A. Introduction
Accounting
records are made for transactions only. This unit is related with recording of
those business transactions. It includes the preparation of Journal, ledger and sub-division of journal.
This unit also gives the knowledge of the different basic accounting
terminologies.
B. Objectives
The
objective of the unit is to help the student to understand the ways of
recording and posting the transactions. After studying this unit, the students
would be able to:
(i) Define the different
accounting terminologies. (ii) Know various rules for debit and credit.
(iii) Make entries in the
journal. (iv) Understand the meaning, importance's and objectives of ledger.
(v) Learn posting technique in
ledger. (vi) Illustrate and balancing ledger.
(vii) Describe the concept of
different subsidiary books.
(viii) Prepare various subsidiary
books and posting them into ledgers.
C. Specification of
Conduct Area of the Unit.
The total teaching hours
allocated for this unit as per syllabus is 18 hours. The total hours can be
sub-divided in the following way. However, the teacher can arrange the
sub-division of hours as per his/her convenient.
Serial Number
|
Areas of Units
|
Teaching Hours
|
2.1
|
Basic
terminologies
|
1
|
2.2
|
Rules of debit
and credit
|
2
|
2.3
|
Books of
original entry
|
2
|
2.4
|
Ledger account
|
6
|
2.5
|
Subsidiary
books and its types
|
6
|
Total
|
|
18
|
2.1. Books of
Original Entry
2.1.1. Meaning
of Journal
Journal
is the book of prime or original entry, in which all financial transactions of
business are systematically recorded according to their date of occurrence and
is maintained with a view to help to prepare the subsequent book of records
known as ledger. A transaction is recorded for the first
time in this book and hence, it is also known as "Books of Original Entry
Journal Entries
Date
|
Particulars
|
L.F.
|
Debit (Rs.)
|
Credit (Rs.)
|
|
Debit
Account
Credit
Account
Narration
|
|
|
|
1. Date: Date of financial transaction
in chronological order.
2. Particulars:
Name of account to be debited and
credited along with a brief description of transaction which is called ‘Narration’.
§ Name of the account to be debited is written in first line.
The word ‘Dr’ is written after the
account name.
§ Name of the account to be credited preceded by the word ‘To’
is written leaving a few spaces away in
the next line.
§ A brief explanation about the
transaction known as narration is
parenthesized by the bracket starting with ‘For’ or ‘Being’ in
third line.
3. Ledger
Folio (LF): Page
number of ledger book in which the particular account is located (or where the
entries are posted).
4. Debit
Amount (Rs.):
Amount to be debited against the Dr. Account
5. Credit
Amount (Rs.):
Amount to be credited against the Cr. Account
2.1.2. Meaning
and Steps in Journalizing
Journalizing
is a process o systematic recording of financial transaction in the book of
prime or original entry in a chronological order. The following steps are taken
while journalizing in the journal book:
1. To identify the two aspect of the
transactions.
2. To identify the appropriate
account for the two aspects of the transaction.
3. To debit and credit account
relevant to the transaction by using rules of debit and credit.
4. To write the entry in the journal
in chronological order such an entry is called Journal Entry.
Note: At the
end of each page the total debit and credit are mad which must be equal each other.
The total was carried forward to the next page. For this, carried forward or C/F is written in particular column at
the end of each page. The same should be brought in next page and brought
forward or B/F is written at the
beginning of the next page.
@.Journalising is a process of
recording of transactions in Journal. The various steps in Journalising are
given below:
Step
1:
|
Ascertain
what accounts are involved in a transaction.
|
Step
2:
|
Identifying
what types of accounts are involved.
|
Step
3:
|
Think
about the rule of debit and credit applicable for each of the accounts involved and ascertain which
account is to be debited and which is to be credited.
|
Step
4:
|
Record
the date of transaction in the 'date' column and write the name of account to
be debited and credited in the particular column along with their related
amounts.
|
Step
5:
|
Write
brief description of transaction within bracket in the next line in the
particular column
|
2.2. Rules for
Journalizing / Rules for Debit and Credit
Under
the double entry system, every financial transaction of business has a double
effects i.e. each transaction involves at least two accounts. One aspect of
financial transaction is debited in an account and other credited in other
account. The debiting and crediting of account are done on the basis of certain
rules. These rules are called rules of
journalizing i.e. debit and credit. The
following two approaches can be applied as the rule for debit and credit.
1.
On
the basis of types of account.
2.
On
the basis of accounting equation (i.e. change in Assets, capital and
Liabilities)
2.2.1. On the
Basis of Types of Account:
This approach is also known as ‘English Approach’ or ‘Traditional Approach’. Under this
approach, an account is classified into three types i.e. personal account, real account and nominal account. For each of these types of accounts, there
are three separate rules of debiting and crediting the financial transaction.
|
Types
of Account
|
|
|
|
|
Ã
|
|
Ä
|
|
Types F
|
1.
Personal
Account
|
|
|
2.
Impersonal
Account
|
|
ê
|
|
|
|
Ã
|
Ä
|
|
|
|
2.1
|
Real Account
|
2.2
|
Nominal
Account
|
|
|
|
|
ê
|
|
ê
|
Rules F
|
Dr. Receiver
|
|
|
Dr. What Comes In
|
|
Dr. All Expenses
& Losses
|
|
Cr. Giver
|
|
|
Cr. What Goes Out
|
|
Cr. All Income
& Gain
|
1.
Personal Account:
Personal
account is the record of a person. A
person may be a natural person [Ram, Sita,
Rajan,Rupa etc. like us], artificial
person or legal person [Lincoln College, Nepal Bank Limited, Golchha
Organization etc.-firms ,institution] and
representative person [Debtors, Creditors, Capital etc.]. It can be
receiver of benefits or giver of benefit. The rule of debiting and crediting
the account of person is as follows:
F Debit the receiver of benefits and, Credit the giver
of benefits
2. Real Account:
Real
account is a record of an asset. It
can either come in the business through its purchase or goes out from the
business through its sale. The rule of debiting and crediting the real account
is as follows:
F Debit what comes in and, Credit what goes out
3. Nominal Account:
Nominal
accounts are also known as fictitious
account. Nominal account is a record
of expense or losses and income or gain. An expense or loss is the
sacrifices of benefit in exchange for services used and income or gain is the
benefit earned in exchange of services render. The
rule of debiting and crediting the nominal account is as follows:
F Debit all expenses and losses and, Credit all income
and gain.
