Amity School of Business
Recording Of Transactions
Module II
Journal Entries
Amity School of Business
• Analyzing transactions and recording them
as journal entries is the first step in
the accounting cycle. It begins at the start
of an accounting period and continues
during the whole period.
• JOURNALIZING = RECORDING
• Accountants classify and record the
events having economic effect via journal
entries according to debit-credit rule.
Amity School of Business
Eg:- Journalise the following transaction:
• An amount of Rs.36,000 was paid as
advance rent for three months.
• Paid Rs.60,000 cash on the purchase of
equipment.
• Purchased office supplies costing
Rs.17,600 on account.
Journal Entries
Amity School of Business
Date
Particulars
1
Prepaid Rent
Debit
36,000
To Cash
2
Equipment
36,000
80,000
Cash
3
Office Supplies
Accounts Payable
Credit
60,000
17,600
17,600
Ledger
Amity School of Business
• The second step of accounting cycle is to
post the journal entries to the ledger
accounts.
• The debit and credit values of journal
entries are transferred to ledger accounts
one by one in such a way that debit
amount of a journal entry is transferred to
the debit side of the relevant ledger
account and the credit amount to the credit
side of the relevant ledger account.
Ledger Account
Amity School of Business
Date Particular J.f Amt
Date Particular J.f Amt
Trial Balance
Amity School of Business
• A trial balance is a list of the balances of
ledger accounts of a business at a specific
point of time usually at the end of a period
such as month, quarter or year.
• In double entry accounting we record each
transaction with two aspects, therefore the
total of debit and credit balances of the
trial balance are always equal.
Trail Balance
Particulars
Cash
Accounts Receivable
Amity School of Business
Credit
Debit
20,430
5,900
Office Supplies
22,800
Prepaid Rent
36,000
Equipment
80,000
Accounts Payable
100000
Service Revenue
110764
Wages Expense
38,200
Miscellaneous Expense
3,470
Electricity Expense
2,470
Telephone Expense
1,494
Total
210764
210764
Cash Book
Amity School of Business
• Cash Book is a book of Original Entry,
which serves the purpose of both a
Journal as well as ledger for cash
transactions. Since in almost all business
concerns, most business transactions are
cash in nature. Like cash sales, Cash
Purchases, payments of expenses,
receipts of incomes, there is a need for a
separate book in which all such
transactions can be grouped.
Single Column
Cash Book
Amity School of Business
Date
Receipts
.
L.F.
Amount Date
Payments
L.F.
Amount
Double Column
Cash Book
Amity School of Business
• A double column cash book or two
column cash book is one which consists
of two separate columns on the debit side
as well as credit side for recording cash
and discount
• Each item of discount allowed will be
shown on Dr. side of the cash book.
• Similarly each item of discount received
will be posted to the credit side of cash
book.
Format
Amity School of Business
Debit
Date
Particulars
Credit
L.F
Discount
Cash Date
Particulars
L.F
Discount
Cash
Triple Column
Cash Book
Amity School of Business
• There are three columns on each side debit and credit side. One is used to
record cash transactions, the second is
used to record bank transactions and third
is used to record discount received and
paid.
• If an amount is entered on the debit side
of the cash book, and the exact amount is
again entered on the credit side of the
same account, it is called "contra entry".
Date
Format
L
.
Particulars
Disc Cash Bank Date
F
.
Amity School of Business
L
.
Particulars
Disc
F
.
Cash Bank
Petty Cash Book
Amity School of Business
• In almost all businesses, it is found
necessary to keep small sums of
ready money with the petty cashier for the
purpose of meeting small expenses such
as postage, stationary and office sundries
etc.
• Under imprest system, a fixed sum
of money is given to the petty cashier to
cover the petty expenses for the month.
Format of
Petty Cash Book
Amity School of Business
Date Particulars V.N
Total
Postage
Printing
and
Stationary
Cartage
Traveling
Expenses
Misc.
Purchase Book
Amity School of Business
• Purchases book or purchases day
book is a book of original
entry maintained to record credit
purchase.
• Cash purchases will not be entered in
purchases day book because entries in
respect of cash purchases must have
been entered in the cash book.
Format of Purchase
Book
Amity School of Business
Date
Particulars
Inv.No.
L.F.
Amount
Sales Book
Amity School of Business
• A sales book is also known as sales day
book is a book of original entry in which
we record the details of credit sales made.
Total of sales book shows the total credit
sales of goods during the period
concerned. Usually the sales book is
totaled every month. The sales day book
is written up daily from the copies of
invoices sent out.
Format of
Sales Book
Date
Particulars
Inv. No.
Amity School of Business
L.F.
Amount