Dr.Varadraj Bapat 1 Module 3. Recording Financial Transactions.

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Presentation transcript:

Dr.Varadraj Bapat 1 Module 3. Recording Financial Transactions

2 Recording of Financial Transaction Journal Ledger Subsidiary Books

3 Books of Account Journal Ledger Subsidiary Books

4 Journal The transactions are first recorded in the book to show which accounts are effected. This book is called as “Journal”. Recording of transaction in journal is termed as journalizing the entries.

5  Entries are recorded chronologically to maintain the records in an orderly manner.  Journal entries are very important and form basis for all further records.

6 of Journal Specimen of Journal DateParticularsL.F. Debit (Amt) Credit (Amt) An entry in journal may appear as follows for the following transaction Goods sold for cash of ` Cash deposited in Bank ` 3000

7 Journal Entries DateParticularsL.F. Debit (Amt) Credit (Amt) Cash A/c….Dr. To Sales A/c To Sales A/c (Being Goods sold on cash) Bank A/c…Dr. To Cash A/c To Cash A/c (Being cash deposited in bank)

8 Ledger After recording transaction in journal, recorded entries are classified and grouped by preparation of accounts, is known as “ledger”. It is also known as principal books of accounts.

9 Specimen of Ledger DateParticularsJ.F.AmtDateParticularsJ.F.Amt Dr. Cr. ABC Account -A ledger account has two sides debit and credit. -Separate account is opened in ledger book for different set of transaction.

10 - It is practice to use word ‘To’ and ‘By’ while posting transaction on debit and credit side of account. - To ascertain the balance in any account, what is done is to total the sides and ascertain the difference; the difference is balance.

11 Case1: Ram & Co. Prepare ledger accounts for Ram & Co from the following details : Opening balances : Cash A/c Rs.1500 Creditors A/c Rs.800 Debtors A/c Rs.1200 Capital A/c Rs.1900

12 Transactions :  2 Apr. Purchased goods of Rs.3000 on credit  4 Apr. Cash sales of Rs.2400  7 Apr. Goods sold on credit Rs.1250  15 Apr. Paid cash of Rs.250 for expenses

13  18 Apr. cash received from debtors Rs.1200  22 Apr. paid cash to creditors Rs.800

14 In the books Of Ram & Company 4050 To balance b/d01-May 5100 Total 5100 Total 4050 By Balance C/d30-Apr1200 To Debtors A/c18-Apr 800 By Creditors A/c22-Apr2400 To Sales A/c04-Apr 250 By Expenses A/c15-Apr1500 To balance b/d01-Apr AmtJ.F.Particulars DateAmt J.F. Particular sDate Cr. Cash A/c Dr. Amt

To balance b/d 01- May 3000 Total 3000 Total 3000 By Balance C/d 30- Apr3000 To Creditors A/c 02- Apr AmtJ.F.ParticularsDateAmtJ.F.ParticularsDate Cr. Purchase A/c Dr By Balance b/d 01- May 3650 Total 3650 Total 1250 By Debtors A/c07-Apr 2400 By Cash A/c04-Apr3650 To Balance C/d 30- Apr Amt.J.F.ParticularsDateAmt. J.F.ParticularsDate Cr. Sales A/c Dr.

To Balance b/d01-May 2450 Total 2450 Total 1250 By Balance c/d30-Apr1250 To Sales A/c07-Apr 1200 By Cash A/c18-Apr1200 To Balance b/d01-Apr Amt.J.F.ParticularsDateAmt.J.F. Particular sDate Cr. Debtors A/c Dr By Balance b/d 01- May 3800 Total 3800 Total 3000 By Purchase A/c02-Apr3000 To Balance c/d 30- Apr 800 By Balance b/d01-Apr800 To Cash A/c 22- Apr Amt.J.F.ParticularsDateAmt.J.F.ParticularsDate Cr. Creditors A/c Dr.

To Balance b/d 01- May 250 Total 250 Total 250 By Balance C/d 30- Apr250 To Cash A/c 15- Apr Amt.J.F.ParticularsDateAmt.J.F.ParticularsDate Cr. Expenses A/c Dr By Balance b/d 01- May 1900 Total 1900 Total 1900 By Balance b/d01-Apr1900 To Balance c/d 30- Apr Amt.J.F.ParticularsDateAmt.J.F.ParticularsDate Cr. Capital A/c Dr.

18 Subsidiary Books  In case of large business organisation numerous transactions takes place with respect to purchase, sales, cash etc. Journalization of each of these transactions separately is laborious and time-consuming. to solve this problem subsidiary books are prepared.

19  Subsidiary book is a book of original entry generally maintained by large organisation wherein cash and cash transactions are directly recorded avoiding cumbersome process of Journalization without sacrificing the fundamental principle of double entry book keeping system.

20  Cash book: To record cash, bank and discount transactions  Purchase book: To record transaction relating to credit purchases of goods in trade  Sales book: To record transaction relating to credit sales Normally, the following subsidiary books are used in business :-

21  Bills receivable book: To record the receipts of the promissory notes or hundies  Sales return book: To record transaction relating to sales return  Purchase return book: To record transaction relating to purchase return

22  Journal proper: To record other transactions for which no specific book is maintained, and for recording entries to rectify mistakes in books of accounts  Bills payable book: To record the issue of the promissory notes or hundies