Process Of Recording Business Transactions Step 4: Preparation of final accounts

Step 3: Preparation of Trial Balance Step 2: Books of Final Entry

Step 1: Books of Original Entry

ACCOUNTING CYCLE

Step 1 Journalising (the transactions)

Step 2 Posting (to the ledger)

Step 3 Balancing (the accounts in the ledger)

Step 4 Trial Balance

Step 5 Income Statement

Final Accounts
Step 6 Position Statement

Figure showing various steps in the accounting cycle

Records Maintained By An Organisation

The books of accounts maintained by an organisation may be classified into two as

a. a. Books of Prime / Original Entry

b. b. Books of Second entry / Final entry Books of Prime / Original Entry 1. Journal 2. Cash Book 3. Subsidiary Books

JOURNAL / DAY BOOK

Format of a Journal

Date

Particulars

Ledger Debit Credit Folio Rs. Rs.

. To. (Being)

CASH
Debit:

BOOK

All Cash receipts and Bank receipts and Discount Allowed

Credit: All Cash payments and Bank payments and Discount

Received.

The cashbook is classified into 4 types viz., 1. Single column cash book 2. Two columnar cash book 3. Three columnar cash book 4. Petty cash book

LEDGER Also called as General Ledger, this is a principal book that contains all the accounts i.e., accounts of Assets liabilities, capital, revenue and expenses. The entries from the books of original entry are transferred to this book. Hence it is also called as a book of final entry. There are a number of accounts in a general ledger. All similar transactions are grouped under one account.
Dr
Date Particulars Folio Amount Rs. -------Date Particulars Folio

Cr
Amount Rs.

To Balance b/d (Opening balance)

By Balance c/d (Closing balance)

--------

The opening and closing balances will appear only in case of assets, liabilities and capital accounts but not in case of incomes and expenditures.

Format of a single column cash book

Dr
Date Particulars
To Balance b/d (Opening balance)

Cr
L.F. Amount Rs. Date Particulars L.F. Amount Rs.

-------

By Balance c/d (Closing balance)

-------

Format of a double column cash book

Dr
Date Particulars
L.F Discount Rs.

Cr
Cash Date Rs.
------

Particulars

L.F

Discount Rs.

Cash Rs.

To Balance b/d (Opening balance)

By Balance c/d (Closing balance)

------

OR

Format of a double column cash book

Dr
Date Particulars
L.F Discount Rs.

Cr
Bank Rs.
------

Date

Particulars

L.F

Discount Rs.

Bank Rs.

To Balance b/d (Opening balance)

By Balance c/d (Closing balance)

------

OR

Format of a double column cash book

Dr
Date Particulars
L.F

Cr
Cash Rs. Bank Rs.
------

Date

Particulars

L.F

Cash Rs.

Bank Rs.

To Balance b/d (Opening balance)

By Balance c/d (Closing balance)

------

Format of a three columnar cash book

Dr
Date Particulars L.F Disco -unt Rs. Cash Bank Rs. Date Particulars L.F Disco -unt Rs. Cash Rs.

Cr
Bank Rs.

To Balance b/d (Opening balance)

------

By Balance c/d (Closing balance)

------

OR

Petty Cash Book

It is a cash book in which all the petty cash expenses incurred daily by an organisation is recorded.
Dr
Dt Particulars CBF Total Rs. Dt Particulars Vr. No Postage Conveyance Wages Business Promotion

Cr
Total Rs.

PURCHASES BOOK
This is a subsidiary book in which all the credit purchases made by the organisation is recorded. The monthly total from the purchase book is transferred to the General Ledger to the Purchases Account.
Date Purchase invoice no. Name of the supplier LF Details Rs. Ps. Total Amount Rs. Ps.

PURCHASE RETURNS BOOK

A book in which all the purchase returns (returns outwards) are recorded.

Date Debit Note No.

Name of the supplier

LF

Details

Total Amount

Rs. Ps.

Rs.

Ps.

SALES BOOK
The credit sales are recorded in this book. The monthly totals are transferred to the sales account in the General Ledger.
Date Sales invoice no. Name of the purchaser LF Details Rs. Ps. Total Amount Rs. Ps.

SALES RETURNS BOOK A book of account in which all the sales returns (returns outwards) made by the organisation are recorded.
Date Credit Note No. Name of the Purchaser LF Details Rs. Ps. Total Amount Rs. Ps.

JOURNAL PROPER

Those journal entries that cannot be recorded in any of the subsidiary books are recorded in the journal proper. The following are recorded in the journal proper:

a. b. c. d. e.

Opening Entries Closing Entries Transfer Entries Adjustment Entries Rectification Entries

TRIAL BALANCE

It is a statement that shows the balance in all the accounts in a ledger. It contains all the debit and credit balances. A trial balance is a list of debit and credit balances of all the ledger accounts prepared on any particular date to verify whether the entries in the books of accounts are arithmetically correct or not.
Sl. No. Head of Account LF Debit Balance Rs. Ps. Credit Balance Rs. Ps.