Real Account Journal Entry Example
Real accounts, also known as permanent accounts, include all asset, liability, and equity accounts. These accounts are not closed at the end of the accounting period and their balances are carried forward to the next period.
Scenario: Purchase of Land
A company purchases a piece of land for ₹500,000 in cash.
Recording the Purchase of Land
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Land A/c | 500,000 | |
| To Cash/Bank A/c | 500,000 | |
| (Being land purchased for cash) |
Explanation:
- Land A/c is debited to record the value of the land as a fixed asset.
- Cash/Bank A/c is credited to reflect the cash outflow for the purchase.
Scenario: Sale of Equipment
A company sells equipment with a book value of ₹150,000 for ₹180,000 in cash.
Recording the Sale of Equipment
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Cash/Bank A/c | 180,000 | |
| To Equipment A/c | 150,000 | |
| To Gain on Sale of Equipment A/c | 30,000 | |
| (Being equipment sold for cash, with gain recorded) |
Explanation:
- Cash/Bank A/c is debited to record the cash received from the sale.
- Equipment A/c is credited to remove the equipment from the books.
- Gain on Sale of Equipment A/c is credited to record the profit from the sale.
Scenario: Purchase of Building on Loan
A company purchases a building worth ₹2,000,000, partially financed by a bank loan of ₹1,500,000, with the remainder paid in cash.
Recording the Purchase of Building
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Building A/c | 2,000,000 | |
| To Bank Loan A/c | 1,500,000 | |
| To Cash/Bank A/c | 500,000 | |
| (Being building purchased, partially financed by a bank loan) |
Explanation:
- Building A/c is debited to record the value of the building as a fixed asset.
- Bank Loan A/c is credited to reflect the liability for the loan.
- Cash/Bank A/c is credited to reflect the cash outflow for the down payment.
