Recording of Transactions – I – Class 11 Accountancy Chapter 3 Notes & NCERT PDF

Introduction

The accounting process begins by identifying business transactions and preparing source documents. These are recorded first in the journal (book of original entry) and then posted to individual accounts in the ledger (principal book). This chapter covers each step: source documents, the accounting equation, rules of debit and credit, journalising, the ledger and posting, including entries under GST.

3.1 Business Transactions and Source Document

A business transaction is an exchange with a give and take aspect. When your father buys a computer for ₹35,000 cash, cash is given and the computer is taken, so the two-fold effect is recorded in at least two accounts.

A document which provides evidence of a transaction is called a Source Document or Voucher – cash memo, invoice, sales bill, pay-in-slip, cheque, salary slip, etc.

3.1.1 Preparation of Accounting Vouchers

Essential elements: name of the firm, date of transaction, serial number, accounts debited and credited, amounts, narration, and the signatures of the preparer and the authorising person. Vouchers are kept at least until the audit and tax assessment are completed.

3.2 Accounting Equation

A = L + C (Assets = Liabilities + Capital); derived forms: A − L = C and A − C = L.

It is also called the Balance Sheet Equation. Every transaction changes the elements, but the equality always holds.

Worked Example 1 – Rohit (from the chapter)

Rohit starts with cash ₹5,00,000. Transactions: (1) opens a bank account with ₹4,80,000; (2) buys furniture ₹60,000 by cheque; (3) buys plant and machinery ₹1,25,000 from M/s Ramjee Lal, paying ₹10,000 cash advance (creditor ₹1,15,000); (4) buys goods ₹55,000 on credit from M/s Sumit Traders; (5) sells goods costing ₹25,000 to Rajani Enterprises for ₹35,000 on credit.

3.3 Using Debit and Credit

An account in its simplest form looks like a T: the left side is Debit (Dr.) and the right side is Credit (Cr.).

3.3.1 Rules of Debit and Credit

All accounts fall into five categories: assets, liabilities, capital, expenses/losses and revenues/gains.

Note: debit does not always mean increase – a debit to a liability decreases it.

Worked Example 2 – Illustration 1 (accounting equation)

(i) introduced cash ₹8,00,000 and stock ₹50,000; (ii) plant ₹3,00,000, paid ₹15,000 cash; (iii) deposited ₹6,00,000 in bank; (iv) furniture ₹1,00,000 by cheque; (v) goods ₹80,000 cash and ₹35,000 credit; (vi) goods costing ₹45,000 sold for ₹60,000 cash; (vii) goods costing ₹80,000 sold for ₹1,25,000 on credit; (viii) cheque ₹35,000 to supplier; (ix) cheque ₹75,000 from customer; (x) drawings ₹25,000.

3.4 Books of Original Entry

Transactions are first recorded in the journal – the process is journalising; transferring them to accounts is posting. The journal is sub-divided into: journal proper, cash book, and other day books (purchases, sales, purchases returns, sales returns, bills receivable, bills payable).

3.4.1 Journal

Columns: Date | Particulars | L.F. | Debit Amount | Credit Amount. The account debited is written first with "Dr."; the account credited is written on the next line, indented, with "To"; a narration follows in brackets. The L.F. column is filled at the time of posting. Page totals are carried forward (c/f) and brought forward (b/f).

Worked Example 3 – Journal entries (from the chapter)

Worked Example 4 – Entries under GST (Illustration 4, Delhi, CGST 5% + SGST 5%)

3.5 The Ledger

The ledger is the principal book – a collection of all accounts. Only the ledger shows the net result of all transactions for a particular account on a given date (e.g. how much a customer owes). Each account has columns for Date, Particulars, J.F. and Amount on both the debit (left) and credit (right) sides.

3.5.1 Classification of Ledger Accounts

3.6 Posting from Journal

Key Facts Sheet

Exam Focus

Key Terms

Source document (स्रोत प्रलेख), Voucher (प्रमाणक), Accounting equation (लेखांकन समीकरण), Debit (नाम), Credit (जमा), Journal (रोजनामचा/जर्नल), Journalising (जर्नल में लेखा करना), Narration (विवरण), Ledger (खाता-बही), Posting (खतौनी), Compound entry (संयुक्त प्रविष्टि), Input tax credit (आगत कर साख), Permanent account (स्थायी खाता), Temporary account (अस्थायी खाता).

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