Accounts Classes by Karthick Balaraman

Double Column Cash Book Full Problem with Contra Entries ✍️📘One small formatting mistake can cost 2 marks in accounting exams! 😲

Purchase A/c or Inventory A/c? 🤔
Periodic Inventory System Explained with Golden & Modern Rules 🔥 Most students know the journal entry…
But very few know WHY Purchase A/c is debited instead of Inventory A/c under the Periodic Inventory System 😯👇

Periodic Inventory System 🔥
Complete Accounting Flow Chart: Transaction → Journal → Ledger → Trial Balance. Many students learn Journal Entries separately, Ledger separately, and Trial Balance separately 😓
But in accounting, everything is connected step-by-step 👇
📌 See how the Periodic Inventory System flows from:
Transaction ➡ Journal Entry ➡ Ledger A/c ➡ Trial Balance. This chart explains the complete accounting cycle under the Periodic Inventory System with simple transactions, journal entries, ledger posting, balancing, and trial balance preparation.
✔ Beginner Friendly
✔ Double Entry System
✔ Ledger Posting Explained
✔ Trial Balance Preparation
✔ Debit & Credit Rules Included
Presented by Accounts Classes by Karthick Balaraman

📝 Daily Accounting Quiz: Test Your Core Concepts! 📚 Challenge your accounts knowledge! 🧠 Can you score a perfect 5/5 on this basic accounting quiz? Most students trip up on the last question!

ACCOUNTING EQUATION Made Simple 🔥
One Transaction → Multiple Effects Explained Clearly ✅. Most students learn journal entries… But struggle to understand WHY the equation balances 🤔
Transaction: A company purchases Land for Rs.20,000 by: ✔️ Paying Cash Rs.10,000 ✔️ Signing Notes Payable Rs.10,000
Now see how ONE transaction creates MULTIPLE effects in the Accounting Equation 👇
✅ Land increases → Asset ⬆️
✅ Cash decreases → Asset ⬇️
✅ Notes Payable increases → Liability ⬆️
✅ Capital → No Effect. When students understand the equation logic, Journal Entries become much easier 🔥 Presented by
Accounts Classes by Karthick Balaraman

Periodic vs Perpetual Inventory System 🔥
One transaction → Different debit accounts 👇.

👉 “Don’t guess ❌ Apply FIFO correctly ✔️ Choose the right answer 👇”

📘 Inventory System Logic – Accounts Decide Rules (Don’t Mix ❌)
❓ Core Idea
Identify the system → accounts used → apply the correct rule
🔴 1️⃣ Periodic Inventory System
👉 Accounts Used
Purchases A/c → Nominal (Expense)
Sales A/c → Nominal (Income)
Cash / Debtors A/c
Creditors A/c
Closing Stock (only at end)
👉 Correct Journal Entries ✅
Purchase (Cash):
Purchases A/c ⬆️ Dr
To Cash A/c ⬇️
Purchase (Credit):
Purchases A/c ⬆️ Dr
To Creditors A/c ⬇️
Sales (Cash):
Cash A/c ⬆️ Dr
To Sales A/c ⬇️
Sales (Credit):
Debtors A/c ⬆️ Dr
To Sales A/c ⬇️
🧮 COGS (Calculated at End)
COGS = Opening\ Stock + Purchases - Closing\ Stock
📝 Explanation
In the periodic system, inventory is not recorded during the year. Purchases are treated as expenses and sales as income, whether cash or credit. Stock is physically counted only at the end, and COGS is calculated, not recorded during transactions. Since Inventory A/c is not maintained, we strictly follow nominal account rules, and “comes in / goes out” logic is not applicable.
📝 Closing Stock
Not recorded during year
Adjusted at end
Appears in Trading A/c & Balance Sheet
⚠️ Key Point
❌ No Inventory A/c during transactions
✔️ Only Nominal Rules
🟢 2️⃣ Perpetual Inventory System
👉 Accounts Used
Cash / Bank A/c
Debtors A/c
Creditors A/c
Sales A/c
COGS A/c
Inventory A/c
👉 Nature of Accounts
Cash / Debtors / Inventory → Real (Assets)
Creditors → Personal (Liability)
Sales → Nominal (Income)
COGS → Nominal (Expense)
👉 Correct Journal Entries ✅
Purchase (Cash):
Inventory A/c ⬆️ Dr
To Cash A/c ⬇️
Purchase (Credit):
Inventory A/c ⬆️ Dr
To Creditors A/c ⬇️
Sales (Cash):
Step 1 – Revenue:
Cash A/c ⬆️ Dr
To Sales A/c ⬇️
Step 2 – Cost:
COGS A/c ⬆️ Dr
To Inventory A/c ⬇️
Sales (Credit):
Step 1 – Revenue:
Debtors A/c ⬆️ Dr
To Sales A/c ⬇️
Step 2 – Cost:
COGS A/c ⬆️ Dr
To Inventory A/c ⬇️
🧮 COGS Logic
COGS = Cost\ of\ goods\ sold\ (recorded\ at\ each\ sale)
📝 Explanation
In the perpetual system, inventory is updated continuously. Every purchase increases inventory, and every sale reduces it immediately. For each sale (cash or credit), two entries are recorded — one for revenue and one for cost (COGS). This ensures real-time stock and profit tracking. Here, “comes in / goes out” applies only to Inventory A/c, while Sales and COGS follow nominal rules.
📝 Closing Stock
✔️ No separate calculation
✔️ Closing Stock = Balance in Inventory A/c (available anytime)
🚫 Biggest Mistake
❌ Mixing Periodic & Perpetual systems
❌ Applying wrong rule to wrong account
❌ Ignoring dual entry (especially COGS in perpetual)
🎯 Final Exam Line
Periodic → Purchases & Sales (Nominal) + COGS at End
Perpetual → Cash/Debtors + Sales + COGS + Inventory (Continuous)
💡 Concept Power Line
“Same goods…
Different system…
Different accounts…
Different rules.”
✅ Final Verdict
✔️ Identify system first
✔️ Identify accounts next
✔️ Then apply correct rule
✔️ Always show full journal entries
📢 Presented by
Accounts Classes by Karthick Balaraman