Amity School of Business

Recording Of Transactions

Module II

Amity School of BusinessJournal 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. 

Amity School of Business

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.

Amity School of BusinessJournal Entries

Date Particulars Debit Credit

1 Prepaid Rent 36,000  

  To Cash   36,000

2 Equipment 80,000  

  Cash   60,000

3 Office Supplies 17,600  

  Accounts Payable   17,600

Amity School of BusinessLedger

• 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.

Amity School of BusinessLedger Account

Date Particular J.f Amt  Date Particular J.f Amt

             

             

             

             

             

Amity School of BusinessTrial 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.

Amity School of BusinessTrail Balance

Particulars Debit Credit

Cash 20,430  

Accounts Receivable 5,900  

Office Supplies 22,800  

Prepaid Rent 36,000  

Equipment 80,000  

Accounts Payable   100000

Service Revenue   110764

Wages Expense 38,200  

Miscellaneous Expense 3,470  

Electricity Expense 2,470  

Telephone Expense 1,494  

Total 210764 210764

Amity School of BusinessCash 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. 

Amity School of BusinessSingle Column Cash Book

  Date                  

 Receipts                  

L.F.  Amount     

Date   Payments           

L.F. 

Amount   

. 

Amity School of BusinessDouble 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.

Amity School of Business FormatDebit Credit

Date Particulars L.F Discount Cash Date Particulars L.F Discount Cash

                   

Amity School of BusinessTriple 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".

Amity School of BusinessFormat

Date Particulars

L.F.

Disc Cash Bank Date Particulars

L.F.

Disc Cash Bank

                       

Amity School of BusinessPetty 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.

Amity School of BusinessFormat of Petty Cash Book

Date

Particulars V.N Total PostagePrinting

and Stationary

CartageTraveling Expenses

Misc.

                 

Amity School of BusinessPurchase 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. 

Amity School of BusinessFormat of PurchaseBook

Date Particulars Inv.No. L.F. Amount

         

Amity School of BusinessSales 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.

Amity School of BusinessFormat of Sales Book

Date Particulars Inv. No. L.F. Amount