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Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce PDF Download

JOURNAL

The first book in which the transactions of a business unit are recorded is called Journal. Here, business transactions are recorded in chronological order i.e. in the order in which they occur. Each record in a journal is called an entry. As a journal is the first book in which entries are recorded. It is also known as a book of original entry.

FORMAT OF JOURNAL

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

Ledger Folio (L.F.): Ledger Folio is the page No. of Ledger on which the Debit A/c & Credit A/c are to be posted.

TYPES OF ENTRIES

(1) Simple Entry: It is that entry in which only two accounts are affected i.e. one account is debited and another account is credited with an equal amount.
Example : Purchase of goods worth Rs. 5,000 from Ramesh by the business firm. The simple entry is.
JOURNAL

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

(2) Compound Entry : It is that entry in which more than two accounts are involved. Compound Entries can further be classified into single compound entry and double compound entry.
In Single Compound Entry Several accounts are to be debited and only one account is to be credited or only one account is to be debited and several accounts are to be credited.
Example : A business firm pays rent Rs.2,000, salaries Rs.1,500, freight Rs.500 on 1 Jan. 2015, the single compound entry is

JOURNAL

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

In Double Compound Entry, several accounts are to be debited which are accompanied by several credit accounts.
Example : A firm receives cash Rs.20,000 and cheque Rs.10,000 in return of sale of goods for Rs.25,000 and furniture Rs.5,000.

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

(3) Opening Entry:- The entry passed to record the closing balances of the previous year is called opening entry. While passing an opening entry, all assets accounts are debited and all liabilities accounts are credited.
Example : The various balances of XYZ ltd. on 1st April 2015 were as follows-

Debit Balance: Cash Rs.20,000, furniture Rs.50,000, Building Rs.1,00,000 & Debtors Rs.30.000.

Credit Balance: Creditors Rs.50,000, Bank loan Rs.25,000.

JOURNAL

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

Transactions related to Goods  


1. Goods purchased for cash. 

Purchase A/C Dr.
   To Cash A/C 

(Being goods purchased for cash)

2. Goods purchased from Ram on credit

Purchase Dr.
   To Ram 

(Being goods purchased from Ram on credit)

3. Goods sold for cash.

Cast A/C Dr.
   To Sales A/C 

(Being goods sold for cash)

4. Goods sold on credit to Mohan

Mohan A/C Dr.
    To Sales A/C 

(Being goods sold to Mohan on credit)

5. Withdrawal of goods by owner for personal use. 

Drawings A/c Dr.
   To Purchases A/c

 (Being goods withdrawn by owner for personal use)

6. Goods distributed as free samples

Advertisement A/c Dr.
   To Purchases A/c 

(Being goods distributed as free samples)

7. Goods given as charity.

Charity A/c Dr.
   To Purchases A/c 

(Being goods given as charity)

8. Goods lost by fire/flood/ theft etc.
Loss by fire/theft A/c Dr.
To Purchase A/c 

(Being goods lost by fire/flood/theft)

Note : Purchases A/c is credited in the above mentioned entries at S. No. 5 to 8 because the goods are going out of our business on cost and it is not a sale hence, deducted from the purchases A/c.

Transactions related to Bank

1. Cash deposited into the bank 

Bank A/c Dr.
   To Cash A/c 

(Being cash deposited into bank) 

2. Cash withdrawn for office use. 

Cash A/c Dr.
   To Bank A/c 

(Being cash withdrawn from bank for offfice use)

3. When cheque is received from customer and deposited into bank same day.
Bank A/c Dr.
   To Customer's personal A/c 

(Being cheque deposited into bank) 

4. Cash withdrawn for personal use by owner.
Drawing A/c Dr.
   To Bank A/c 

(Being cash withdrew for personal use)

5. When cheque is received from customer and not deposited into bank same day.
Cheque-in-hand A/c Dr.
   To customer’s personal A/c

6. When above cheque (Point 5) is deposited later into bank. 

BankA/c Dr. 

   To cheque-in-hand A/c 

(Being cheque deposited into bank received from........... On......... )

7. When payment is made through cheque 

Personal A/c Dr. 

   To BankA/c

 (being payment made to ..... by cheque)

8. When expense is paid through cheque.
ExpenseA/c Dr.

   To BankA/c 

(Being expense paid by cheque)

9. When interest is allowed by the bank.
Bank A/c Dr. 

   To Interest A/c

(Being interest allowed by bank) 

10. When Bank charges for the services provided.
Bank Charges A/c Dr.

   To Bank A/c

(Being Bank charges deducted)

Note:- Bank A/C will be debited if the amount is deposited/credited by bank & Bank A/C will be credited if the amount is withdrawn/debited by bank.
Note:- Cash will be debited if business receives it & Credited if Business paid it.

Transactions related to Expense or Income

1. Expense paid by bank / Cash by the Business

Expense A/C Dr.
   To Cash/ Bank A/C

(Being expense paid by cash/Bank) 

2. Expense is outstanding during a current F.Y.

Expense A/C Dr.
   To Outstanding Exp. A/C 

(Being expense is due not paid) 

3. Expense paid in advance

Prepaid Expense A/C Dr.
   To Cash/Bank A/C 

(Being expense paid in advance by cash/ Bank)

4. Income received in Cash/Bank

 Cash/Bank A/C Dr.

    To Income A/C 

(Being Income received in cash / bank)

5. Income due but not received Accrued/Outstanding

 Income A/C Dr.

    To Income A/C

 (Being Income due but not received) 

6. Income received in cash /Bank in advance. 

Cash/Bank A/C Dr.
   To Prepaid Income A/C

 (Being income received in advance)

Transactions related to Assets /Liabilities

1. When Assets is purchased in Cash/Bank

Assets A/C Dr.
   To Cash/Bank A/C 

(Being Assets purchased in cash/Bank.)

2. Depreciation charged on assets

Depreciation A/C Dr.
   To Assets A/C 

(Being Depreciation charged on assets @ ........ %)

3. Assets Sold by the business 

Cash/Bank A/C Dr.
   To Assets A/C 

(Being Assets sold in cash/Bank)

4. Liability arise when business raise funds. 

Cash/Bank A/C Dr.
   To Liability A/C

 (Being funds raised)

5. Payment of Liability 

Liability A/C Dr.
   To Cash/Bank A/C 

(Being Liability paid in cash/Bank)

Some other Journal Entries:

1. Bad Debts (when Debtors fail to pay due) 

Bad Debts A/C

   To Debtors A/C

 (Being amount debtors failed to pay)

2. Bad Debts Recovered

Cash/Bank A/C Dr.
   To Bad Debts Recovered A/C
(Being bad debts recovered) 

3.Debtors Become insolvent
Cash/Bank A/C Dr. (Amt. Received) 

Bad Debts A/C Dr. (Amt. not rec.) 

   To Debtors A/C (the due amount) 

(Being Debtors become insolvent could pay only.....Paise in a Rupees)

4.Interest on drawing

Capital A/C Dr.
   To Interest on Drawing A/C 

(Being Interest on Drawing charged by business From capital A/C)

5.Interest on Capital

Interest on Capital A/C Dr.
   To Capital A/C 

(Being Interest on capital credited by business in capital A/C)

Illustration 7: Pass necessary Journal entries relating to Mr. X for the month of January 2015.

2015
Jan. 1 Started business with Rs. 20,000 and furniture Rs. 4,000.
Jan. 1 Bought shop fitting Rs. 4,000 and a car Rs. 6,000 and payment made in cash.
Jan. 2 Paid into Bank Rs. 8,000.
Jan. 3 Paid rent Rs. 2,000 by cheque.
Jan. 10 Purchased on credit goods for Rs. 5,000 from Mr. Khatana.
Jan. 12 Cash Sales Rs. 10,000.
Jan. 15 Paid wages Rs. 500 and Commission Rs. 200 by cash.
Jan. 20 Sold good to shyam Rs. 15000 Bank charges Rs. 500.
Jan. 21 Withdrew cash for personal use Rs. 5,000.
Jan. 23 bought goods for cash Rs. 14,000.
Jan. 25 paid to Mr. Khatana by cash Rs.4800 in full settlement of his account.
Jan. 28 Received cash from shyam Rs. 14500 in full settlement of his account.
Jan.31 salary outstanding forthe month Rs. 5,000.
Jan. 31 Paid insurance charges for whole year in advance Rs.12,000.

Solution: In the books of Mr. X.
 Journal

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

Note:- In the last entry insurance is paid for the whole year that's why insurance for 11 month is treated as prepaid & insurance for the month of January is treated as expense.


BOOKS OF ORIGINAL ENTRY/SPECIAL PURPOSE BOOKS

As the business grows and number of transactions increase, it becomes necessary for the business to divide the recording work. The books maintained are illustrated below:

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

Advantages of Maintaining Subsidiary Books • Division of work • Leads to Specialization • Easy to maintain Ledger • Check on frauds • Easy to fix responsibility • Quick availability of Required information.

Cash Book
Cash book shows all the transaction related to cash receipt and payments. Cash book serves two purpose. First, all the cash transactions are recorded first time in cash book it becomes Book of original entry. Second, there is no need to prepare Cash a/c in ledger. It also play the role of Principal Book.

Simple Cash Book 
All the cash receipts are shown in left hand side i.e. Debit side and all the cash payments are shown in right hand side i.e. Credit Side.

Points to Remember

  • Cash in hand/opening balance of cash is shown in Dr. side of the Cash Book as "To Balance b/d"
  • Only transaction of cash receipts and payments are recorded in this book.
  • This book never shows a credit balance because one can't pay more than the cash one have.

Illustrations 8:

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce


Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

Notes: One can draw the following conclusions:

1. In a Simple Cash Book only cash receipts and cash payments are recorded. Credit transaction are not recorded. Purchases from Mohan of Rs. 5,000 on 15th Jan is a credit purchase hence, is not recorded in the Cash Book.

2. The debit side is always more than the credit side since the payments can never exceed the available cash. This is true even for daily balances.

3. It is like an ordinary account.


Illustration 9 : Enter the following transactions in the cash book with discount column for the month of April 2015.

 April

1. Cash in hand Rs. 50,000.

11. Cash Sales Rs. 25,000.

12. Goods sold to Aryan on creditfor Rs.  20,000.

13. Purchased goods from Khushi on credit for Rs.  30,000.

14. Purchased stationary for Rs. 1,000 in cash.

25. Received from Aryan Rs.  19,500 in full settlement.

26. Paid to Khushi Rs.  29,000 as full & final payment.

27. Deposited into bank Rs. 5,000.

30. Paid to Vishal, on old creditor Rs. 9800 and received discount of Rs.  200. 

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

CASH BOOK WITH CASH AND BANK COLUMN

In this case the Cash Book is ruled with two amount columns on either side of the cash book namely, "Cash and Bank". Cash columns in such a case will record actual cash received in the debit side and payments in the credit side. Cheques received should be entered on the debit side of the bank column when it is deposited in the bank. The payments by cheques should be entered on the credit side in bank column and also when cash is withdrawn from the bank.

IMPORTANT ENTRIES
(1) Contra Entries : 
These entries affect cash and bank columns both at the same time. To indicate contra entry "C" is mentioned in the L.F column of the cash Book. Following two cases result in Contra entries.
(a) Depositing cash into Bank Rs.  1,000. It will increase bank balance, so bank column is debited and cash balance will decrease, so cash column is credited.

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

(b) Withdrawn from Bank for office use Rs. 1,000. It will increase cash balance, so cash column is debited and bank balance will decrease, so bank column is credited.

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

(2) Entries relating to cheque:

(a) When any payment is made by cheque: It will reduce the bank balance and thus bank column will be credited.

(b) When any payment is received in the form of cheque and no information about its deposit into bank is given. In this case, it is assumed that the cheque is deposited into bank on the same day. when it is received & so bank A/c will be debited.

(c) When any payment is received in the form of cheque and it is deposited into bank on same day then bank A/c will be debited. When payment is receive in the form of cheque on one day & its is deposited into Bank on other day i.e. when two dates, one for the receipt of cheque and the other for deposit. In this case no entry it to be recorded at the time of receiving the cheque. Entry is to made when cheque deposited in the bank, as bank column is debited.

 
Illustration 10: Record the following transactions in the cash book with cash and Bank columns. 

2015

Jan. 1 Cash balance Rs.  10,000 & Bank balance Rs.  7,000.
Jan.2 Cash received from sale of furniture Rs. 8,000 and paid into Bank Rs.  5,000
Jan. 5 Paid to Mr. Kasana by Cheque Rs.  2,000, who allowed discount of Rs. 50
Jan.10 Received cheque from Mr. Nagar for Rs.  2.400 and allowed him discount of Rs.  100.
Jan. 15 Paid wages by cash Rs. 500 and salaries by cheque Rs.  1,000.
Jan.20 Mr. Nagar Deposited Cheque of Rs. 2400 into Bank.
Jan.22 Drawn from Bank for office use Rs.  2,000.
Jan.25 Withdraw cash Rs.  1,000 and from bank Rs.  500 for personal use.
Jan.30 Received cheque from Mr. Lohiya for Rs.  2,500 and paid into Bank.

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce


Petty Cash Book :Business has to incur small expenses which are repetitive in nature. To save the time and efforts of head cashier, business appoints a petty cashier. He is entrusted with the duty of paying these expenses.

Ordinary system: Under ordinary system, a lump sum amount of cash is given to the petty cashier. When the whole amount is spent, the petty cashier submits the details of petty expenditures recorded in the petty cash book to the head or chief cashier for review.

Imprest System of Petty Cash Book: Under this system, Head cashier gives a fixed amount to petty cashier for a definite period. At the end of given period, Head cashier reimburses the amount actually spent by the petty cashier resulting the same amount with petty cashier which he had in the beginning of the period. This can be illustrated as under:

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

Advantages of Petty Cash Book 

  • Saving of time and efforts of Head cashier.
  • Control on Petty expenses.
  • Less chances of fraud.

Illustration 11: Prepare a Petty Cash book on the imprest system from the following transactions:-

2015                                                      Amt.(Rs.) 

Jan. 1 Received cash from Head cashier 1000

Jan. 2 Bought stationary 80

Jan. 3 Paid for registered post 120

Jan. 4 Bought Pen/Pencils for office use 90

Jan. 4 Paid for Speed Post 50

Jan. 5 Paid for refreshment 250

Jan. 6 Bought postal stamps 40

Solution: Petty Cash Book  

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce


SPECIAL PURPOSE SUBSIDIARY BOOKS

Purchase Book In this book, only those transactions are recorded which are related to credit purchases of goods in which the business deals in. Recording is made on the basis of Bills/ Invoices issued by the Suppliers.

Transactions not recorded in purchases Book

  • Purchases of goods for cash.
  • Purchases of Assets meant for long term, not for resale.


Illustration 12: Enter the following transaction in the Purchase Book of M/s Ajeet Stationers.
2015
Aug.1 Brought from Aggarwal Book House (Invoice No. 205) 25 Dozen Pencils @Rs. 30 per dozen, 20 Dozen Ball pens@ Rs. 10 per pen. Trade discount 10%. 

Aug. 5 Brought furniture of Rs. 20,000 on credit from M/s Interior Decor (Invoice No. 109).

Aug.8 Shivani Bros, sold to us (Invoice No. 626) 30 Registers Rs.50 each 50 Note Books @ Rs. 20 each.

Aug.17 Brought from Tushar stationers: (Cash Memo No. 101) 300 Refills @ Rs. 5 each, 10 Ink pads Rs. 50 each Trade discount @ 10%.


Note
 1
. Transaction of Aug. 5 is related to credit purchases of furniture i.e. an Asset.
2. On Aug. 17, goods bought for cash, Hence both the transaction are not recorded in Purchases Book.
Solution: In the Books of M/s Ajeet Stationers.

PURCHASE BOOK

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

Sales Books/Sales Journal 

In this book, transactions for credit sales of goods are recorded. The source documents for this book is duplicate copy of invoice/bills issued to the customers.

Transactions not recorded in Sales Book 

  • Sales of goods for cash
  • Sales of Assets

Illustration 13 : From the following transactions. Prepare a Sales Book of Subhash Furnitures.
 2015

Jul.7 Sold to Anil furniture house (Invoice No. 107) 200 Tables @ Rs. 150 each 100 Chairs @ Rs. 100 each. Trade discount @ 10%.

Jul.8 Sold Air Conditioner to Ram Rs. 12,000.

Jul.20 Sold to Rama Furnitures (Cash Memo no. 3001) 10 Beds @ Rs. 2,500 each.

Jul.29 Sold to Jitesh Woods (Invoice No. 506) 10 Dressing Tables @ Rs. 1.700 each 5 tables @ Rs. 500 each.
Trade Discount @ 10%

Solution:
 In the books of M/s Subhash Furniture

Sales Book

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

Note:- 1. Transaction of July 5 is related to sale of asset.
2. Sale of Rama Furniture is made for cash, hence not recorded in Sales Book.


PURCHASE RETURNS/RETURNS OUTWARD BOOK

This book includes only those transactions which are related to returns of goods bought on credit. The goods may be returned due to various reasons such as goods bought being defective, supply of inferior quality goods etc. Entries in this book are made on the basis of Debit Note. A Debit note contains the name of the supplier to whom good are returned, details of goods returned.


Illustration 14: Enter the following transactions in the Purchases Returns Book of Vikas Traders.

2015 

Aug. 5 Returned to Aggarwal Book House (Debit Note No. 105) 5 Dozen Pencils @ Rs. 30 per Dozen Trade Discount @ 10%

Aug. 10 Returned to Shivani Bros. (Debit Note No. 106) 5 Resisters @ Rs. 50 each.

Solution:- In the Books of M/s Vikas Traders
PURCHASE RETURNS BOOK

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce


SALES RETURNS BOOK

This book includes all the returns by customers of credit sales of goods. The Credit Note is used for recording entries in this book. The credit note contains the details of customers and goods returned.

Illustration 15: From the following transactions, Prepare a Sales Returns Book of Subhash Furnitures.

2015

Jul-09 Returned by Anil furniture house (Credit Note No.209) 5 Table @ Rs. 150 each, 10 Chairs @ Rs. 100 each Trade discount @ 10%

Jul-30 Returned by Jitesh Woods (Credit Note No.210) 1 Dressing tables @ Rs. 1700 each Trade discount @ 10%

Solution:- In the books of M/s Subhash furnitures

Sales Returns Book

Recording of Transactions-II Chapter Notes | Accountancy Class 11 - Commerce

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FAQs on Recording of Transactions-II Chapter Notes - Accountancy Class 11 - Commerce

1. What are recording transactions?
Ans. Recording transactions refers to the process of documenting and keeping a record of financial activities within an organization. This includes recording the details of all financial transactions such as sales, purchases, expenses, and payments in a systematic manner.
2. Why is recording transactions important?
Ans. Recording transactions is important for several reasons. It helps in maintaining accurate financial records, which are essential for decision-making, financial analysis, and compliance with legal and regulatory requirements. It also provides a clear trail of all financial activities, enabling better accountability and transparency within an organization.
3. What are the common methods of recording transactions?
Ans. The common methods of recording transactions include manual bookkeeping using journals, ledgers, and spreadsheets, as well as computerized accounting systems. Manual methods involve physically writing down the details of each transaction, while computerized methods use software to automate the recording process.
4. What is the purpose of double-entry bookkeeping?
Ans. Double-entry bookkeeping is a method in which every transaction is recorded twice – once as a debit and once as a credit. The purpose of double-entry bookkeeping is to maintain accuracy and ensure that the accounting equation (Assets = Liabilities + Equity) remains balanced. It helps in detecting errors, provides a complete view of the financial position, and facilitates the preparation of financial statements.
5. How do you record a sales transaction?
Ans. To record a sales transaction, you would typically debit the accounts receivable or cash account (depending on the payment method) and credit the sales revenue account. Additionally, you may need to credit other accounts such as sales tax payable and cost of goods sold, depending on the specific details of the transaction. The exact recording process may vary based on the accounting system and the specific requirements of the organization.
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