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

Short Question Answers

Q1: State the three fundamental steps in the accounting process.
Ans: The three fundamental steps in the process of accounting are:

  1. Collection of data – The first step requires the collection of the data in the form of collecting data of financial transactions in a particular month in the form of all the vouchers and the bills.
  2. Processing of data – After when the process of identification of the transactions is complete, the process of accounting requires the due recording of these very transactions in the book of accounts. Hence the accountants are expected to journalise these transactions and classify them into the respective ledger accounts and to lastly summarise them through Trial Balance.
  3. Reporting – After when all the accounts are tallied, the trail balance of the financial statements are prepared. Financial statement is the Profit and loss account and Balance sheet. These reports are made available to users. Once the financial statement for a period is reported it is said to be the completion of the cycle. A new accounting cycle begins thereafter. Previous year closing balances becomes the opening balance for the current cycle.

Q2: Why is the evidence provided by source documents important to accounting?
Ans: The evidence provided by the source document is important because the source document is the initial document which contains of the details of the transactions that have taken place in the business. Thus the source document is important for any organization as: 

  • It provides confirmation to the transactions that have taken place in the organization. 
  • It provides a valid evidence of the transaction in the cases when the dispute may likely arise and the matters are taken into courts. 
  • It contains all the relevant details of the transactions such as date of the transactiona, amount involved in the transaction, parties involved in the transaction, particulars of the transaction etc. 
  • It acts as a check during the process of auditing.

Q3: Should a transaction be first recorded in the journal or ledger? Why?
Ans: All the transactions should be recorded in the journal first and then in the ledger. Journal entries of all the transactions have to be passed as and when they occur in the chronological order in the course of the business and for the very reason the journal book is also referred to as day book. Journal is also referred to as the book of the original entry as it encompasses of all the details of the transactions such as the date of the transactions, the parties involved, the amount of the transactions which is directly made from the source documents. The postings in the ledger account are made after when the entries are made in the journal book. Journal is the first book in which the transactions are recorded from the source documents Journal gives complete details about a transaction. 

Q4: Are debits or credits listed first in journal entries? Are debits or credits indented?
Ans: Accounting follows the double entry system as per which there are two sides namely "Debit‟ and "Credit‟. In the journal entries, the column of "Debit Amount" comes prior to the column of the "Credit Amount‟. Thus the side which indented and posted lately is the credit side.

NCERT Solution: Recording of Transactions-I | Accountancy Class 11 - Commerce

Q5: Why are some accounting systems called double accounting systems?
Ans: The double accounting system refers to the system of accounting in which the transaction is recorded in the two side of the account, namely Debit and Credit. Under the double entry system of accounting, the effect made on the one side of the account is made in simultaneous manner to the other side of the account. This is hence the widely recognized system of accounting which systematically records the transactions and gives the actual financial position of the business. The other method of accounting is the single entry system in which the transactions are recorded in the single side of the account only.

Q6: Give a specimen of an account.
Ans: 
NCERT Solution: Recording of Transactions-I | Accountancy Class 11 - Commerce

Q7: Why are the rules of debit and credit the same for both liability and capital?

NCERT Solution: Recording of Transactions-I | Accountancy Class 11 - Commerce  View Answer

Ans: As per the business entity concept, business is considered to be a legal entity which has its own individual existence which is apart from the existence of the owner. Any business has a number of the sources to fund itself which can be both internal as well as external. He amount invested by the owner of the business is known as capital which is hence regarded to be the internal source of the business fund. Thus the amount invested by the owner of the business is a liability for the business as it is liable o repay the invested amount back in the case when the business is about to close. In a similar manner the amount withdrawn by the owner of the business and the net loss incurred by the business is debited from the capital as it reduces the liability of the business. Hence, the treatment given to the creditor of the business is the same treatment given to the owner of the business and hence rules of the debit and credit are same for both liability and capital.

Q8: What is the purpose of posting J.F. numbers in the journal at the time entries are posted to the accounts?
Ans: The Journal Folio numbers are used as reference to denote the page numbers of the journal entry book in which the particular transactions is recorded. This hence allows the users to directly take the reference of the transaction in the journal entry book from the ledger account. This hence allows the users to track the information in the corresponding manner and verify the details of the transactions in a corresponding manner from the book of journal entries.

Q9: What entry (debit or credit) would you make to: 
(a) increase revenue 
(b) decrease in expense, 
(c) record drawings 
(d) record the fresh capital introduced by the owner.
Ans:
(a) Increase in Revenue: For this case, Income / Gain should be credited as it increases the revenue of the business making the rise in the amount of the capital. 
(b) Decrease in expense: The expenses are usually debited in the books of account. But in this case the expenses are decreasing implying that reverse treatment should be given and hence the expenses have to be credited. 
(c) Record drawings: Drawings refer to the withdrawal of a certain amount from the amount capital which thereby reduces the amount of the capital. Hence this should be debited in the books of accounts. 
(d) Record the fresh capital introduced: Whenever the fresh capital is reduced in the business it must be credited as it increases the liability of the business by giving the rise of the capital in the business.

Q10: If a transaction has the effect of decreasing an asset, is the decrease recorded as a debit or as a credit? If the transaction has the effect of decreasing a liability, is the decrease recorded as a debit or as a credit?
Ans: The purchase of the asset is recorded as the debit in the books of account and hence the effects which cause the decrease in the value of the asset it will be credited in the books of account. For example the sale of the asset of the business causes the decrease in the value of the asset and hence such sale will be credited.
The decrease in the liabilities of the business is debited in the books of accounts as the liabilities are recorded in the credit side of the book. For example the drawings made by the owner of the business decrease the liability of the capital invested by the organization and hence such transactions will be shown in the debit side.

Long Question Answers

Q1: Describe the events recorded in an accounting system and the importance of source documents in those systems.
Ans: Any business goes through large number of voluminous transaction in day to day basis and hence is not possible for anyone to remember the details of the transactions. Thus the accounting system allows the organization to record the transactions and keep a track of them. These transactions are made on the basis of the source documents which are used as support documents to account and record the transactions.
Only the monetary events are recorded in the books of accounts with the help of supporting documents. These transactions include: 

  • Credit sale recorded using invoice. 
  • Purchases recorded using bill/invoice. 
  • Cash Sale recorded using Cash memo.
  • Bank deposits made recorded using bank pay-in-slips 
  • Expenses paid through bank supported by cheques. 
  • Purchase returns and Sales returns recorded using debit note and credit note respectively.

The importance of the source document in accounting is as follows: 

  • It confirms the occurrence of the transactions which has taken place. 
  • It is a valid evidence which can be presented during court proceedings in case of any kind of disputes related to the transaction. 
  • It contains the necessary details of the transactions such as the parties involved, the amount involved, the date of the transaction, particulars of the transaction etc. 
  • It acts as a check during the process of auditing.

Q2: Describe how debits and credits are used to analyze transactions.
Ans: As per the dual concept of accounting all the recoded transactions in the books of accounts have the two aspects – debit and credit. With the effect on the aspect of the transaction there is a simultaneous and corresponding effect on the other side of the account. The example of such transaction is as follows:
A business sells goods of worth Rs. 500 on the 1st April 2018. Thus the books of account will debit the cash received from such transaction and credit the sales in a simultaneous manner in this transaction. In this example there is  sale of the goods that the business deals with cash coming in the business.

There are three kinds of accounts in accountancy which are: 

  • Personal account: These are the accounts which deal with persons. The rule of the personal account is that receiver must be debited and the giver must be credited. Example: Bank A/c represents bank, an organisation.

  • Real Account: These are accounts which deal with assets of material nature. The rule for the real account is: Debit what comes in and credit what goes out. Example: Furniture A/c, Machinery, Goodwill A/c etc. 

  • Nominal account: These are the accounts which deal with all kinds of expenses/ incomes. The rule of accounting for the real account is: Debit are all the expenses/ losses and all income/gains should be credited.
    Example: Salary A/c, Telephone charges A/c, Interest earned  etc.

Q3: Describe how accounts are used to record information about the effects of transactions.
Ans: The journal entry gives the clear picture of a particular transactions but it is difficult to asses information about any particular account when there is a chain of transactions related to it. Hence in such a cases the ledger accounts become important as they maintains systematic account in tabular format which helps the user to determine the details of the transaction for the particular account. This can be better understood with an example. 
01.01.17- Credit Sale is made to Ram for Rs.10000 
05.01.17- Goods worth Rs.2000 is returned from Ram 
08.01.17- Cheque received Rs.5000 on account from Ram 
10.01.17- Cash received Rs.1000 on account from Ram 
Now this is posted in Journal on various dates. A clear picture can be seen only when the entries are posted in ledger account of Ram. The balance amount receivable from Ram is clearly shown in the ledger below.

NCERT Solution: Recording of Transactions-I | Accountancy Class 11 - Commerce

Q4: What is a journal? Give a specimen of journal showing at least five entries.
Ans: Journal is derived from the French word “Jour”, the meaning of which is “daily records”. Journal thus records the day to day transactions of the business in the chronological manner and hence is also called as the “Day Book”.  The format of journal is given below.
Format of the journal is shown below:

NCERT Solution: Recording of Transactions-I | Accountancy Class 11 - CommerceDate: The date of the transaction in which the transaction has occurred so that journal could be made and maintained in the chronological manner from the source document.
Particulars: The accounts which have to be debited/ credited.
LF: Ledger Folio – It is the reference to Ledger Page for the particular account.
Debit: Amount which has to be debited is recorded here.
Credit: Amount which has to be credited is recorded here.
Example:
Journalise the below mentioned transactions in the books of Geeta:

NCERT Solution: Recording of Transactions-I | Accountancy Class 11 - Commerce

Q5: Differentiate between source documents and vouchers.
Ans: 
NCERT Solution: Recording of Transactions-I | Accountancy Class 11 - Commerce

Q6: Accounting equation remains intact under all circumstances. Justify the statement with the help of an example.
Ans: The double entry accounting system states that or every debit there is an equal amount of credit. However there is unlikely to be the equality of the total assets with the total claims of the business and the accounting equation will persist to be Assets = Liabilities+ Capital. Hence this equation will remain intact under all the circumstances. The examples for the same are as follows:

a. Mr. A started a business with cash Rs.100000
Assets = Liabilities+ Capital
Cash increases by 100000
And Capital 100000 
100000 = 0+100000

b. Purchased goods on credit for Rs.30000
Assets (Inventory) =30000
Creditors = 30000
Assets = Liabilities +Capital
30000= 30000+0

Q7: Explain the double entry mechanism with an illustrative example.
Ans: As per the double entry system of accounting, every transaction has two aspects debit and credit. Hence the double entry accounting system states that or every debit there is an equal amount of credit. Thus the ledger account always shows the debit on one side and the credit on the other side to abide by the dual aspect concept.
The three golden rules of accounting must be known in passing an entry: 
1. Personal Account- Debit the receiver 
Credit the giver 
2. Real Account - Debit what comes in 
Credit what goes out 
3. Nominal accounts- Debit the expenses/ losses 
Credit the income / gain

Example: Mr. Shyam commenced business with Cash Rs. 200000 and building Rs.150000.
Analysis: In the above transaction in-hand Cash comes in Rs. 200000 and building comes in Rs. 150000. On the other hand liability to be paid to the proprietor i.e. Capital increase is Rs. 350000.
Journal Entry in the books of Shyam

NCERT Solution: Recording of Transactions-I | Accountancy Class 11 - Commerce

Numerical Questions

Q1: Prepare accounting equation on the basis of the following:
(a) Harsha started business with cash Rs 2,00,000
(b) Purchased goods from Naman for cash Rs 40,000
(c) Sold goods to Bhanu costing Rs 10,000 for Rs 12,000
(d) Bought furniture on credit Rs 7,000

Ans: The accounting equation is given by:
Assets = Capital + Liabilities

Accounting Equation Calculation:

NCERT Solution: Recording of Transactions-I | Accountancy Class 11 - Commerce

NCERT Solution: Recording of Transactions-I | Accountancy Class 11 - Commerce

Q2: Prepare accounting equation from the following:
(a) Kunal started business with ₹2,50,000 cash
(b) He purchased furniture for ₹35,000 cash
(c) He paid commission ₹2,000
(d) He purchases goods on credit ₹40,000
(e) He sold goods (costing ₹ 26,000) for cash ₹20,000

Ans:

NCERT Solution: Recording of Transactions-I | Accountancy Class 11 - CommerceNCERT Solution: Recording of Transactions-I | Accountancy Class 11 - CommerceNCERT Solution: Recording of Transactions-I | Accountancy Class 11 - Commerce

Q3: Mohit has the following transactions, prepare accounting equation:
(a) Business started with cash - Rs. 1,75,000 
(b) Purchased goods from Rohit - Rs. 50,000 
(c) Sales goods on credit to Manish (Costing Rs 17,500) - Rs.20,000
(d) Purchased furniture for office use  - Rs.10,000 
(e) Cash paid to Rohit in full settlement  - Rs.48,500 
(f) Cash received from Manish  - Rs.20,000 
(g) Rent paid  - Rs.1,000 
(h) Cash withdrew for personal use  - Rs.3,000

Ans: 
NCERT Solution: Recording of Transactions-I | Accountancy Class 11 - CommerceNCERT Solution: Recording of Transactions-I | Accountancy Class 11 - CommerceNCERT Solution: Recording of Transactions-I | Accountancy Class 11 - CommerceNCERT Solution: Recording of Transactions-I | Accountancy Class 11 - CommerceNCERT Solution: Recording of Transactions-I | Accountancy Class 11 - Commerce

Q4: Rohit has the following transactions :
(a) Commenced business with cash - ₹1,50,000
(b) Purchased machinery on credit - ₹ 40,000
(c) Purchased goods for cash - ₹ 20,000
(d) Purchased car for personal use - ₹ 80,000
(e) Paid to creditors in full settlement - ₹ 38,000
(f) Sold goods for cash costing ₹ 5,000 - ₹ 4,500
(g) Paid rent - ₹ 1,000
(h) Commission received in advance - ₹ 2,000

Prepare the Accounting Equation to show the effect of the above transactions on the assets, liabilities and capital.
Ans: 

NCERT Solution: Recording of Transactions-I | Accountancy Class 11 - CommerceNCERT Solution: Recording of Transactions-I | Accountancy Class 11 - CommerceNCERT Solution: Recording of Transactions-I | Accountancy Class 11 - Commerce

Q5: Use accounting equation to show the effect of the following transactions of M/s Royal Traders:
(a) Started business with cash - ₹1,20,000
(b) Purchased goods for cash - ₹ 10,000
(c) Rent received - ₹ 5,000
(d) Salary outstanding - ₹ 2,000
(e) Prepaid Insurance  - ₹ 1,000
(f) Received interest - ₹ 700

(g) Sold goods for cash (Costing  ₹ 5,000) - ₹ 7,000
(h) Goods destroyed by fire - ₹ 500

Ans: 

NCERT Solution: Recording of Transactions-I | Accountancy Class 11 - Commerce

NCERT Solution: Recording of Transactions-I | Accountancy Class 11 - CommerceNCERT Solution: Recording of Transactions-I | Accountancy Class 11 - CommerceNCERT Solution: Recording of Transactions-I | Accountancy Class 11 - CommerceNCERT Solution: Recording of Transactions-I | Accountancy Class 11 - Commerce

The document NCERT Solution: Recording of Transactions-I | Accountancy Class 11 - Commerce is a part of the Commerce Course Accountancy Class 11.
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FAQs on NCERT Solution: Recording of Transactions-I - Accountancy Class 11 - Commerce

1. What are the main types of transactions recorded in accounting?
Ans. The main types of transactions recorded in accounting include sales, purchases, receipts, and payments. These transactions can be categorized as cash transactions, where payment is made immediately, or credit transactions, where payment is made at a later date.
2. Why is it important to record transactions accurately?
Ans. Accurate recording of transactions is crucial for maintaining reliable financial records, which are essential for making informed business decisions. It helps in tracking the financial performance of the business, ensuring compliance with legal requirements, and providing stakeholders with an accurate picture of the company's financial health.
3. What are the basic principles of recording transactions in double-entry accounting?
Ans. The basic principles of double-entry accounting include the concept that every transaction affects at least two accounts, with a debit entry in one account and a corresponding credit entry in another. This system ensures that the accounting equation (Assets = Liabilities + Equity) remains balanced.
4. How does the recording of transactions affect the financial statements?
Ans. The recording of transactions directly impacts the financial statements, such as the income statement and balance sheet. Accurate and timely recording ensures that revenues, expenses, assets, and liabilities are correctly reflected, which provides a true representation of the company's financial position and performance.
5. What are some common errors to avoid when recording transactions?
Ans. Common errors to avoid when recording transactions include transposition errors (switching digits), omission of transactions, incorrect account selection, and failing to record both sides of a transaction in the double-entry system. Regular reviews and reconciliations can help identify and correct these errors.
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