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CA FOUNDATION: ACCOUNTING · THEORETICAL FRAMEWORK AND ACCOUNTING PROCESS

Journal entries: which account to debit and credit

Modern rules: assets and expenses increase with a debit; liabilities, capital and incomes increase with a credit.

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Worked examples

Example 1 · level 1

Reddy Agro: Proprietor withdrew cash for personal use ₹8,700. Which entry is correct?

  1. Debit Expenses A/c, Credit Cash A/c
  2. Debit Drawings A/c, Credit Cash A/c
  3. Debit Cash A/c, Credit Drawings A/c
  4. Debit Capital A/c, Credit Drawings A/c
Show solution
  1. Personal withdrawals reduce the owner’s claim via Drawings (debit); cash goes out (credit).
  2. Entry: Drawings A/c Dr ₹8,700; To Cash A/c ₹8,700.

Answer: Debit Drawings A/c, Credit Cash A/c

Example 2 · level 2

Iyer Textiles: Deposited cash into the bank ₹4,200. Which entry is correct?

  1. Debit Bank A/c, Credit Sales A/c
  2. Debit Bank A/c, Credit Capital A/c
  3. Debit Bank A/c, Credit Cash A/c
  4. Debit Cash A/c, Credit Bank A/c
Show solution
  1. Bank balance increases → debit Bank; cash decreases → credit Cash (a contra entry).
  2. Entry: Bank A/c Dr ₹4,200; To Cash A/c ₹4,200.

Answer: Debit Bank A/c, Credit Cash A/c

Example 3 · level 3

Reddy Agro: Deposited cash into the bank ₹12,300. Which entry is correct?

  1. Debit Bank A/c, Credit Cash A/c
  2. Debit Bank A/c, Credit Sales A/c
  3. Debit Cash A/c, Credit Bank A/c
  4. Debit Bank A/c, Credit Capital A/c
Show solution
  1. Bank balance increases → debit Bank; cash decreases → credit Cash (a contra entry).
  2. Entry: Bank A/c Dr ₹12,300; To Cash A/c ₹12,300.

Answer: Debit Bank A/c, Credit Cash A/c

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