accountancy basic
Module 2: Preparation of Books of Accounts
Double Entry System
• Double entry system was introduced to the business world by an Italian merchant named Lucas Pacioli in 1494 A.D. According to J.R.Batliboi “Every business transaction has a two-fold effect and that it affects two accounts in opposite directions and if a complete record were to be made of each such transaction, it would be necessary to debit one account and credit another account. It is this recording of the two fold effect of every transaction that has given rise to the term Double Entry System”.
Golden Rules of Accounting Illustration
Solution Journals
• The book in which the transaction is recorded for the first time is called journal or book of original entry.
• Journal is derived from French word “Jour” which means a day. Journal, therefore, means a daily record of business transactions.
• Journal is one of the books of original entry in which transactions are originally recorded in a chronological (day-to-day) order according to the principles of Double Entry System.
Characteristics of Journal
• Journal is the first successful step of the double entry system. A transaction is recorded first of all in the journal. So the journal is called the book of original entry.
• A transaction is recorded on the same day it takes place. So, journal is called Day Book.
• Transactions are recorded chronologically, So, journal is called chronological book
• For each transaction the names of the two concerned accounts indicating which is debited and which is credited, are clearly written in two consecutive lines. This makes ledger-posting easy. That is why journal is called "Assistant to Ledger" or "subsidiary book"
• Narration is written below each entry.
• The amount is written in the last two columns - debit amount in debit column and credit amount in credit column.
Format of Journal
Date
(1) Particulars
(2) L.F
(3) Amount (Dr.)
(4) Amount (Cr.)
(5)
DD/MM
Double Entry System
• Double entry system was introduced to the business world by an Italian merchant named Lucas Pacioli in 1494 A.D. According to J.R.Batliboi “Every business transaction has a two-fold effect and that it affects two accounts in opposite directions and if a complete record were to be made of each such transaction, it would be necessary to debit one account and credit another account. It is this recording of the two fold effect of every transaction that has given rise to the term Double Entry System”.
Golden Rules of Accounting Illustration
Solution Journals
• The book in which the transaction is recorded for the first time is called journal or book of original entry.
• Journal is derived from French word “Jour” which means a day. Journal, therefore, means a daily record of business transactions.
• Journal is one of the books of original entry in which transactions are originally recorded in a chronological (day-to-day) order according to the principles of Double Entry System.
Characteristics of Journal
• Journal is the first successful step of the double entry system. A transaction is recorded first of all in the journal. So the journal is called the book of original entry.
• A transaction is recorded on the same day it takes place. So, journal is called Day Book.
• Transactions are recorded chronologically, So, journal is called chronological book
• For each transaction the names of the two concerned accounts indicating which is debited and which is credited, are clearly written in two consecutive lines. This makes ledger-posting easy. That is why journal is called "Assistant to Ledger" or "subsidiary book"
• Narration is written below each entry.
• The amount is written in the last two columns - debit amount in debit column and credit amount in credit column.
Format of Journal
Date
(1) Particulars
(2) L.F
(3) Amount (Dr.)
(4) Amount (Cr.)
(5)
DD/MM