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Describe how accounts are used to record information about the effects of transactions? - Accountancy

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Journal Entry

Describe how accounts are used to record information about the effects of transactions?

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Solution

Every transaction is recorded in the original book of entry (journal) in order of their occurrence; however, if we want to know that how much we receive from our debtors or how much to pay to the creditors, it is not possible to determine at a single movement.

Hence, we prepare accounts to know the position of business activities in the meantime.

There are some steps to record transactions in accounts; it can be easily understood with the help of an example.

Sold goods to Mr. A worth Rs 50,000 on 12th April and received payment Rs 40,000 on 25th April.

The following journal entries will be recorded:

  Particulars L.F. Debit
Amount
Credit Amount
Apr. 12 A's A/c                 ..............Dr.  22 50,000  
      To sales 18   50,000
  (Good sold on credit to Mr. A)      
         
Apr. 25 Cash A/c              ..............Dr.  13 40,000  
      To A's A/c 22   40,000
  (Cash received from Mr. A)      

Step 1- Locate the account in ledger, i.e., Mr. A’s Account.

Step 2- Enter the date of transaction in the date column of the debit side of Mr. A’s Account.

Step 3- In the ‘Particulars’ column of the debit side of Mr. A’s Account, the name of corresponding account is to be written, i.e., ‘Sales’.

Step 4- Enter the page number of the ledger in the Journal Folio (J.F.) column of Mr. A’s Account.

Step 5- Enter the amount in the ‘Amount’ column.

Step 6- Same steps are to be followed to post entries in the credit side of Mr. A’s Account.

Step 7- After entering all the transactions for a particular period, balance the account by totalling both sides and write the difference in shorter side, as ‘Balance c/d’.

Step 8- Total of account is to be written on either sides.

Concept: Recording of Transactions 1
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APPEARS IN

NCERT Accountancy Financial Accounting 1 Class 11
Chapter 3 Recording of Transactions - I
Questions for practice | Q 3 | Page 88
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