Recording Of Business Transactions-II Class 11 Notes Accountancy Chapter 4 - CBSE

Chapter : 4

What Are Recording Of Business Transactions-II ?

Ledger

Ledger may be defined as a book or register which contains a record of all the transactions in a summarised and classified form. Ledger is the Book of Final Entry as transactions recorded in the Books of Original Entry are finally incorporated in the Ledger.

Importance Or Utility Of A Ledger

  • Provides complete information of a particular account.
  • Knowledge of Expenses and Incomes earned from an item.
  • Basis for Preparation of Trial Balance.
  • Helpful in preparation of Final Accounts.

Posting

Posting refers to the process of transferring entries from Journal to Ledger.

Balancing Of An Account

Balancing of an account means that the debit and credit sides are totalled and the difference between the two sides is put on the shorter side so as to make their totals equal.

Trial Balance

Trial Balance is a statement which shows debit balances and credit balances of all accounts in the ledger to test their arithmetical accuracy.

Subsidiary Books

Subsidiary Books refer to the journals meant for recording specific transactions of similar nature.

Types Of Subsidiary Books

The most commonly used Subsidiary Books are :

  • Cash Book: This book records all transactions relating to cash receipts and cash payments It also records all banking transactions relating to receipts and payments.
  • Purchases Book: This book is used to record credit purchases of goods dealt in by the firm.
  • Sales Book: This book is used to record credit sales of goods dealt in by the firm.
  • Purchases Return Book or Returns Outward Book: This book is used to record return of goods previously purchased on credit.
  • Sales Return Book or Returns Inward Book: This book is used to record return of goods previously sold on credit to the customers.
  • Journal Proper: This book is used to record transactions which cannot be recorded in any of the above mentioned books.

Advantages Of Subsidiary Books

  • Division of Work
  • Increased Efficiency
  • Saves Time and Efforts
  • Complete Information at one place
  • Facilitates Quick Checking
  • Less Chances of Frauds
  • Flexible
  • Fixation of Responsibility

Cash Book

Cash Book is a book of Original Entry (or Prime Entry) in which all the cash and bank transactions are recorded in a chronological order.

Kinds of Cash Books

There are two types of Cash Books:

  • Simple Cash Book or Single Column Cash Book: It is used for recording Cash transactions only. It has one amount column on each side for recording cash receipts and cash payments.
  • Double-column or Two-column Cash Book: It is used for recording cash and bank transactions. It has two columns on each side, i.e., cash column and bank column.

Contra Entry

There are some transactions, which affect both cash and bank columns of the Cash Book and are therefore, recorded on both sides of the Cash Book.

Such entries are known as Contra Entries.

Dishonour Of A Cheque

The following treatment is done:

  • When a Cheque sent for collection is dishonoured: It is recorded on the credit side of bank column in the Cash Book. If some discount was also allowed, then the discount is written back by
    passing an entry in the Journal Proper. Any bank charges on dishonour of the cheque be added into the amount of dishonoured cheque itself.
  • When a Cheque issued is dishonoured: It is recorded on the debit side of bank column in Cash
    Book. If some discount was also received while issuing the cheque, then the discount is written back by passing an entry in the Journal Proper. Any bank charges on dishonour of the cheque will be added into the amount of dishonoured cheque itself.

Cheques In Hand

When a cheque received is not deposited on the date of receipt, then it is in the Journal Proper. On deposit of the cheque, it is recorded in the Cash Book by name of the cheques in hand in the bank column on the receipts side.

Endorsement Of A Cheque

The receipt as well as endorsement of the cheque are recorded in the Journal Proper and not in the
Cash Book.