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FAQs on PPT - Recording of Transactions - Accountancy Class 11 - Commerce

1. What is the purpose of recording transactions in accounting?
Ans. The purpose of recording transactions in accounting is to maintain an accurate and complete record of all financial activities of a business. This includes documenting all income, expenses, assets, and liabilities. Recording transactions allows businesses to track their financial performance, make informed decisions, and comply with legal and regulatory requirements.
2. What are the different methods of recording transactions?
Ans. There are several methods of recording transactions in accounting. The most commonly used methods include the cash basis and accrual basis. In the cash basis, transactions are recorded when cash is received or paid. On the other hand, the accrual basis records transactions when they occur, regardless of cash flow. Other methods include the single-entry system and the double-entry system, which involve different levels of detail and complexity in recording transactions.
3. How are transactions recorded in a double-entry system?
Ans. In a double-entry system, transactions are recorded using the principles of debits and credits. Each transaction has at least two entries, with one being a debit and the other a credit. Debits represent increases in assets or expenses, and credits represent increases in liabilities, equity, or revenue. The total debits must always equal the total credits, ensuring that the accounting equation (Assets = Liabilities + Equity) remains balanced.
4. What are some common errors that can occur when recording transactions?
Ans. Common errors when recording transactions include data entry mistakes, transposition errors, omission of transactions, and incorrect classification of transactions. These errors can lead to inaccurate financial statements and misrepresentation of a company's financial position. It is important to review and reconcile transactions regularly to identify and correct any errors promptly.
5. How should transactions involving foreign currencies be recorded?
Ans. Transactions involving foreign currencies should be recorded using the appropriate exchange rates on the transaction date. The exchange rate used depends on the accounting policy adopted by the business. If the functional currency of the business is different from the reporting currency, foreign currency transactions need to be translated into the functional currency for recording purposes. This ensures that the financial statements accurately reflect the impact of foreign currency transactions on the business's financial position and performance.
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