Professional Documents
Culture Documents
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VOUCHERS
Meaning of Voucher
On the basis of source documents entries are, first of all, recorded on Vouchers and then on the basis of
Vouchers recording is made in the Journal or books of original entry. Vouchers are printed separately by all
the firms in the their own names . A separate Voucher is prepared for each transaction and it specifies the
accounts to be debited and credited. Vouchers are prepared by an accountant and each Voucher is
countersigned by an authority person of the firm.
Types of Vouchers
Vouchers may be classified into two categories as follows:
(1) Cash Vouchers
(2) Non – Cash Vouchers or Transfer Vouchers
(1) Cash Vouchers : Cash Voucher are prepared for cash transactions i.e., cash receipts and cash
payments. These are of two types viz., Debit Vouchers and Credit Vouchers.
(2) Non – Cash Vouchers or Transfer Vouchers: The se Vouchers are prepared for non-cash
transactions such as:
For Credit Purchase or Credit Sale of goods
For Credit Purchase or Credit sale of investments
For Credit Purchase or Credit Sale of fixed assets
For Return of goods purchased or sold on credit
For Providing depreciation
For Writing off bad debts
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1. Assets Accounts These accounts relate to tangible or intangible real assets. Eg. Land A/c, Building
A/c, cash A/c, Patents, Goodwill, Trademark etc.
2. Liabilities Accounts These accounts relate to the financial obligations of an enterprise towards
outsiders. Eg Trade creditors, Bills Payable , Bank Overdraft, Loans, Outstanding
Exp. etc.
3. Capital Accounts These accounts relate to owners of an enterprise. Eg. Capital A/c, Drawings A/c.
4. Revenue Accounts These accounts relate to the amount charged for goods sold or services rendered
or permitting others to use enterprise’s resources yielding interest, royalty or
dividend. Eg. Sales A/c, Discount Received A/c, Dividend Received A/c, Interest
Received A/c.
5. Expenses Accounts These accounts relate to the amount incurred or lost in the process of earning
revenue. Eg. Purchase A/c, Discount allowed A/c, Royalty paid A/c, Interest
payable A/c, Loss by Fire A/c etc.
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JOURNAL
A Journal is a book in which transactions are recorded in the order in which they occur i.e., in chronological
order. A journal is the primary books of account under which all the transactions are recorded with
complete narration on the basis of the three basic rules given for recording the transactions. The process of
recording a transaction in a journal is called Journalizing. An entry made in the journal is called a ‘Journal
Entry’.
A journal entry is an analysis of all the effect of a single transaction on the various accounts, usually
accompanied by an explanation. For each transaction, this analysis identifies the accounts to be debited or
credited.
FORMAT:
Date Particulars L.F. Amount (Dr.) Amount (Cr.)
Note:- The ‘Ledger Folio column’ is filled in at the time of posting into the ledger and not at the time of
journalizing.
ADVANTAGES OF JOURNAL
♦ Chronological record:- It records the transactions in the order in which they occur.
♦ Explanation of transaction:- Each journal entry in the journal carries narration which gives a brief
explanations of the transaction.
♦ Recording the both aspects:- Both the aspect (i.e., debit and credit) of a transaction are recorded in
the journal. Since the amounts recorded in both debit amount column and credit amount column
must be equal, the possibility of accounting error is reduced and the detection of errors, if any,
committed becomes easy.
LIMITATIONS OF JOURNAL:
When the number of transactions is large, it is practically impossible to record all the transactions
through one journal because of the following reasons:
(i) The system of recording all the transactions in a journal required (a) the writing down of the
name of account involved as many times as the transactions occur; and (b) an individual posting
of each account debited and credited and hence involves the repetitive journalizing and posting
labour.
(ii) Such system does not provide the information on prompt basis.
(iii) Such a system does not facilitate the installation of an internal check system since, the journal
can be handled by only one person.
(iv) The journal becomes bulky and voluminous.
To overcome and shortcomings of the use of the journal only as a book of original entry, the journal is
subdivided into special journal.
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NARRATION:
The narration is the explanation of the entry and facilitates quick understanding. The length of the
narration depends on the complexity of the transaction and whether management wants the journal itself
to contain all relevant information. Most often narration are in brief.
S.No. Particulars Amount Amount
(Dr.) (Cr.)
1. On bringing of Capital in Cash:
Cash Account ...........…...........… Dr.
To Capital Account
(Being cash brought as capital in to business)
2. On brining of capital in the mode of cheque:
Bank Account ...........…...........… Dr.
To Capital Account
(Being capital brought into business)
3. On deposit of cash into bank:
Bank Account ...........…...........… Dr.
To Cash Account
(Being Cash deposited into bank)
4. On purchase of assets for cash.
Assets (name of assets) Account ...........…. Dr.
To Cash Account.
(Being assets purchase for cash)
5. On purchase of assets on credit:
Assets Account ...........…...........…. Dr.
To Supplier Account
(Being assets purchased on credit from .............)
6. On sale of goods for cash.
Cash Account ...........…...........…… Dr.
To Sales Account
(Being goods sold for cash)
7. On sale of goods on credit.
Sundry Debtors Account ...........…… Dr.
To Sales Accounts
(Being goods sold to Mr. ............. on credit)
8. On return of goods from customer:
Sales Account ...........…...........… Dr.
To Sundry Debtors / Cash A/c
(Being goods return from Mr. ...........…)
9. On payment received from debtors:
(i) Received in cash:
Cash Account ...........…...........… Dr.
To Sundry Debtors Account
(Being cash received from .............)
COMPOUND ENTRY:
When more than two accounts are involved in a transaction and the transaction is recorded by means of
single journal entry instead of passing several journal entries, such single journal entry is termed as
‘Compound Journal Entry’. A compound journal may also be passed if there are more transactions of
the same nature, taking place on the same date. It may be recorded in the following three way:
(i) by debiting one account and crediting two or more accounts; or
(ii) by debiting two or more accounts and crediting one account; or
(iii) by debiting several accounts and crediting several accounts.
Example:-
Paid Rs. 920 to Mr. Gopal in full settlement of his account of Rs. 1,000.
Gopal A/c ...........… Dr. 1000
To Cash a/c 980
To discount received A/c 20
(Being cash paid to Gopal in full settlement of his account)
OPENING ENTRY
A Journal entry by means of which the balances of various assets, liabilities and capital appearing in the
balance sheet of previous accounting period are brought forward in the books of current accounting
period, is known as ‘Opening Entry’.
While passing an opening entry. All those accounts which denote what the business possesses (assets)
are debited and all the accounts showing amounts due by the business (liabilities) are credited.
⇒ If Capital is not given, it can be easily found out by deducting liabilities from assets.
Opening entries are the following:
Cash Account ............. Dr.
Cash at Bank Account ............. Dr.
Sundry Debtors Account ............. Dr.
Stock Account ............. Dr.
Fixed Assets Account ............. Dr.
To Sundry Creditors Account
To Capital Account
⇒ The opening entry is made in the journal. At the end of the trading period, closing entries are made,
the object being to close the books.
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LEDGER:
A ledger is a principal book, which contains all the accounts to which the transactions recorded in the
books of original entry are transferred. As the ledger is the ultimate destination of all transactions, the
ledger is called the ‘Book of Final Entry.’
The ledger may be kept in the form of a bound book, a loose-leaf set of pages, or some kind of electronic
storage device such as magnetic tape or floppy diskettes or CDs, but it is always kept current in a
systematic manner.
Journal Ledger
⇒ It is a book of primary entry. ⇒ It is book of final or secondary entry.
⇒ It is prepared on the basis of source documents ⇒ It is prepared on the basis of journal.
of transactions.
⇒ Recording of transactions in the journal is the ⇒ Recording in the ledger is third or final stage. It
second stage. It is done after preparing is prepared after the journal entry.
vouchers.
TRIAL BALANCE
Meaning of Trial Balance, After posting the accounts in the Ledger, a statement is prepared to show
separately the debit and credit balances. Such a statement is known as the Trial Balance.Whichever way it is
prepared, the totals of the two columns should agree. An agreement indicates reasonable arithmetic accuracy
of the accounting work. If the two sides do not agree, there is definitely some error or errors.