NCERT Textbook - Recording of Transactions-I | Accountancy Class 11 - Commerce PDF Download

 Page 1


46 Accountancy
LEARNING OBJECTIVES
After studying this
chapter, you will be able
to:
• describe the nature of
transaction and source
documents;
• explain the prepa-
ration of accounting
vouchers;
• apply  accounting
equation to explain the
effect of transactions;
• record  transactions
using rules of debit
and credit;
• explain  the concept of
book of original entry
and recording of
transactions in journal;
• explain the concept of
ledger and posting of
journal entries to the
ledger accounts.
I
n chapter1and2, while explaining the
development and importance of accounting as a
source of disseminating the financial information
along with the discussion on basic accounting
concepts that guide the recording of business
transactions, it has been indicated that accounting
involves a process of identifying and analysing the
business transactions, recording them, classifying
and summarising their effects and finally
communicating it to the interested users of
accounting information.
In this chapter, we will discuss the details of each
step involved in the accounting process. The first
step involves identifying the transactions to be
recorded and preparing the source documents
which are in turn recorded in the basic book of
original entry called journal and are then posted to
individual accounts in the principal book called
ledger.
3.1 Business Transactions and Source Document
After securing good percentage in your previous
examination, as promised, your father wishes to
buy you a computer. You go to the market along
with your father to buy a computer. The dealer gives
a cash memo along with the computer and in
exchange your father makes cash payment of
` 35,000. Purchase of computer for cash is an
example of a transaction, which involves reciprocal
exchange of two things: (i) payment of cash,
(ii) delivery of a computer. Hence, the transaction
Recording of Transactions-I 3
2024-25
Page 2


46 Accountancy
LEARNING OBJECTIVES
After studying this
chapter, you will be able
to:
• describe the nature of
transaction and source
documents;
• explain the prepa-
ration of accounting
vouchers;
• apply  accounting
equation to explain the
effect of transactions;
• record  transactions
using rules of debit
and credit;
• explain  the concept of
book of original entry
and recording of
transactions in journal;
• explain the concept of
ledger and posting of
journal entries to the
ledger accounts.
I
n chapter1and2, while explaining the
development and importance of accounting as a
source of disseminating the financial information
along with the discussion on basic accounting
concepts that guide the recording of business
transactions, it has been indicated that accounting
involves a process of identifying and analysing the
business transactions, recording them, classifying
and summarising their effects and finally
communicating it to the interested users of
accounting information.
In this chapter, we will discuss the details of each
step involved in the accounting process. The first
step involves identifying the transactions to be
recorded and preparing the source documents
which are in turn recorded in the basic book of
original entry called journal and are then posted to
individual accounts in the principal book called
ledger.
3.1 Business Transactions and Source Document
After securing good percentage in your previous
examination, as promised, your father wishes to
buy you a computer. You go to the market along
with your father to buy a computer. The dealer gives
a cash memo along with the computer and in
exchange your father makes cash payment of
` 35,000. Purchase of computer for cash is an
example of a transaction, which involves reciprocal
exchange of two things: (i) payment of cash,
(ii) delivery of a computer. Hence, the transaction
Recording of Transactions-I 3
2024-25
47 Recording of Transactions - I
involves this aspect, i.e. Give and Take.  Payment of cash involves give aspect
and delivery of computer is a take aspect. Thus, business transactions are
exchanges of economic consideration between parties and have two-fold effects
that are recorded in at least two accounts.
Business transactions are usually evidenced by an appropriate documents
such as Cash memo, Invoice, Sales bill, Pay-in-slip, Cheque, Salary slip, etc. A
document which provides evidence of the transactions is called the Source
Document or a Voucher. At times, there may be no documentary for certain items
as in case of petty expenses. In such case voucher may be prepared showing the
necessary details and got approved by appropriate authority within the firm. All
such documents (vouchers) are arranged in chronological order and are serially
numbered and kept in a separate file. All recording in books of account is done
on the basis of vouchers.
Transaction Voucher
Name of Firm :
Voucher No :
Date :
Debit account :
Credit account:
Amount (` ` ` ` `) :
Narration :
Authorised By : Prepared By :
Fig. 3.1 : : : : : Showing specimen transaction voucher
3.1.1 Preparation of Accounting Vouchers 3.1.1 Preparation of Accounting Vouchers 3.1.1 Preparation of Accounting Vouchers 3.1.1 Preparation of Accounting Vouchers 3.1.1 Preparation of Accounting Vouchers
Accounting vouchers may be classified as cash vouchers, debit vouchers, credit
vouchers, journal vouchers, etc. There is no set format of accounting vouchers.
A specimen of a simple transaction voucher is used in practice is shown in
figure 3.1.
These must be preserved in any case till the audit of the accounts and tax
assessments for the relevant period are completed. Now a days, accounting is
computerised and the necessary accounting vouchers showing the code
number and name of the accounts to be debited and credited are prepared for
the purpose of necessary recording of transactions. A transaction with one
debit and one credit is a simple transaction and the accounting vouchers
prepared for such transaction is known as Transaction Voucher, the format of
2024-25
Page 3


46 Accountancy
LEARNING OBJECTIVES
After studying this
chapter, you will be able
to:
• describe the nature of
transaction and source
documents;
• explain the prepa-
ration of accounting
vouchers;
• apply  accounting
equation to explain the
effect of transactions;
• record  transactions
using rules of debit
and credit;
• explain  the concept of
book of original entry
and recording of
transactions in journal;
• explain the concept of
ledger and posting of
journal entries to the
ledger accounts.
I
n chapter1and2, while explaining the
development and importance of accounting as a
source of disseminating the financial information
along with the discussion on basic accounting
concepts that guide the recording of business
transactions, it has been indicated that accounting
involves a process of identifying and analysing the
business transactions, recording them, classifying
and summarising their effects and finally
communicating it to the interested users of
accounting information.
In this chapter, we will discuss the details of each
step involved in the accounting process. The first
step involves identifying the transactions to be
recorded and preparing the source documents
which are in turn recorded in the basic book of
original entry called journal and are then posted to
individual accounts in the principal book called
ledger.
3.1 Business Transactions and Source Document
After securing good percentage in your previous
examination, as promised, your father wishes to
buy you a computer. You go to the market along
with your father to buy a computer. The dealer gives
a cash memo along with the computer and in
exchange your father makes cash payment of
` 35,000. Purchase of computer for cash is an
example of a transaction, which involves reciprocal
exchange of two things: (i) payment of cash,
(ii) delivery of a computer. Hence, the transaction
Recording of Transactions-I 3
2024-25
47 Recording of Transactions - I
involves this aspect, i.e. Give and Take.  Payment of cash involves give aspect
and delivery of computer is a take aspect. Thus, business transactions are
exchanges of economic consideration between parties and have two-fold effects
that are recorded in at least two accounts.
Business transactions are usually evidenced by an appropriate documents
such as Cash memo, Invoice, Sales bill, Pay-in-slip, Cheque, Salary slip, etc. A
document which provides evidence of the transactions is called the Source
Document or a Voucher. At times, there may be no documentary for certain items
as in case of petty expenses. In such case voucher may be prepared showing the
necessary details and got approved by appropriate authority within the firm. All
such documents (vouchers) are arranged in chronological order and are serially
numbered and kept in a separate file. All recording in books of account is done
on the basis of vouchers.
Transaction Voucher
Name of Firm :
Voucher No :
Date :
Debit account :
Credit account:
Amount (` ` ` ` `) :
Narration :
Authorised By : Prepared By :
Fig. 3.1 : : : : : Showing specimen transaction voucher
3.1.1 Preparation of Accounting Vouchers 3.1.1 Preparation of Accounting Vouchers 3.1.1 Preparation of Accounting Vouchers 3.1.1 Preparation of Accounting Vouchers 3.1.1 Preparation of Accounting Vouchers
Accounting vouchers may be classified as cash vouchers, debit vouchers, credit
vouchers, journal vouchers, etc. There is no set format of accounting vouchers.
A specimen of a simple transaction voucher is used in practice is shown in
figure 3.1.
These must be preserved in any case till the audit of the accounts and tax
assessments for the relevant period are completed. Now a days, accounting is
computerised and the necessary accounting vouchers showing the code
number and name of the accounts to be debited and credited are prepared for
the purpose of necessary recording of transactions. A transaction with one
debit and one credit is a simple transaction and the accounting vouchers
prepared for such transaction is known as Transaction Voucher, the format of
2024-25
48 Accountancy
which is shown in figure 3.1. Voucher which records a transaction that entails
multiple debits/credits and one credit/debit is called compound voucher.
Compound voucher may be: (a) Debit Voucher o7r (b) Credit Voucher; the
specimen is shown in figure 3.2.
Debit Voucher
Name of Firm :
Voucher No : Date :
Credit Account :
Amount :
Debit Accounts
S. No. Code Account Name Amount Narration (i.e. Explanation)
`
Authorised By : Prepared By :
Credit Voucher
Name of Firm :
Voucher No : Date :
Debit Account :
Amount :
Credit Accounts
S. No. Code Account Name Amount Narration (i.e. Explanation)
`
Authorised By : Prepared By :
Fig. 3.2 : Showing debit and credit vouchers
2024-25
Page 4


46 Accountancy
LEARNING OBJECTIVES
After studying this
chapter, you will be able
to:
• describe the nature of
transaction and source
documents;
• explain the prepa-
ration of accounting
vouchers;
• apply  accounting
equation to explain the
effect of transactions;
• record  transactions
using rules of debit
and credit;
• explain  the concept of
book of original entry
and recording of
transactions in journal;
• explain the concept of
ledger and posting of
journal entries to the
ledger accounts.
I
n chapter1and2, while explaining the
development and importance of accounting as a
source of disseminating the financial information
along with the discussion on basic accounting
concepts that guide the recording of business
transactions, it has been indicated that accounting
involves a process of identifying and analysing the
business transactions, recording them, classifying
and summarising their effects and finally
communicating it to the interested users of
accounting information.
In this chapter, we will discuss the details of each
step involved in the accounting process. The first
step involves identifying the transactions to be
recorded and preparing the source documents
which are in turn recorded in the basic book of
original entry called journal and are then posted to
individual accounts in the principal book called
ledger.
3.1 Business Transactions and Source Document
After securing good percentage in your previous
examination, as promised, your father wishes to
buy you a computer. You go to the market along
with your father to buy a computer. The dealer gives
a cash memo along with the computer and in
exchange your father makes cash payment of
` 35,000. Purchase of computer for cash is an
example of a transaction, which involves reciprocal
exchange of two things: (i) payment of cash,
(ii) delivery of a computer. Hence, the transaction
Recording of Transactions-I 3
2024-25
47 Recording of Transactions - I
involves this aspect, i.e. Give and Take.  Payment of cash involves give aspect
and delivery of computer is a take aspect. Thus, business transactions are
exchanges of economic consideration between parties and have two-fold effects
that are recorded in at least two accounts.
Business transactions are usually evidenced by an appropriate documents
such as Cash memo, Invoice, Sales bill, Pay-in-slip, Cheque, Salary slip, etc. A
document which provides evidence of the transactions is called the Source
Document or a Voucher. At times, there may be no documentary for certain items
as in case of petty expenses. In such case voucher may be prepared showing the
necessary details and got approved by appropriate authority within the firm. All
such documents (vouchers) are arranged in chronological order and are serially
numbered and kept in a separate file. All recording in books of account is done
on the basis of vouchers.
Transaction Voucher
Name of Firm :
Voucher No :
Date :
Debit account :
Credit account:
Amount (` ` ` ` `) :
Narration :
Authorised By : Prepared By :
Fig. 3.1 : : : : : Showing specimen transaction voucher
3.1.1 Preparation of Accounting Vouchers 3.1.1 Preparation of Accounting Vouchers 3.1.1 Preparation of Accounting Vouchers 3.1.1 Preparation of Accounting Vouchers 3.1.1 Preparation of Accounting Vouchers
Accounting vouchers may be classified as cash vouchers, debit vouchers, credit
vouchers, journal vouchers, etc. There is no set format of accounting vouchers.
A specimen of a simple transaction voucher is used in practice is shown in
figure 3.1.
These must be preserved in any case till the audit of the accounts and tax
assessments for the relevant period are completed. Now a days, accounting is
computerised and the necessary accounting vouchers showing the code
number and name of the accounts to be debited and credited are prepared for
the purpose of necessary recording of transactions. A transaction with one
debit and one credit is a simple transaction and the accounting vouchers
prepared for such transaction is known as Transaction Voucher, the format of
2024-25
48 Accountancy
which is shown in figure 3.1. Voucher which records a transaction that entails
multiple debits/credits and one credit/debit is called compound voucher.
Compound voucher may be: (a) Debit Voucher o7r (b) Credit Voucher; the
specimen is shown in figure 3.2.
Debit Voucher
Name of Firm :
Voucher No : Date :
Credit Account :
Amount :
Debit Accounts
S. No. Code Account Name Amount Narration (i.e. Explanation)
`
Authorised By : Prepared By :
Credit Voucher
Name of Firm :
Voucher No : Date :
Debit Account :
Amount :
Credit Accounts
S. No. Code Account Name Amount Narration (i.e. Explanation)
`
Authorised By : Prepared By :
Fig. 3.2 : Showing debit and credit vouchers
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49 Recording of Transactions - I
Transactions with multiple debits and multiple credits are called complex
transactions and the accounting voucher prepared for such transaction is
known as Complex Voucher/ Journal Voucher.  The format of a complex
transaction voucher is shown in figure 3.3.
Journal Voucher
Name of Firm :
Voucher No : Date :
Debit Accounts
S. No. Code Account Name Amount Narration (i.e. Explanation)
`
Credit Accounts
S. No. Code Account Name Amount Narration (i.e. Explanation)
`
Authorised By : Prepared By :
Fig. 3.3 : : : : : Showing specimen of complex transaction voucher
The design of the accounting vouchers depends upon the nature, requirement
and convenience of the business. There is no set format of an accounting
voucher. To distinguish various vouchers, different colour papers and different
fonts of printing are used. Some of the specimen of the accounting vouchers
are given in the earlier pages. An accounting voucher must contain the following
essential elements :
• It is written on a good quality paper;
• Name of the firm must be printed on the top;
• Date of transaction     is filled up against the date and not the date of recording
of transaction is to be mentioned;
• The number of the voucher is to be in a serial order;
• Name of the account     to be debited or credited is mentioned;
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Page 5


46 Accountancy
LEARNING OBJECTIVES
After studying this
chapter, you will be able
to:
• describe the nature of
transaction and source
documents;
• explain the prepa-
ration of accounting
vouchers;
• apply  accounting
equation to explain the
effect of transactions;
• record  transactions
using rules of debit
and credit;
• explain  the concept of
book of original entry
and recording of
transactions in journal;
• explain the concept of
ledger and posting of
journal entries to the
ledger accounts.
I
n chapter1and2, while explaining the
development and importance of accounting as a
source of disseminating the financial information
along with the discussion on basic accounting
concepts that guide the recording of business
transactions, it has been indicated that accounting
involves a process of identifying and analysing the
business transactions, recording them, classifying
and summarising their effects and finally
communicating it to the interested users of
accounting information.
In this chapter, we will discuss the details of each
step involved in the accounting process. The first
step involves identifying the transactions to be
recorded and preparing the source documents
which are in turn recorded in the basic book of
original entry called journal and are then posted to
individual accounts in the principal book called
ledger.
3.1 Business Transactions and Source Document
After securing good percentage in your previous
examination, as promised, your father wishes to
buy you a computer. You go to the market along
with your father to buy a computer. The dealer gives
a cash memo along with the computer and in
exchange your father makes cash payment of
` 35,000. Purchase of computer for cash is an
example of a transaction, which involves reciprocal
exchange of two things: (i) payment of cash,
(ii) delivery of a computer. Hence, the transaction
Recording of Transactions-I 3
2024-25
47 Recording of Transactions - I
involves this aspect, i.e. Give and Take.  Payment of cash involves give aspect
and delivery of computer is a take aspect. Thus, business transactions are
exchanges of economic consideration between parties and have two-fold effects
that are recorded in at least two accounts.
Business transactions are usually evidenced by an appropriate documents
such as Cash memo, Invoice, Sales bill, Pay-in-slip, Cheque, Salary slip, etc. A
document which provides evidence of the transactions is called the Source
Document or a Voucher. At times, there may be no documentary for certain items
as in case of petty expenses. In such case voucher may be prepared showing the
necessary details and got approved by appropriate authority within the firm. All
such documents (vouchers) are arranged in chronological order and are serially
numbered and kept in a separate file. All recording in books of account is done
on the basis of vouchers.
Transaction Voucher
Name of Firm :
Voucher No :
Date :
Debit account :
Credit account:
Amount (` ` ` ` `) :
Narration :
Authorised By : Prepared By :
Fig. 3.1 : : : : : Showing specimen transaction voucher
3.1.1 Preparation of Accounting Vouchers 3.1.1 Preparation of Accounting Vouchers 3.1.1 Preparation of Accounting Vouchers 3.1.1 Preparation of Accounting Vouchers 3.1.1 Preparation of Accounting Vouchers
Accounting vouchers may be classified as cash vouchers, debit vouchers, credit
vouchers, journal vouchers, etc. There is no set format of accounting vouchers.
A specimen of a simple transaction voucher is used in practice is shown in
figure 3.1.
These must be preserved in any case till the audit of the accounts and tax
assessments for the relevant period are completed. Now a days, accounting is
computerised and the necessary accounting vouchers showing the code
number and name of the accounts to be debited and credited are prepared for
the purpose of necessary recording of transactions. A transaction with one
debit and one credit is a simple transaction and the accounting vouchers
prepared for such transaction is known as Transaction Voucher, the format of
2024-25
48 Accountancy
which is shown in figure 3.1. Voucher which records a transaction that entails
multiple debits/credits and one credit/debit is called compound voucher.
Compound voucher may be: (a) Debit Voucher o7r (b) Credit Voucher; the
specimen is shown in figure 3.2.
Debit Voucher
Name of Firm :
Voucher No : Date :
Credit Account :
Amount :
Debit Accounts
S. No. Code Account Name Amount Narration (i.e. Explanation)
`
Authorised By : Prepared By :
Credit Voucher
Name of Firm :
Voucher No : Date :
Debit Account :
Amount :
Credit Accounts
S. No. Code Account Name Amount Narration (i.e. Explanation)
`
Authorised By : Prepared By :
Fig. 3.2 : Showing debit and credit vouchers
2024-25
49 Recording of Transactions - I
Transactions with multiple debits and multiple credits are called complex
transactions and the accounting voucher prepared for such transaction is
known as Complex Voucher/ Journal Voucher.  The format of a complex
transaction voucher is shown in figure 3.3.
Journal Voucher
Name of Firm :
Voucher No : Date :
Debit Accounts
S. No. Code Account Name Amount Narration (i.e. Explanation)
`
Credit Accounts
S. No. Code Account Name Amount Narration (i.e. Explanation)
`
Authorised By : Prepared By :
Fig. 3.3 : : : : : Showing specimen of complex transaction voucher
The design of the accounting vouchers depends upon the nature, requirement
and convenience of the business. There is no set format of an accounting
voucher. To distinguish various vouchers, different colour papers and different
fonts of printing are used. Some of the specimen of the accounting vouchers
are given in the earlier pages. An accounting voucher must contain the following
essential elements :
• It is written on a good quality paper;
• Name of the firm must be printed on the top;
• Date of transaction     is filled up against the date and not the date of recording
of transaction is to be mentioned;
• The number of the voucher is to be in a serial order;
• Name of the account     to be debited or credited is mentioned;
2024-25
50 Accountancy
• Debit and credit amount is to be written in figures against the amount;
• Description of the transaction is to be given account wise;
• The person who prepares the voucher must mention his name along with
signature; and
• The name and signature of the authorised person are mentioned on the
voucher.
3.2 Accounting Equation
Accounting equation signifies that the assets of a business are always equal
to the total of its liabilities and capital (owner’s equity). The equation reads as
follows:
A = L + C
Where,
A  = Assets
L  = Liabilities
C  = Capital
The above equation can also be presented in the following forms as its
derivatives to enable the determination of missing figures of Capital(C) or
Liabilities(L).
(i) A – L = C
(ii) A – C = L
Since, the accounting equation depicts the fundamental relationship among
the components of the balance sheet, it is also called the Balance Sheet
Equation. As the name suggests, the balance sheet is a statement of assets,
liabilities and capital.
At any point of time resources of the business entity must be equal to the
claims of those who have financed these resources.  The proprietors and
outsiders provide the resources of the business. The claim of the proprietors
is called capital and that of the outsides is known as liabilities. Each element
of the equation is the part of balance sheet, which states the financial position
of the business on a particular date. When we analyse the transactions, we
actually try to know that how balance sheet of a business entity gets affected.
Asset side of the balance sheet is the list of assets, which the business
entity owns. The liabilities side of the balance sheet is the list of owner’s
claims and outsider’s claims, i.e., what the business entity owes. The equality
of the assets side and the liabilities side of the balance sheet is an undeniable
fact and this justifies the name of accounting equation as balance sheet
equation also.
2024-25