Learn CBSE Accountancy Index Terms for Class 11, Chapter 3 Recording of transactions – I
1. Debit – Under the double entry system of bookkeeping, debit is denoted as (dr.). It is where the money inflows are recorded in the respective accounts.
2. Credit – Under the double entry system of bookkeeping, credit is denoted as (cr.). It is where the money outflows are recorded in the respective accounts.
3. Cash Account – A cash account is an account in a ledger. It records only one aspect of a transaction, i.e. cash. The cash account is opened in the ledger and posting is done in this account from the journal. When transactions of cash are recorded in a journal, it is necessary to open a cash account in the ledger.
4. Capital Account – All transactions associated with partners of an enterprise are maintained in the books of an enterprise via their capital accounts. This incorporates the amount of money pulled in as withdrawal of capital, capital, interest on capital, the share of profit, partner’s salary, commission to partners, and interest on drawings.
5. Inventory – Inventory refers to the actual raw materials that are used in the production of goods as well as the final goods produced that will be sold in the market. A company’s total inventory represents a very important asset, simply because its turnover is among the primary sources of revenue generation, as well as subsequent earnings for the organisation and its shareholders. There are mainly three types of inventory: raw material, work-in-progress goods, and finished goods. Inventory is categorised as a part of the current assets on the balance sheet of a company.
Inventory is one of the most crucial assets for any company. No company can function properly if they do not keep proper track of its inventory and its actual value.
6. Journal Entry – Journal entry is a record of a business transaction taking place in the accounting books of a business. It is the first step of the accounting process. A journal entry is mostly recorded in a general ledger.
7. Ledger – A ledger is a principal book of account, and its primary purpose is to transfer transactions from a journal and then classify it into separate accounts. Ledger is also known as the book of final entry as it helps businesses prepare accounting statements like the Trial Balance.
A ledger in accounting refers to a book that contains different accounts where records of transactions pertaining to a specific account are stored. It is also known as the book of final entry or principal book of accounts. It is a book where all transactions either debited or credited are stored.
A ledger account is a combination of all the ledgers and contains information related to all the accounting activities of an organisation. It is regarded as the most important book in accounting as it helps in creating a trial balance that acts as a precursor to the preparation of financial statements.
8. Journal Proper – A book is maintained to record transactions, which does not find a place in special journals, which is known as journal proper or journal residual.
9. Cash Book – Cash book is a special type of book that is only concerned with the recording of cash transactions of an organisation. It performs the dual role of both a journal and a ledger for all the cash transactions taking place in a business organisation. A cash book records all the cash receipts on the debit side and all the cash payments of the organisation on the credit side.
10. Single Column Cash Book – Single column cash book is also called a simple cash book. It presents entries for cash received (receipts) on the left side or debit side and cash payments on the right-hand side or credit side.
The bank transactions and the discounts that are given for transactions will be featured in separate ledger accounts in the case of single-column cash books.
Cash books are updated on a daily basis in some business firms. The most striking feature of a cash book is that it can never have a credit balance. It should always show a debit balance.
11. Double Column Cash Book – In a double-column cash book, there is an additional column that is reserved for discounts. Therefore, in a double-column cash book, also known as a two-column cash book, the cash receipts and transactions are recorded in one column while the second column records discounts received and discounts provided.
Discount being a nominal account, the discount provided is placed on the debit side of the cash book while the discount received is placed on the credit side of the cash book.
At the end of the accounting period, both the columns are balanced, and the closing balances are transferred appropriately.
12. Triple Column Cash Book – In a triple column cash book, the two columns are similar to the double column cash book. While the additional column is for bank transactions.
Due to the advances in the banking industry, most firms deal in cheques, and therefore, the presence of a bank column in a cash book is helpful in understanding the transactions properly.
13. Petty Cash Book – Petty cash book, as the name suggests, is for very small transactions that take place in an organisation. Such transactions can occur in a day and are repetitive in nature, which can put an undue load on the general cash book. For this reason, it is maintained separately. Examples of such transactions are stationery, postage, food bills, etc.
14. Purchase Book – Purchase book is a type of special purpose subsidiary book which is used for recording only credit purchases of goods. Cash purchases of goods are recorded in the cash book. Entries for credit purchases of goods are recorded from the source documents directly to the purchase book. The source documents are the invoices or bills that are received from the supplier of goods.
The main purpose of preparing a purchase book is to know the amount of credit purchases taking place in a business at a particular point in time. One important point to note about the purchase of books is that it records credit to purchase items that are integral to the core business operations or items that are procured with the purpose of reselling.
15. Book of Original Entry – Books of original entry are referred to as the books or journals where a business records all the business transactions initially. The information that is contained in the books of original entry is summarised and recorded in the general ledger, which is then used to prepare the trial balance and the financial statements.
16. Journal – A journal is a subsidiary book of account that records monetary transactions according to accounting standards. These transactions get recorded in chronological order, and it gives details about the accounts that are affected by each transaction. It is known as the first step of the accounting process.
17. Purchase Return Book – A purchase returns book is a book in accounting where the goods returned to the supplier are recorded. It is also known as purchase returns day book or return outwards book.
18. Sales Book – Sales book is a book of original entry or a subsidiary book that is used to record the credit sales of the goods. The sales that are made by cash are recorded in the cash books and credit sales of any other asset apart from goods are recorded in the journal proper.
Goods here refer to the items a business sells as a part of its core sales function. The invoice that is supplied to the purchasers of goods acts as the source document for the financial entry.
19. Sales Return Book – Sales return book, also known as the ‘Return Inwards Book’, is one of the eight subsidiary books in accounting. It is the original book of entry where transactions related to the return of goods sold are recorded. Unless the returns are taking place frequently, the transactions can be recorded. The return of goods that are on a cash basis is not recorded in the sales return book.
20. Bills Receivable Book – A bills receivable book is designed as a summary of information regarding a duly accepted bill received by a drawer. It contains almost all the details of the bill like bill date, acceptor’s name, amount, term, place of payment, etc., for future reference.
21. Bills Payable Book – A bills payable book is designed as a summary of information regarding the various acceptances by a drawee. It contains almost all the details of Acceptance (Bills Payable) like bill date, drawer’s name, amount, term, place of payment, cash book folio, etc., for future reference.
22. Source Documents – A source document is referred to as the original document that contains the details of a business transaction. It contains the most important details of the transaction like the amount paid, and the parties involved.
In other words, a source document is a document that contains the details of a business transaction. Source documents are used for preparing accounting vouchers. Examples of source documents are invoices, receipts, cash memos, etc.
23. Accounting Equation – The accounting equation is the basic element of the balance sheet and the primary principle of accounting. It helps the company to prepare a balance sheet and see if the entire enterprise’s asset is equal to its liabilities and stockholder equity. It is the base of the double-entry accounting system.
Double-entry accounting is a system that ensures that accounting and transaction equations should be equal as it affects both sides. Any change in the asset account, there should be a change in related liability and stockholder’s equity account.
We hope that the offered Accountancy Index Terms for Class 11 with respect to Chapter 3: Recording of transactions – I, will help you.
Related Links:
- Class 11 Accountancy Terms Part I – Chapter 1: Introduction to Accounting
- Class 11 Accountancy Terms Part I – Chapter 2: Theory Base of Accounting
- Class 11 Accountancy Terms Part I – Chapter 4: Recording of Transactions – II
- Class 11 Accountancy Terms Part I – Chapter 5: Bank Reconciliation Statement
- Class 11 Accountancy Terms Part I – Chapter 6: Trial Balance and Rectification of Errors
- Class 11 Accountancy Terms Part I – Chapter 7: Depreciations, Provisions, and Reserves
- Class 11 Accountancy Terms Part II – Chapter 1: Financial Statements I
- Class 11 Accountancy Terms Part II – Chapter 2: Financial Statements II
- Class 11 Accountancy Terms Part II – Chapter 3: Accounts from Incomplete Records
- Class 11 Accountancy Terms Part II – Chapter 4: Applications of Computers in Accounting
