Important Points to Remember in Recording of Transactions

Recording of Transactions is important to identify and analyze the business transactions in accounting. It helps to record, classify and summarize their effects and to communicate with other users. The chapter focuses on the steps involved in the accounting process.

The chapter mainly discusses about the following objectives:

  • To describe the nature of transaction and source documents
  • To explain the preparation of accounting vouchers
  • To apply accounting equation to explain the effect of transactions
  • To record transactions using rules of debit and credit
  • To explain the importance of recording of transactions in journal
  • To explain the posting of journal entries to the ledger accounts

The first step is to identify the transaction to be recorded and to prepare the source documents which are in turn to be recorded in basic book of original entry called journal. These are later posted to individual accounts in the principal book called the ledger. The CBSE Class 11 Accountancy Part 1 focuses on:

Business Transactions ans Source document: Business transactions are recorded using documents like Cash memo, sales bill, invoice, cheque, salary slip, etc. In case these source documents are not produced, a cash voucher can be prepared. Accounting vouchers are to be prepared and are classified as cash vouchers, debit vouchers, journal vouchers, and credit vouchers etc. These are to be preserved until auditing. An accounting voucher must contain following elements:

  1. I) Must be written in a good quality paper
  2. II) Name of the firm must be printed atop of paper

III) The number of voucher must follow serial numbers

  1. IV) Debit and Credit amount has to be written in figures against the amount
  2. V) The name and signature of the authorized person are mentioned on the voucher.

Accounting Equation: This signifies the assets of a business are equal to the total of its liabilities and capital. Since, it describes the fundamental relationship among the components of a balance sheet, it is often referred to as the Balance Sheet Equation.

Using Debit and Credit: The debit and credit transactions are recorded in accounting and it must follow that the total amount debited must be equal to total amount credited.

Books of Original Entry: The book in which the transaction is recorded for the first time is called journal or book of original entry. This provides complete record of each transaction in one place and provides the linkage between debit and credit transactions. A Journal is subdivided as:

  1. I) Journal Paper
  2. II) Cash Book

III) Other day books like Purchases book, Sales book, Bills receivable book, Bills payable book, etc.

The ledger: This is considered as the principal book in the accounting system. It contains different accounts where transactions relating to that account are recorded. The ledger accounts can be classified as assets, capital, liabilities, revenues and expensive losses. All these can be further classified as permanent accounts and temporary accounts.

Posting from Journal: This is the process of transferring the entries from the journals to the ledger.

From the NCERT Class XI Recording of Transactions- 1, one has to remember these important references:

  • Meaning of source documents
  • Meaning of accounting equation ( Balance Sheet Equation)
  • Rules of Debit and Credit
  • Books of Original Entry
  • Ledger

Leave a Reply

Your email address will not be published. Required fields are marked *