Describe
how accounts are used to record information about the effects of
transactions?
Describe how accounts are used to record information about the effects of transactions?
Every transaction is recorded in the original book of entry (journal) in order of their occurrence; however, if we want to know that how much we receive from our debtors or how much to pay to the creditors, it is not possible to determine at a single movement. Hence, we prepare accounts to know the position of business activities in the meantime.
There are some steps to record transactions in accounts; it can be easily understood with the help of an example.
Sold goods to Mr A worth Rs 50,000 on 12th April and received payment Rs 40,000 on 25th April. The following journal entries will be recorded:
Particulars
L.F.
Debit Amount
Rs
Credit Amount
Rs
Apr.12
A's A/c
Dr.
22
50,000
To Sales
18
50,000
(Goods sold on credit to Mr. A)
Apr.25
Cash A/c
Dr.
13
40,000
To A's A/c
22
40,000
(Cash received from Mr. A)
Step 1− Locate the account in ledger, i.e., Mr A’s Account.
Step 2− Enter the date of transaction in the date column of the debit side of Mr A’s Account.
Step 3− In the ‘Particulars’ column of the debit side of Mr A’s Account, the name of corresponding account is to be written, i.e., ‘Sales’.
Step 4− Enter the page number of the ledger in the Journal Folio (J.F.) column of Mr A’s Account.
Step 5− Enter the amount in the ‘Amount’ column.
Step 6− Same steps are to be followed to post entries in the credit side of Mr A’s Account.
Step 7− After entering all the transactions for a particular period, balance the account by totalling both sides and write the difference in shorter side, as ‘Balance c/d’.
Step 8− Total of account is to be written on either sides.
Every transaction is recorded in the original book of entry (journal) in order of their occurrence; however, if we want to know that how much we receive from our debtors or how much to pay to the creditors, it is not possible to determine at a single movement. Hence, we prepare accounts to know the position of business activities in the meantime.
There are some steps to record transactions in accounts; it can be easily understood with the help of an example.
Sold goods to Mr A worth Rs 50,000 on 12th April and received payment Rs 40,000 on 25th April. The following journal entries will be recorded:
|
|
Particulars |
L.F. |
Debit Amount Rs |
Credit Amount Rs |
|||
|
Apr.12 |
A's A/c |
Dr. |
22 |
50,000 |
|
||
|
To Sales |
18 |
50,000 |
|||||
|
(Goods sold on credit to Mr. A) |
|
|
|||||
|
|
|
|
|
|
|||
|
Apr.25 |
Cash A/c |
Dr. |
13 |
40,000 |
|
||
|
To A's A/c |
|
22 |
40,000 |
||||
|
|
(Cash received from Mr. A) |
|
|
|
|
||
Step 1− Locate the account in ledger, i.e., Mr A’s Account.
Step 2− Enter the date of transaction in the date column of the debit side of Mr A’s Account.
Step 3− In the ‘Particulars’ column of the debit side of Mr A’s Account, the name of corresponding account is to be written, i.e., ‘Sales’.
Step 4− Enter the page number of the ledger in the Journal Folio (J.F.) column of Mr A’s Account.
Step 5− Enter the amount in the ‘Amount’ column.
Step 6− Same steps are to be followed to post entries in the credit side of Mr A’s Account.
Step 7− After entering all the transactions for a particular period, balance the account by totalling both sides and write the difference in shorter side, as ‘Balance c/d’.
Step 8− Total of account is to be written on either sides.
