 |
| Total |
| 100 |
|
| Total |
| 100 |
|
|
|
|
|
| By Balance b/d |
| 100 |
Cash A/c
Dr |
| Cr |
Date | Particulars | JF | Amount |
| Date | Particulars | JF | Amount |
| To Capital |
| 100 |
|
| By Purchases |
| 50 |
| To Sales |
| 60 |
|
| By Wages |
| 5 |
| To Krishna |
| 20 |
|
| By Salaries |
| 5 |
|
|
|
|
|
| By Furniture |
| 20 |
|
|
|
|
|
| By Interest |
| 2 |
|
|
|
|
|
| By Balance c/d |
| 98 |
| Total |
| 180 |
|
| Total |
| 180 |
| To Balance b/d |
| 98 |
|
|
|
|
|
Purchases A/c
Dr |
| Cr |
Date | Particulars | JF | Amount |
| Date | Particulars | JF | Amount |
| To Cash |
| 50 |
|
|
|
|
|
| Total |
| 50 |
|
|
|
|
|
Sales A/c
Dr |
| Cr |
Date | Particulars | JF | Amount |
| Date | Particulars | JF | Amount |
|
|
|
|
|
| By Cash |
| 60 |
|
|
|
|
|
| Total |
| 60 |
Wages A/c
Dr |
| Cr |
Date | Particulars | JF | Amount |
| Date | Particulars | JF | Amount |
| To cash |
| 5 |
|
|
|
|
|
| Total |
| 5 |
|
|
|
|
|
Salaries A/c
Dr |
| Cr |
Date | Particulars | JF | Amount |
| Date | Particulars | JF | Amount |
| To cash |
| 5 |
|
|
|
|
|
| Total |
| 5 |
|
|
|
|
|
Furniture A/c
Dr |
| Cr |
Date | Particulars | JF | Amount |
| Date | Particulars | JF | Amount |
| To Cash |
| 20 |
|
| By Depreciation |
| 5 |
|
|
|
|
|
| By Balance c/d |
| 15 |
| Total |
| 20 |
|
| Total |
| 20 |
| To Balance b/d |
| 15 |
|
|
|
|
|
Depreciation A/c
Dr |
| Cr |
Date | Particulars | JF | Amount |
| Date | Particulars | JF | Amount |
| To Furniture |
| 5 |
|
|
|
|
|
| Total |
| 5 |
|
|
|
|
|
Krishna A/c
Dr |
| Cr |
Date | Particulars | JF | Amount |
| Date | Particulars | JF | Amount |
| To Balance c/d |
| 20 |
|
| By Cash |
| 20 |
| Total |
| 20 |
|
| Total |
| 20 |
|
|
|
|
|
| By Balance b/d |
| 20 |
Interest A/c
Dr |
| Cr |
Date | Particulars | JF | Amount |
| Date | Particulars | JF | Amount |
| To Cash |
| 2 |
|
|
|
|
|
| Total |
| 2 |
|
|
|
|
|
Trial Balance
Trial Balance
SN | Particulars | LF | Dr | Cr |
1 | Capital |
|
| 100 |
2 | Cash |
| 98 |
|
3 | Purchases |
| 50 |
|
4 | Sales |
|
| 60 |
5 | Wages |
| 5 |
|
6 | Salaries |
| 5 |
|
7 | Furniture |
| 15 |
|
8 | Krishna |
|
| 20 |
9 | Depreciation |
| 5 |
|
10 | Interest |
| 2 |
|
| Total |
| 180 | 180 |
Final Accounts
Trading A/c of ABC ltd for the year ending______
Dr |
| Cr |
SN | Particulars |
| Amount |
| SN | Particulars |
| Amount |
| To Purchases |
| 50 |
|
| By Sales |
| 60 |
| To Wages |
| 5 |
|
| By Closing Stock |
| 10 |
| To Gross Profit (c/f to P & L A/c) |
| 15 |
|
|
|
|
|
| Total |
| 70 |
|
| Total |
| 70 |
Profit & Loss A/c of ABC Ltd for the year ending____
Dr |
| Cr |
SN | Particulars |
| Amount |
| SN | Particulars |
| Amount |
| To Salaries |
| 5 |
|
| By Gross Profit (b/d from Trading A/c) |
| 15 |
| To Depreciation |
| 5 |
|
|
|
|
|
| To Interest |
| 2 |
|
|
|
|
|
| To Net Profit (C/f to Capital) |
| 3 |
|
|
|
|
|
| Total |
| 15 |
|
| Total |
| 15 |
Balance Sheet of ABC ltd as on 31st March _____
Liabilities |
| Assets |
SN | Particulars |
| Amount |
| SN | Particulars |
| Amount |
| Capital | 100 |
|
|
| Furniture |
| 15 |
| + Net Profit | 3 | 103 |
|
| Cash |
| 98 |
| Sundry Creditors |
| 20 |
|
| Closing Stock |
| 10 |
|
|
|
|
|
|
|
|
|
| Total |
| 123 |
|
|
|
| 123 |