Recording of Transactions

Double entry
•
It this system every business transaction is
having a two fold effect of benefits giving and
benefit receiving aspects.

•
Double Entry is an accounting system that
records the effects of transactions and other
events in at least two accounts with equal
debits and credits.

•
Assets = Liabilities + Capital
Accounting Cycle

Identification

Analysis &
FINAL Interpretation Recording
JOURN
A/C’s AL

Summarizing Classifying

TRIAL
BALANC LEDGER
E
What is a Voucher
•
Voucher is a very primary accounting record which shows
the authenticity of the transactions. In business so many
transactions take place. To record any transaction in
account books, first of all a voucher is prepared by the
accountant. Therefore, we call the vouchers as the base of
the accounting system.
•
Voucher is prepared by the accountant with the help of
source document. Source document means any proof
relating to the business transactions. These documents
include:- bills, cash memos, receipts, bank deposit slips,
cheque book counter foils, challans and other details
which show the happening of any transaction in a
business firm.

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The Performa of a voucher
1. Type of Voucher
2. Date of Voucher
3. Debit Column
4. Credit Column
5. Amount in figures and words.
6. Total Column
7. Particulars column in which brief description of the
transaction is being mentioned
8. Signature of accountant
9. Signature of Manager or other authorized person.
10. In Case of Bank Payment Voucher or Cash Payment
Voucher, signature of receivers is also shown.
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 Types of vouchers
1. Cash Payment voucher
2. Bank Payment Voucher or Cheque Payment Voucher
3. Cash Receipt Voucher
4. Bank Receipt Voucher or Cheque receipt voucher
5. Contra Voucher
6. Purchase Voucher
7. Sales Voucher
8. Journal Voucher
9. Sales Return Voucher
10. Purchase Return Voucher

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Types of accounts
•
Transactions relating to persons. (PERSONAL
ACCOUNT)

•
Transactions relating to properties and assets
(REAL ACCOUNT)

•
Transactions relating to incomes and
expenses.(NOMINAL ACCOUNT)
Rules of accounts
•
Personal Account
»
Debit the receiver & Credit the giver

•
Real Account

»
Debit what comes in & credit what goes out

•
Nominal account

»
Debit all expenses and losses & credit all incomes and
gains
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Format of journal

Date Particular L.F. Debit Credit

Rs. Rs.
Question 1
1. Shri ganesh started business with cash Rs. 50000
2. Purchased goods Rs. 5000
3. Purchased goods for cash Rs 10000
4. Purchased goods for Mr. Sun for cash Rs 15000
5. Sold goods Rs 6000
6. Sold goods for cash 12000
7. Sold goods to Mr. sky for cash Rs 18000
8. Purchased goods from Mr. Moon Rs.10000
9. Purchased goods from Mr. Star on credit Rs.20000
10. Sold goods to Mr. sea 12500
11. Sold goods to Mr. ocean on credit 25000
12. Mr sea returned goods 2500
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Question 1
1. Returned goods to Mr. moon Rs 2000
2. Received from Mr. Sea 9900, allowed him discount 100
3. Paid Mr. moon 7880, discount allowed by him 120
4. Withdrew for personal use 1000
5. Withdrew goods for private use (cost Rs 500, selling price
Rs.600)
6. Paid salary to Mr. sevakram an employee 500
7. Paid rent to Mr. Estate , landlord Rs 500

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Question 2
•
Paid Rs 490 to ram in full settlement of his account of Rs
500
•
Received Rs 400 from Shyam in full settlement of his
account of Rs 500
•
Withdrew cash for personal use Rs 2000
•
Withdrew goods for personal use worth Rs 5000
•
Withdrew goods for distributing as free samples Rs2500
•
Goods lost by fire Rs 1000
•
Goods lost by theft Rs 1500

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Opening Entry

•
A journal entry by means of which the
balances of various assets, liabilities and
capital appearing in the balance sheet of
previous accounting period are brought
forward in the books of the current accounting
period, is known as “opening entry”

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Method of recording an opening
entry
•
While passing an opening entry, all assets accounts
(individually) are debited and all liabilities account
(individually) are credited and net worth (i.e. excess of
assets over liabilities) is credited to proprietors capital
account.
Assets Dr
To Liabilities
•
Dr and Cr side both should be equal
•
If DR > CR the remaining amount will get t/f to capital
account
•
If CR > DR the remaining balance get t/f to goodwill
account

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Question
•
Pass the opening entry in the journal of ram
•
Cash in hand 1000
•
Cash at bank 5000
•
Stock 20000
•
Land and building 100000
•
Plant and machinery 50000
•
Furniture and fixtures 25000
•
Owings from X ltd. 12500
•
Prepaid insurance 500
•
Interest received in advance 250
•
Loans from Y ltd 10000
•
Owing to Z ltd. 3750

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 Cash in hand A/ C Dr 1000
Cash at bank A/c Dr 5000
Stock A/c Dr 20000
Land and building A/C dr 100000
Plant and machinery A/c Dr 50000
Furniture and fixtures A/c Dr 25000
Owings from X ltd. A/c dr 12500
Prepaid insurance A/C Dr 500

To Interest received in advance 250

To Loans from Y ltd 10000
To Owing to Z ltd. 3750
To Capital A/c (Balance) 200000
214000 214000
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Format of ledger

Dr. Account Title Cr.

Date Particulars J.F. Amount Date Particulars J.F. Amount

The process of transferring of debits and

credits entries from the journal to the
ledger is called ledger posting
Balancing of ledger
•
It means to make the total of amounts column
appearing on the debit and credit side equal to
each other.

•
If the total of debit side is greater than the
credit side, the difference between the two
sides is known as debit balance and likewise,
if total of credit side is greater, the difference
is known as credit balance.
Journalize the following transactions in the books of S &
Co.

1998 Rs.
June 1 Started business with a capital of
60,000
June 2 Paid into bank
30,000
June 4 Purchased goods from Kamal on credit
10,000
June 6 Paid to Shiram
4,920
June 6 Discount allowed by him 80
June 8 Cash Sales
20,000
June 12 Sold to Hameed 5,000
June 15 Purchased goods from Bharat on credit 7,500
June 18 Paid Salaries 4,000
June 20 Received from Prem 2,480
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Trial balance
•
Trial balance is a statement prepared with the balances or
total of debits and credits of all the accounts in the ledger
to test the arithmetical accuracy of the ledger accounts.

•
If the total of the debit and credit amount columns of the
trail balance are equal, it is assumed that the posting to
the ledger in terms of debit and credit amounts is
accurate.

•
The agreement of a trail balance ensure arithmetical
accuracy only.

•
A concern can prepare trail balance at any time, but its
preparation as on the closing date of an accounting year is
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S. no. Particulars Debit / Credit

1 Capital CR

2 Cash DR

3 Assets DR

4 Liability CR

5 Expenses / Losses DR

6 Income / Gains CR

7 Debtors DR

8 Creditors CR

9 Purchase DR

10 Sales CR

11 Purchase return CR

12 Sales Return DR
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