Recording of Transactions
RECORDING OF TRANSACTIONS
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Introduction
·
An external event that indirectly or directly
affects
o
Assets
o
Liabilities
o
Or Capital is known as a transaction
·
A document in which entries are recorded in
the books of account are known as source documents.eg
o
Vouchers
o
Invoice
o
Bills
o
Cash memos
·
These document provide information about the
nature of the transaction and the amount involved in it
·
Book Keeping
o
A science and an art of systematically and
correctly recording of all transactions which
involve the transfer of money or money’s worth
o
The systematic book keeping enables us to get
the accurate results of business transactions during a particular period
·
Double entry book keeping system
o
It is based on the principle that every
transaction has two fold aspects
§ A giving aspect
§ A receiving aspect
o
Both aspects must be recorded in the books of
both the parties
o
The left hand side is known as Debit side and denoted by Dr
o
The right hand side is known as Credit side and denoted by Cr
Principles of Transactions
·
Receivers is debited with the monetary value
of whatever he receives
·
Giver is credited with the monetary value of
whatever he gives
·
Every debit requires a credit and vice versa
Books of Original
Account
·
Journal
o
Column1 (date of transaction)
o
Column2 (brief explanation of the
transaction)
o
Column3 (page number of the ledger)
o
Column4 (amount to be debited)
o
Column5 (amount to be credited)
·
Ledger
o
It is divided into two sections by a central
vertical line
§ Date on which a transaction is recorded
§ Particulars relating to a transaction
§ Page number of the book of original entry
§ Amount involved in the transaction
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