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Recording Of Transactions. Module II. Journal Entries. Analyzing transactions and recording them as journal entries is the first step in the accounting cycle. It begins at the start of an accounting period and continues during the whole period. JOURNALIZING = RECORDING
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Recording Of Transactions Module II
Journal Entries • Analyzing transactions and recording them as journal entries is the first step in the accounting cycle. It begins at the start of an accounting period and continues during the whole period. • JOURNALIZING = RECORDING • Accountants classify and record the events having economic effect via journal entries according to debit-credit rule.
Eg:- Journalise the following transaction: • An amount of Rs.36,000 was paid as advance rent for three months. • Paid Rs.60,000 cash on the purchase of equipment. • Purchased office supplies costing Rs.17,600 on account.
Ledger • The second step of accounting cycle is to post the journal entries to the ledger accounts. • The debit and credit values of journal entries are transferred to ledger accounts one by one in such a way that debit amount of a journal entry is transferred to the debit side of the relevant ledger account and the credit amount to the credit side of the relevant ledger account.
Trial Balance • A trial balance is a list of the balances of ledger accounts of a business at a specific point of time usually at the end of a period such as month, quarter or year. • In double entry accounting we record each transaction with two aspects, therefore the total of debit and credit balances of the trial balance are always equal.
Cash Book • Cash Book is a book of Original Entry, which serves the purpose of both a Journal as well as ledger for cash transactions. Since in almost all business concerns, most business transactions are cash in nature. Like cash sales, Cash Purchases, payments of expenses, receipts of incomes, there is a need for a separate book in which all such transactions can be grouped.
Double Column Cash Book • A double column cash book or two column cash book is one which consists of two separate columns on the debit side as well as credit side for recording cash and discount • Each item of discount allowed will be shown on Dr. side of the cash book. • Similarly each item of discount received will be posted to the credit side of cash book.
Triple ColumnCash Book • There are three columns on each side - debit and credit side. One is used to record cash transactions, the second is used to record bank transactions and third is used to record discount received and paid. • If an amount is entered on the debit side of the cash book, and the exact amount is again entered on the credit side of the same account, it is called "contra entry".
Petty Cash Book • In almost all businesses, it is found necessary to keep small sums of ready money with the petty cashier for the purpose of meeting small expenses such as postage, stationary and office sundries etc. • Under imprest system, a fixed sum of money is given to the petty cashier to cover the petty expenses for the month.
Purchase Book • Purchases book or purchases day book is a book of original entry maintained to record credit purchase. • Cash purchases will not be entered in purchases day book because entries in respect of cash purchases must have been entered in the cash book.
Sales Book • A sales book is also known as sales day book is a book of original entry in which we record the details of credit sales made. Total of sales book shows the total credit sales of goods during the period concerned. Usually the sales book is totaled every month. The sales day book is written up daily from the copies of invoices sent out.
