Notes : Recording of Transactions - 2 Class 11 Notes | EduRev

Created by: Paras Saxena

Class 11 : Notes : Recording of Transactions - 2 Class 11 Notes | EduRev

 Page 1


15 
 
UNIT-03  
 
RECORDING OF TRANSACTION 
 
Unit at a Glance : 
? Meaning of accounting equation 
? Classification of transactions 
? Rules of debit and credit 
? Meaning of  Source documents 
? Meaning of voucher 
? Meaning of journal  
? Meaning and types of cash book 
? Purchase journal 
? Sales journal 
? Purchase return journal 
? Sales return journal 
? Questions 
  
Accounting Equation : 
Total Assets = Total Liabilities    Or 
Total Assets = Internal Liabilities + External Liabilities Or 
Total Assets = Capital + Liabilities 
Classification of Transactions 
Following are the nine basic transactions: 
1. Increase in assets with corresponding increase in capital. 
2. Increase in assets with corresponding increase in liabilities. 
3. Decrease in assets with corresponding decrease in capital. 
4. Decrease in assets with corresponding decrease in liabilities. 
5. Increase and decrease in assets. 
6. Increase and decrease in liabilities 
7. Increase and decrease in capital 
8. Increase in liabilities and decrease in capital 
9. Increase in capital and decrease in liabilities. 
Illustration : 
Show the effect of the following business transactions on assets, liabilities and capital through 
accounting equations: 
1. Commenced business with cash 20,000 
2. Goods purchased on credit 7,000 
3. Furniture purchased 3,000 
4. paid to creditors 2,000 
5. Amount withdrawn by the proprietor 4,000 
6. Creditors accepted a bill for payment 1,500 
7. interest on capital 1,000 
8. Transfer from capital to loan 5,000 
9. Allotted shares to creditors 1,000 
Page 2


15 
 
UNIT-03  
 
RECORDING OF TRANSACTION 
 
Unit at a Glance : 
? Meaning of accounting equation 
? Classification of transactions 
? Rules of debit and credit 
? Meaning of  Source documents 
? Meaning of voucher 
? Meaning of journal  
? Meaning and types of cash book 
? Purchase journal 
? Sales journal 
? Purchase return journal 
? Sales return journal 
? Questions 
  
Accounting Equation : 
Total Assets = Total Liabilities    Or 
Total Assets = Internal Liabilities + External Liabilities Or 
Total Assets = Capital + Liabilities 
Classification of Transactions 
Following are the nine basic transactions: 
1. Increase in assets with corresponding increase in capital. 
2. Increase in assets with corresponding increase in liabilities. 
3. Decrease in assets with corresponding decrease in capital. 
4. Decrease in assets with corresponding decrease in liabilities. 
5. Increase and decrease in assets. 
6. Increase and decrease in liabilities 
7. Increase and decrease in capital 
8. Increase in liabilities and decrease in capital 
9. Increase in capital and decrease in liabilities. 
Illustration : 
Show the effect of the following business transactions on assets, liabilities and capital through 
accounting equations: 
1. Commenced business with cash 20,000 
2. Goods purchased on credit 7,000 
3. Furniture purchased 3,000 
4. paid to creditors 2,000 
5. Amount withdrawn by the proprietor 4,000 
6. Creditors accepted a bill for payment 1,500 
7. interest on capital 1,000 
8. Transfer from capital to loan 5,000 
9. Allotted shares to creditors 1,000 
16 
 
 
Solution 
Transactions            Assets = Liabilities                                + Capital 
 Cash + Stock+ Furniture = Creditors + B/P + Loan + Capital 
1. Commenced business 
with cash Rs.20000 
20000 + 0+ 0 =  0 + 0 +  0 + 20,000 
2. Goods purchased on 
credit Rs. 7,000/- 
 + 7,000 + 0= 7,000+ 0+ 0+ 0 
New Equation 20,000+ 7,000+ 0= 7,000+ 0+ 0+ 20,000 
3. Furniture Purchased (-) 3,000 0+ 3,000= 0+ 0+ 0+ 0 
New Equation 17,000+ 7,000+ 3,000= 7,000+ 0+ 0+ 20,000 
4. Paid to creditors (-) 
2,000+ 
0+ 0= (-) 2000+ 0+ 0+ 0 
New Equation 15,000+ 7,000 3,000= 5,000+ 0+ 0+ 20,000 
5. Amount withdrawn 
by proprietor 
- 4000+ 0+ 0= 0+ 0+ 0+ -4000 
New Equation 11,000+ 7,000 3,000= 5,000+ 0+ 0+ 16,000 
6. Creditors accepted a 
bill 
0+ 0+ 0= -1500+ 1500+ 0+ 0 
New Equation 11000+ 7000+ 3000= 3500+ 1500+ 0+ 16000 
7. Interest on capital 0+ 0+ 0= 0+ 0+ 0+ -1000 
New Equation 11000+ 7000+ 3000= 3500+ 1500+ 0+ 16000 
8. Transfer from capital 
to loan 
0+ 0+ 0= 0+ 0+ 5000+ -5000 
New Equation 11000+ 7000+ 3000= 3500+ 1500+ 5000+ 11000 
9. Allotted shares to 
creditors 
0+ 0+ 0= -1000+ 0+ 0+ 1000 
New Equation 11000+ 7000+ 3000= 2500+ 1500+ 5000+ 12000 
 
 
 
Question for Practice:   
 
Prepare Accounting equation on the basis of following information: 
(1) Sohan started business with cash =80,000 
 Machinery    =10,000 
 And stock    =10,000 
(2) Interest on the above capital was allowed @ 10% 
(3) Money withdrew from the business for his personal use 10,000/- 
(4) Interest on drawings 500/- 
(5) Depreciation charged on machinery 2,000/- 
 
Q. How the assets liabilities and capital will be affected under following cases: 
(1) Purchase of building for cash 
(2) Purchase of furniture on credit 
(3) Receipt of commission 
(4) Payment to creditors. 
 
Page 3


15 
 
UNIT-03  
 
RECORDING OF TRANSACTION 
 
Unit at a Glance : 
? Meaning of accounting equation 
? Classification of transactions 
? Rules of debit and credit 
? Meaning of  Source documents 
? Meaning of voucher 
? Meaning of journal  
? Meaning and types of cash book 
? Purchase journal 
? Sales journal 
? Purchase return journal 
? Sales return journal 
? Questions 
  
Accounting Equation : 
Total Assets = Total Liabilities    Or 
Total Assets = Internal Liabilities + External Liabilities Or 
Total Assets = Capital + Liabilities 
Classification of Transactions 
Following are the nine basic transactions: 
1. Increase in assets with corresponding increase in capital. 
2. Increase in assets with corresponding increase in liabilities. 
3. Decrease in assets with corresponding decrease in capital. 
4. Decrease in assets with corresponding decrease in liabilities. 
5. Increase and decrease in assets. 
6. Increase and decrease in liabilities 
7. Increase and decrease in capital 
8. Increase in liabilities and decrease in capital 
9. Increase in capital and decrease in liabilities. 
Illustration : 
Show the effect of the following business transactions on assets, liabilities and capital through 
accounting equations: 
1. Commenced business with cash 20,000 
2. Goods purchased on credit 7,000 
3. Furniture purchased 3,000 
4. paid to creditors 2,000 
5. Amount withdrawn by the proprietor 4,000 
6. Creditors accepted a bill for payment 1,500 
7. interest on capital 1,000 
8. Transfer from capital to loan 5,000 
9. Allotted shares to creditors 1,000 
16 
 
 
Solution 
Transactions            Assets = Liabilities                                + Capital 
 Cash + Stock+ Furniture = Creditors + B/P + Loan + Capital 
1. Commenced business 
with cash Rs.20000 
20000 + 0+ 0 =  0 + 0 +  0 + 20,000 
2. Goods purchased on 
credit Rs. 7,000/- 
 + 7,000 + 0= 7,000+ 0+ 0+ 0 
New Equation 20,000+ 7,000+ 0= 7,000+ 0+ 0+ 20,000 
3. Furniture Purchased (-) 3,000 0+ 3,000= 0+ 0+ 0+ 0 
New Equation 17,000+ 7,000+ 3,000= 7,000+ 0+ 0+ 20,000 
4. Paid to creditors (-) 
2,000+ 
0+ 0= (-) 2000+ 0+ 0+ 0 
New Equation 15,000+ 7,000 3,000= 5,000+ 0+ 0+ 20,000 
5. Amount withdrawn 
by proprietor 
- 4000+ 0+ 0= 0+ 0+ 0+ -4000 
New Equation 11,000+ 7,000 3,000= 5,000+ 0+ 0+ 16,000 
6. Creditors accepted a 
bill 
0+ 0+ 0= -1500+ 1500+ 0+ 0 
New Equation 11000+ 7000+ 3000= 3500+ 1500+ 0+ 16000 
7. Interest on capital 0+ 0+ 0= 0+ 0+ 0+ -1000 
New Equation 11000+ 7000+ 3000= 3500+ 1500+ 0+ 16000 
8. Transfer from capital 
to loan 
0+ 0+ 0= 0+ 0+ 5000+ -5000 
New Equation 11000+ 7000+ 3000= 3500+ 1500+ 5000+ 11000 
9. Allotted shares to 
creditors 
0+ 0+ 0= -1000+ 0+ 0+ 1000 
New Equation 11000+ 7000+ 3000= 2500+ 1500+ 5000+ 12000 
 
 
 
Question for Practice:   
 
Prepare Accounting equation on the basis of following information: 
(1) Sohan started business with cash =80,000 
 Machinery    =10,000 
 And stock    =10,000 
(2) Interest on the above capital was allowed @ 10% 
(3) Money withdrew from the business for his personal use 10,000/- 
(4) Interest on drawings 500/- 
(5) Depreciation charged on machinery 2,000/- 
 
Q. How the assets liabilities and capital will be affected under following cases: 
(1) Purchase of building for cash 
(2) Purchase of furniture on credit 
(3) Receipt of commission 
(4) Payment to creditors. 
 
17 
 
Generally Students commit these mistakes please avoid : 
? Treatment of adjustment in accounting equation 
? Dual or triple effect of transaction 
? Omission in recording amount 
? Interest on capital and drawing 
? Debit and credit should be done properly 
? Depreciation must be treated properly. 
 
 
RULES OF DEBIT AND CREDIT 
 
(I) Traditional or English Approach: This approach is based on the main principle of double entry 
system i.e. every debit has a credit and every credit has a debit. According to this system we should 
record both the aspects of a transaction whereas one aspect of a transaction will be debited and other 
aspect of a transaction will be credited. 
(1)  Personal Account:  Debit the receiver and credit the giver. 
(2) Real Account:  Debit what comes in and credit what goes out. 
(3) Nominal Account:  Debit all expenses and losses credit all incomes and gains. 
 
(2) Modern or American Approach: This approach is based on the accounting equation or balance 
sheet. In this approach accounts are debited or credited according to the nature of an account. In a 
summarised way the five rules of modern approach is as follows: 
1. Increase in asset will be debited and decrease will be credited. 
2. Increase in the liabilities will be credited and decrease will be debited. 
3. Increase in the capital will be credited and decrease will be debited. 
4. Increase in the revenue or income will be credited and decrease will be debited. 
5. Increase in expenses and losses will be debited and decrease will be credited. 
 
SOURCE DOCUMENTS 
 
Meaning of Source documents: 
Business transactions are recorded in the books of accounts on the basis of some written evidence 
called source document. 
 
Common Source documents are Cash Memo, Invoice or Bill, Receipts, Debit Note, Credit Note, 
Cheque, Pay in slip 
 
Meaning of Voucher: 
Voucher is a source by which we record the transactions. 
 
 
Meaning of Journal: 
Journal is a book of prime entry in which transactions are copied in order of date from a 
memorandum or waste book. 
 
Page 4


15 
 
UNIT-03  
 
RECORDING OF TRANSACTION 
 
Unit at a Glance : 
? Meaning of accounting equation 
? Classification of transactions 
? Rules of debit and credit 
? Meaning of  Source documents 
? Meaning of voucher 
? Meaning of journal  
? Meaning and types of cash book 
? Purchase journal 
? Sales journal 
? Purchase return journal 
? Sales return journal 
? Questions 
  
Accounting Equation : 
Total Assets = Total Liabilities    Or 
Total Assets = Internal Liabilities + External Liabilities Or 
Total Assets = Capital + Liabilities 
Classification of Transactions 
Following are the nine basic transactions: 
1. Increase in assets with corresponding increase in capital. 
2. Increase in assets with corresponding increase in liabilities. 
3. Decrease in assets with corresponding decrease in capital. 
4. Decrease in assets with corresponding decrease in liabilities. 
5. Increase and decrease in assets. 
6. Increase and decrease in liabilities 
7. Increase and decrease in capital 
8. Increase in liabilities and decrease in capital 
9. Increase in capital and decrease in liabilities. 
Illustration : 
Show the effect of the following business transactions on assets, liabilities and capital through 
accounting equations: 
1. Commenced business with cash 20,000 
2. Goods purchased on credit 7,000 
3. Furniture purchased 3,000 
4. paid to creditors 2,000 
5. Amount withdrawn by the proprietor 4,000 
6. Creditors accepted a bill for payment 1,500 
7. interest on capital 1,000 
8. Transfer from capital to loan 5,000 
9. Allotted shares to creditors 1,000 
16 
 
 
Solution 
Transactions            Assets = Liabilities                                + Capital 
 Cash + Stock+ Furniture = Creditors + B/P + Loan + Capital 
1. Commenced business 
with cash Rs.20000 
20000 + 0+ 0 =  0 + 0 +  0 + 20,000 
2. Goods purchased on 
credit Rs. 7,000/- 
 + 7,000 + 0= 7,000+ 0+ 0+ 0 
New Equation 20,000+ 7,000+ 0= 7,000+ 0+ 0+ 20,000 
3. Furniture Purchased (-) 3,000 0+ 3,000= 0+ 0+ 0+ 0 
New Equation 17,000+ 7,000+ 3,000= 7,000+ 0+ 0+ 20,000 
4. Paid to creditors (-) 
2,000+ 
0+ 0= (-) 2000+ 0+ 0+ 0 
New Equation 15,000+ 7,000 3,000= 5,000+ 0+ 0+ 20,000 
5. Amount withdrawn 
by proprietor 
- 4000+ 0+ 0= 0+ 0+ 0+ -4000 
New Equation 11,000+ 7,000 3,000= 5,000+ 0+ 0+ 16,000 
6. Creditors accepted a 
bill 
0+ 0+ 0= -1500+ 1500+ 0+ 0 
New Equation 11000+ 7000+ 3000= 3500+ 1500+ 0+ 16000 
7. Interest on capital 0+ 0+ 0= 0+ 0+ 0+ -1000 
New Equation 11000+ 7000+ 3000= 3500+ 1500+ 0+ 16000 
8. Transfer from capital 
to loan 
0+ 0+ 0= 0+ 0+ 5000+ -5000 
New Equation 11000+ 7000+ 3000= 3500+ 1500+ 5000+ 11000 
9. Allotted shares to 
creditors 
0+ 0+ 0= -1000+ 0+ 0+ 1000 
New Equation 11000+ 7000+ 3000= 2500+ 1500+ 5000+ 12000 
 
 
 
Question for Practice:   
 
Prepare Accounting equation on the basis of following information: 
(1) Sohan started business with cash =80,000 
 Machinery    =10,000 
 And stock    =10,000 
(2) Interest on the above capital was allowed @ 10% 
(3) Money withdrew from the business for his personal use 10,000/- 
(4) Interest on drawings 500/- 
(5) Depreciation charged on machinery 2,000/- 
 
Q. How the assets liabilities and capital will be affected under following cases: 
(1) Purchase of building for cash 
(2) Purchase of furniture on credit 
(3) Receipt of commission 
(4) Payment to creditors. 
 
17 
 
Generally Students commit these mistakes please avoid : 
? Treatment of adjustment in accounting equation 
? Dual or triple effect of transaction 
? Omission in recording amount 
? Interest on capital and drawing 
? Debit and credit should be done properly 
? Depreciation must be treated properly. 
 
 
RULES OF DEBIT AND CREDIT 
 
(I) Traditional or English Approach: This approach is based on the main principle of double entry 
system i.e. every debit has a credit and every credit has a debit. According to this system we should 
record both the aspects of a transaction whereas one aspect of a transaction will be debited and other 
aspect of a transaction will be credited. 
(1)  Personal Account:  Debit the receiver and credit the giver. 
(2) Real Account:  Debit what comes in and credit what goes out. 
(3) Nominal Account:  Debit all expenses and losses credit all incomes and gains. 
 
(2) Modern or American Approach: This approach is based on the accounting equation or balance 
sheet. In this approach accounts are debited or credited according to the nature of an account. In a 
summarised way the five rules of modern approach is as follows: 
1. Increase in asset will be debited and decrease will be credited. 
2. Increase in the liabilities will be credited and decrease will be debited. 
3. Increase in the capital will be credited and decrease will be debited. 
4. Increase in the revenue or income will be credited and decrease will be debited. 
5. Increase in expenses and losses will be debited and decrease will be credited. 
 
SOURCE DOCUMENTS 
 
Meaning of Source documents: 
Business transactions are recorded in the books of accounts on the basis of some written evidence 
called source document. 
 
Common Source documents are Cash Memo, Invoice or Bill, Receipts, Debit Note, Credit Note, 
Cheque, Pay in slip 
 
Meaning of Voucher: 
Voucher is a source by which we record the transactions. 
 
 
Meaning of Journal: 
Journal is a book of prime entry in which transactions are copied in order of date from a 
memorandum or waste book. 
 
18 
 
Illustration: 
Journalise the following transactions in the books of Ravi: 
1. Bought goods from Sonam Rs. 20,000 less trade discount 20% plus VAT @ 10%. 
2. Sold goods costing Rs. 6,000 to Ram for Rs. 8,000 plus VAT @ 10% 
3. Sold the balance goods for Rs. 16,000 and charged VAT @ 10% to Mohan against payment 
by cheque which was banked on the same day. 
4. Deposited the VAT into government account by cheque. 
 
Solution: 
Date Particulars L.F. Amount (Dr.) 
Rs. 
Amount Cr. 
Rs. 
1 Purchases A/c  Dr. 
VAT Paid A/c  Dr. 
 To Sonam  
(Goods purchased from Sonam ) 
 16,000 
1,600 
 
 
17,600 
2 Ram  Dr. 
 To Sales A/c 
 To VAT Collected A/c 
(Goods sold & charged VAT @10%) 
 8,800  
8,000 
800 
3 Bank A/c  Dr. 
 To Sales A/c 
 To VAT Collected A/c 
(Goods sold to Mohan against cheque 
& charged VAT @10%) 
 17,600  
16,000 
1,600 
4 VAT Collected A/c Dr. 
 To VAT paid A/c 
(Adjustment of VAT paid with VAT  
collected) 
 1,600  
1,600 
5 VAT Collected A/c Dr. 
 To Bank A/c 
(Balance amount of VAT deposited in 
Govt.A/c 
 800  
800 
 
Question for Practice: 
Journalise the following transactions: 
1. Paid sales tax Rs. 5,000. 
2. Sold goods for Rs. 80,000 to Diwan for cash and charged 8% sales tax. 
3. Purchased goods from Neelam for Rs. 50,000 plus VAT @ 10% 
4. Sold goods to Punam worth Rs. 80,000 plus VAT @ 10%. 
5. VAT was deposited into Government Account on its due date. 
6. Paid Income Tax Rs. 7,000. 
 
CASH BOOK 
Meaning: Cash book is a book in which all the transactions related to cash receipts and cash 
payments are recorded.  
Page 5


15 
 
UNIT-03  
 
RECORDING OF TRANSACTION 
 
Unit at a Glance : 
? Meaning of accounting equation 
? Classification of transactions 
? Rules of debit and credit 
? Meaning of  Source documents 
? Meaning of voucher 
? Meaning of journal  
? Meaning and types of cash book 
? Purchase journal 
? Sales journal 
? Purchase return journal 
? Sales return journal 
? Questions 
  
Accounting Equation : 
Total Assets = Total Liabilities    Or 
Total Assets = Internal Liabilities + External Liabilities Or 
Total Assets = Capital + Liabilities 
Classification of Transactions 
Following are the nine basic transactions: 
1. Increase in assets with corresponding increase in capital. 
2. Increase in assets with corresponding increase in liabilities. 
3. Decrease in assets with corresponding decrease in capital. 
4. Decrease in assets with corresponding decrease in liabilities. 
5. Increase and decrease in assets. 
6. Increase and decrease in liabilities 
7. Increase and decrease in capital 
8. Increase in liabilities and decrease in capital 
9. Increase in capital and decrease in liabilities. 
Illustration : 
Show the effect of the following business transactions on assets, liabilities and capital through 
accounting equations: 
1. Commenced business with cash 20,000 
2. Goods purchased on credit 7,000 
3. Furniture purchased 3,000 
4. paid to creditors 2,000 
5. Amount withdrawn by the proprietor 4,000 
6. Creditors accepted a bill for payment 1,500 
7. interest on capital 1,000 
8. Transfer from capital to loan 5,000 
9. Allotted shares to creditors 1,000 
16 
 
 
Solution 
Transactions            Assets = Liabilities                                + Capital 
 Cash + Stock+ Furniture = Creditors + B/P + Loan + Capital 
1. Commenced business 
with cash Rs.20000 
20000 + 0+ 0 =  0 + 0 +  0 + 20,000 
2. Goods purchased on 
credit Rs. 7,000/- 
 + 7,000 + 0= 7,000+ 0+ 0+ 0 
New Equation 20,000+ 7,000+ 0= 7,000+ 0+ 0+ 20,000 
3. Furniture Purchased (-) 3,000 0+ 3,000= 0+ 0+ 0+ 0 
New Equation 17,000+ 7,000+ 3,000= 7,000+ 0+ 0+ 20,000 
4. Paid to creditors (-) 
2,000+ 
0+ 0= (-) 2000+ 0+ 0+ 0 
New Equation 15,000+ 7,000 3,000= 5,000+ 0+ 0+ 20,000 
5. Amount withdrawn 
by proprietor 
- 4000+ 0+ 0= 0+ 0+ 0+ -4000 
New Equation 11,000+ 7,000 3,000= 5,000+ 0+ 0+ 16,000 
6. Creditors accepted a 
bill 
0+ 0+ 0= -1500+ 1500+ 0+ 0 
New Equation 11000+ 7000+ 3000= 3500+ 1500+ 0+ 16000 
7. Interest on capital 0+ 0+ 0= 0+ 0+ 0+ -1000 
New Equation 11000+ 7000+ 3000= 3500+ 1500+ 0+ 16000 
8. Transfer from capital 
to loan 
0+ 0+ 0= 0+ 0+ 5000+ -5000 
New Equation 11000+ 7000+ 3000= 3500+ 1500+ 5000+ 11000 
9. Allotted shares to 
creditors 
0+ 0+ 0= -1000+ 0+ 0+ 1000 
New Equation 11000+ 7000+ 3000= 2500+ 1500+ 5000+ 12000 
 
 
 
Question for Practice:   
 
Prepare Accounting equation on the basis of following information: 
(1) Sohan started business with cash =80,000 
 Machinery    =10,000 
 And stock    =10,000 
(2) Interest on the above capital was allowed @ 10% 
(3) Money withdrew from the business for his personal use 10,000/- 
(4) Interest on drawings 500/- 
(5) Depreciation charged on machinery 2,000/- 
 
Q. How the assets liabilities and capital will be affected under following cases: 
(1) Purchase of building for cash 
(2) Purchase of furniture on credit 
(3) Receipt of commission 
(4) Payment to creditors. 
 
17 
 
Generally Students commit these mistakes please avoid : 
? Treatment of adjustment in accounting equation 
? Dual or triple effect of transaction 
? Omission in recording amount 
? Interest on capital and drawing 
? Debit and credit should be done properly 
? Depreciation must be treated properly. 
 
 
RULES OF DEBIT AND CREDIT 
 
(I) Traditional or English Approach: This approach is based on the main principle of double entry 
system i.e. every debit has a credit and every credit has a debit. According to this system we should 
record both the aspects of a transaction whereas one aspect of a transaction will be debited and other 
aspect of a transaction will be credited. 
(1)  Personal Account:  Debit the receiver and credit the giver. 
(2) Real Account:  Debit what comes in and credit what goes out. 
(3) Nominal Account:  Debit all expenses and losses credit all incomes and gains. 
 
(2) Modern or American Approach: This approach is based on the accounting equation or balance 
sheet. In this approach accounts are debited or credited according to the nature of an account. In a 
summarised way the five rules of modern approach is as follows: 
1. Increase in asset will be debited and decrease will be credited. 
2. Increase in the liabilities will be credited and decrease will be debited. 
3. Increase in the capital will be credited and decrease will be debited. 
4. Increase in the revenue or income will be credited and decrease will be debited. 
5. Increase in expenses and losses will be debited and decrease will be credited. 
 
SOURCE DOCUMENTS 
 
Meaning of Source documents: 
Business transactions are recorded in the books of accounts on the basis of some written evidence 
called source document. 
 
Common Source documents are Cash Memo, Invoice or Bill, Receipts, Debit Note, Credit Note, 
Cheque, Pay in slip 
 
Meaning of Voucher: 
Voucher is a source by which we record the transactions. 
 
 
Meaning of Journal: 
Journal is a book of prime entry in which transactions are copied in order of date from a 
memorandum or waste book. 
 
18 
 
Illustration: 
Journalise the following transactions in the books of Ravi: 
1. Bought goods from Sonam Rs. 20,000 less trade discount 20% plus VAT @ 10%. 
2. Sold goods costing Rs. 6,000 to Ram for Rs. 8,000 plus VAT @ 10% 
3. Sold the balance goods for Rs. 16,000 and charged VAT @ 10% to Mohan against payment 
by cheque which was banked on the same day. 
4. Deposited the VAT into government account by cheque. 
 
Solution: 
Date Particulars L.F. Amount (Dr.) 
Rs. 
Amount Cr. 
Rs. 
1 Purchases A/c  Dr. 
VAT Paid A/c  Dr. 
 To Sonam  
(Goods purchased from Sonam ) 
 16,000 
1,600 
 
 
17,600 
2 Ram  Dr. 
 To Sales A/c 
 To VAT Collected A/c 
(Goods sold & charged VAT @10%) 
 8,800  
8,000 
800 
3 Bank A/c  Dr. 
 To Sales A/c 
 To VAT Collected A/c 
(Goods sold to Mohan against cheque 
& charged VAT @10%) 
 17,600  
16,000 
1,600 
4 VAT Collected A/c Dr. 
 To VAT paid A/c 
(Adjustment of VAT paid with VAT  
collected) 
 1,600  
1,600 
5 VAT Collected A/c Dr. 
 To Bank A/c 
(Balance amount of VAT deposited in 
Govt.A/c 
 800  
800 
 
Question for Practice: 
Journalise the following transactions: 
1. Paid sales tax Rs. 5,000. 
2. Sold goods for Rs. 80,000 to Diwan for cash and charged 8% sales tax. 
3. Purchased goods from Neelam for Rs. 50,000 plus VAT @ 10% 
4. Sold goods to Punam worth Rs. 80,000 plus VAT @ 10%. 
5. VAT was deposited into Government Account on its due date. 
6. Paid Income Tax Rs. 7,000. 
 
CASH BOOK 
Meaning: Cash book is a book in which all the transactions related to cash receipts and cash 
payments are recorded.  
19 
 
Types of Cash book: 
1. Single Column Cash Book 
2. Double Column Cash Book 
3. Petty Cash Book  
 
1. Single Column Cash Book: 
 
Illustration: 
Enter the following transactions in a single column cash book for the month of January 2008 from the 
following particulars: 
January 2008 Rs. 
1 Cash in hand 2,000 
2 Goods sold 18,000 
4  Paid salaries to employees 10,000 
6 Payment made to a creditor A by cheque 5,000 
8 Cash sales of Rs. 30,000 out of which Rs. 5,000 immediately deposited into bank. 
9 Cash sales of Rs. 28,000 out of which Rs. 10,000 was deposited into bank on 12
th
 January 
15 Purchased goods from Hari Ram 6,000 
18 Paid to transporter 1,000 
19 Sold goods to Manik Chand 3,000 
28 Paid electricity bill 500 
30 Paid to Mr. Sharma Rs.140 and discount received Rs.10 
 
Solution : 
CASH BOOK (SINGLE COLUMN) 
Date  Particulars V. No. LF Amount 
(Rs.) 
Date  Particulars V. 
No. 
LF Amount 
(Rs.) 
2008 
Jan. 
1 
2 
8 
9 
 
 
 
2008 
Feb. 
1 
 
 
To Balance b/d 
To Sales 
To Sales  
To Sales 
 
 
 
 
 
To Balance b/d 
 
 
 
  
 
2,000 
18,000 
25,000 
28,000 
 
2008 
Jan. 
4 
12 
18 
28 
30 
31 
 
 
By Salaries 
By Bank 
By Transporter 
By Electricity Bill 
By Mr. Sharma 
By Balance c/d 
   
 
10,000 
10,000 
1,000 
500 
140 
51360 
73,000 73,000 
 
 
51,360 
 
 
 
 
Question for Practice:   
Enter the following transactions in the cash book  
Oct.2010  Rs. 
1 
3 
5 
8 
Cash in hand 
Goods sold for cash 
Bought goods for cash 
Paid Salary 
13,000 
9,500 
6,700 
3,000 
Read More
Offer running on EduRev: Apply code STAYHOME200 to get INR 200 off on our premium plan EduRev Infinity!

Content Category

Related Searches

Free

,

ppt

,

study material

,

MCQs

,

mock tests for examination

,

Semester Notes

,

Notes : Recording of Transactions - 2 Class 11 Notes | EduRev

,

practice quizzes

,

Viva Questions

,

Extra Questions

,

Previous Year Questions with Solutions

,

Exam

,

Notes : Recording of Transactions - 2 Class 11 Notes | EduRev

,

Objective type Questions

,

video lectures

,

Sample Paper

,

shortcuts and tricks

,

Summary

,

past year papers

,

Notes : Recording of Transactions - 2 Class 11 Notes | EduRev

,

pdf

,

Important questions

;