Project for Practice - Capital Investment - Date:01/04/2021-Trading Business - Proprietorship Firm - M/s. R S Food Products

Financial Books of Account using both Manual/Pen and Paper & Digital/Electronic mode for Capital Introduced/Investment of a Proprietorship Business.

When a person decides to start business for fulfilling the needs of his/her social responsibilities, think about different parts of business. In the major parts of business, maintaining Books of Account is an important part.

So, in the very first/beginning let's come to discuss about Accounting treatment for Capital Investment/introduced in Financial Record Books of a Proprietorship business.

In this matter one can follow the below mentioned Project of a Proprietorship Business.

Name of the Business Owner/Proprietor - Mr. Rohit Sharma

Trade Name - M/s. R S Food Products

Address : Bhubaneswar, Odisha, India - 751001

GSTIN - 21ODISH5132A1ZK

Nature of Business - Whole Sale and Retail Sale of Edible Oil/Cooking Oil.

Financial Year : 2021-22(from date 01/04/2021 to 31/03/2022)

Business Commencement/starting date - 01/04/2021

(All the GSTINs,Name of the Sundry Creditors and Sundry Debtors mentioned in this Project are used only for educational purpose).

Date of Transaction : 01/04/2021

Mr.Rohit Sharma introduced/invested ₹10,00,000/- by Cash and ₹4,50,000/- by Indian Bank Savings Account No- 00000006350 to start his business.

Practical procedure to record the above transaction.

Let's us go with a step by step systematic procedure to record this transaction in Books of Account.

Step - 1

In first step, one have to decide Debit and Credit Ledgers involved in this transaction.

In the above transaction,

Debit Ledgers are : 

• Cash A/c

• Indian Bank SB A/c No - 6350

Credit Ledger is :

• Proprietor's Capital A/c

see the post : Decision making for Debiting and Crediting of Account/Account Head for more details.

Step - 2

Preparation of supporting documents which can give the details of transaction.

Prepare a Credit Voucher as mentioned below

Step - 3

In case of Manual/pen and paper mode of Book Keeping

Recording and posting of transaction from the above Credit Voucher into their respective Books of Account and Ledger Accounts.

Related Books of Account and Ledger Accounts for this transaction.

• Journal Book/Journal Register

• Cash Book : Cash A/c
  

• Bank Book : Indian Bank SB A/c No-6350

• General Ledger Book : Proprietor's Capital A/c
  

Procedure to Record/post this transaction into the above mentioned Books of Account.

Entry in Journal Book/Journal Register as mentioned in the format below.

Write :

• Date of transaction in Date column.

• Cash A/c in Particulars column.

• 'Dr.' at the right hand side of  Cash A/c.

• Cash amount in Debit amount column for ₹10,00,000/-.
  

• Indian Bank SB A/c No-6350 just below to the Cash A/c in Particulars column.
  

• 'Dr.' right to the Indian Bank SB A/c No-6350.

• Indian Bank SB A/c No-6350 amount in Debit amount column for ₹4,50,000/-

• Proprietor's Capital A/c in Particulars column just below to the Indian Bank SB A/c No-6350 by leaving some blank space with prefix 'To'.

• Proprietor's Capital A/c amount in Credit amount column for ₹14,50,000/-(i.e Cash A/c ₹10,00,000/- +  Indian Bank SB A/c No-6350 ₹4,50,000/-).

• Narration just below to the Proprietor's Capital A/c in Particulars column.
  

• Folio numbers after entering the transaction into their respective Ledger Accounts.

Entry in Cash Book as mentioned in the format below :

Opening Cash Balance is 'zero/nil' because it is a newly setup business.

Writing/mentioning Opening Cash Balance is not mandatory for newly setup business. One may or may not write Opening Cash Balance.

Write on the Receipts Side as mentioned below.

• Date of transaction in Date Column.
  

• Proprietor's Capital A/c using prefix 'To' in Particulars column.

• Amount ₹10,00,000/- in amount column.

• Narration just below the Proprietor's Capital A/c in Particulars column.
  

• Folio numbers after entering the transaction into their respective Ledger Accounts. 

Entry in Bank Book(Indian Bank SB A/c No-6350) as mentioned in the format below :

In case of initial capital investment through Bank Account in a newly setup business, writing/mentioning Opening Balance is not mandatory. Because Opening Bank Balance is 'zero/nil'. One may or may not write Opening Balance. The amount of Bank Balance is the inward/investment money for the newly setup business though Bank Account has balance on that date.

Write on the Receipts Side as mentioned below.

• Date of transaction in Date Column.
  

• Proprietor's Capital A/c using prefix 'To' in Particulars column.

• Amount ₹4,50,000/- in amount column.

• Narration just below to the Proprietor's Capital A/c in Particulars column.
  

• Folio numbers after entering the transaction into their respective Ledger Accounts.   

Entry in Ledger Account of : Proprietor's Capital A/c.

Write :

• Date of transaction in Date Column.

• Cash A/c in Particulars column using prefix 'By'.

• Amount of investment by Cash for ₹10,00,000/- in Credit amount column.

• Narration just below the Cash A/c in Particulars column.

• Indian Bank SB A/c No-6350 in Particulars column using prefix 'By'.

• Amount of investment by Indian Bank SB A/c No-6350 for ₹4,50,000/- in Credit amount column.

• Narration just below the Indian Bank SB A/c No-6350 A/c in Particulars column.

• Folio numbers after entering the transaction into their respective Ledger Accounts.
  

Now the transaction recording phase is complete.

In case of Digital/Electronic mode of Book Keeping

Let's know about the procedure to pass the above mentioned Accounting Entry using Accounting Software TallyPrime.

• Open TallyPrime.

• Select Create Company.

• Press Enter.
  

• Fill Name and Address of the Company/Business with other details.

• Press Yes/Enter to Accept.

• Message shows 'Company created successfully'

To setup more features, 

• Press back space.

• Select 'Yes' on Show more features
  

To fill GST Profile details of the Business,

• Select 'Yes' on Enable Good and Services Tax(GST).

• Fill GST profile details and Press Accept.

Accept after all the setup as per your need for

• Accounting

• Inventory

• Taxation

• Online Access

• Others etc

• Press Accept/Enter.

• Select and Press Enter on 'Create'.

•  Select and Press Enter on 'Ledger'

• Enter Name of the Ledger Account and other details.

• Name - Proprietor's Capital A/c under Capital Account

• After entry of the Ledger data Press Yes/Enter to Accept.

 Create Ledger Account - Indian Bank SB A/c No-6350 under Bank Accounts.

No need to create Cash Ledger Account. Because in TallyPrime Accounting Software Cash Account is a default Ledger Account.

Now it's the time for Voucher Entry.

• Select and Press Enter on Vouchers.

• Press 'F6' or click on 'F6:Receipt' at the right hand side Menu Bar.

• Press 'F2' or click on 'F2:Date' at the right hand side Menu Bar to enter Voucher Date.

• Press 'Enter'.
  

• Select and press 'Enter' on Proprietor's Capital A/c for ₹14,50,000/- where 'To/Cr' shows.

• Select and press 'Enter' on Cash for ₹10,00,000/- where 'By/Dr' shows.

• Select and press 'Enter' on Indian Bank SB A/c No-6350 for ₹4,50,000/- where 'By/Dr' shows.

• Write Narration for this transaction and press Yes/Enter to Accept.

Now the Voucher Entry of Capital Introduced/investment is complete.

Place of these three Ledger Accounts mentioned above in Financial Record and Statements :

Cash A/c

• Cash Book

• Balance Sheet - Assets side - Current Assets - Cash in Hand

Indian Bank SB A/c No-6350

• Bank Book

• Balance Sheet - Assets side - Current Assets - Cash at Bank

Proprietor's Capital A/c

• General Ledger

• Balance Sheet - Liabilities side - Capital Account.

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Transaction Summary