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Class 11 Commerce

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Recording of Transactions - I

Recording of Transactions - I

Action PlanNotesQuestionsMock-Test
Study Action Plan (Sorted by Difficulty)
Ledger Accounts
Accuracy: 65%
Total Attempted63
Total Correct41
Total Incorrect22
Difficulty Level:
Medium
Complex Journal Entries
Accuracy: 67%
Total Attempted24
Total Correct16
Total Incorrect8
Difficulty Level:
Medium
GST Accounting Entries
Accuracy: 71%
Total Attempted21
Total Correct15
Total Incorrect6
Difficulty Level:
Medium
Preparation of Accounting Vouchers
Accuracy: 72%
Total Attempted25
Total Correct18
Total Incorrect7
Difficulty Level:
Medium
Rules of Debit and Credit
Accuracy: 82%
Total Attempted50
Total Correct41
Total Incorrect9
Difficulty Level:
Low
Accounting Equation
Accuracy: 84%
Total Attempted50
Total Correct42
Total Incorrect8
Difficulty Level:
Low
Journal Entries and Posting
Accuracy: 100%
Total Attempted12
Total Correct12
Total Incorrect0
Difficulty Level:
Low

Learning Objectives

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Learning Objectives

  • Describe the nature of transactions and source documents.
  • Explain the preparation of accounting vouchers.
  • Apply accounting equation to explain the effect of transactions.
  • Record transactions using rules of debit and credit.
  • Explain the concept of book of original entry and recording of transactions in journal.
  • Explain the concept of ledger and posting of journal entries to the ledger.

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Revision Notes & Summary

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Recording of Transactions - I

Key Terms Introduced in the Chapter

  • Source Documents
  • Credit
  • Accounting Equation
  • Debit
  • Books of Original Entry
  • Account
  • Journalising and Posting
  • Ledger
  • Double Entry Book Keeping
  • Journal

Summary with Reference to Learning Objectives

  1. Meaning of source documents: Various business documents such as invoices, bills, cash memos, and vouchers that serve as evidence of a business transaction recorded in the books of account.
  2. Meaning of accounting equation: A statement of equality between debits and credits, indicating that the assets of a business are always equal to the total liabilities and capital.
  3. Rules of debit and credit: An account is divided into two sides. The left side is known as debit and the right side as credit. The rules are summarized as follows:
    • Assets: Debit - Increase, Credit - Decrease
    • Liabilities: Debit - Decrease, Credit - Increase
    • Capital: Debit - Decrease, Credit - Increase
    • Revenues: Debit - Decrease, Credit - Increase
    • Expenses: Debit - Increase, Credit - Decrease
  4. Books of Original Entry: Transactions are first recorded in these books in chronological order. The journal is one of the books of original entry, and the process of recording entries in the journal is called journalising.
  5. Ledger: A book containing all accounts to which entries are transferred from the books of original entry. The process of transferring entries from books of original entry to the ledger is called posting.

Learning Objectives

  • Describe the nature of transactions and source documents.
  • Explain the preparation of accounting vouchers.
  • Apply accounting equation to explain the effect of transactions.
  • Record transactions using rules of debit and credit.
  • Explain the concept of the book of original entry and recording of transactions in the journal.
  • Explain the concept of ledger and posting of journal entries to the ledger.

Common Mistakes & Exam Tips

  • Common Pitfall: Confusing the order of recording transactions in the journal and ledger.
    • Tip: Remember that the journal is the first point of entry, while the ledger is for classification.
  • Common Pitfall: Misapplying the rules of debit and credit.
    • Tip: Familiarize yourself with the nature of accounts to correctly apply debits and credits.
  • Common Pitfall: Neglecting the importance of source documents.
    • Tip: Always ensure that transactions are backed by appropriate source documents for validity.

Important Diagrams

  • Journal Format: The journal format includes columns for Date, Particulars, L.F. (Ledger Folio), Debit Amount, and Credit Amount.
  • Account Format: Each account is typically structured with a left side for debits and a right side for credits, showing the balance.

Distinction between Journal and Ledger

  1. The Journal is the book of first entry; the ledger is the book of second entry.
  2. The Journal records transactions chronologically; the ledger records them analytically.
  3. The Journal serves as legal evidence; the ledger is primarily for classification.
  4. Transactions classify data in the Journal; accounts classify data in the ledger.
  5. Recording in the Journal is called Journalising; recording in the ledger is known as Posting.
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Practice Test – MCQs, True/False

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Multiple Choice Questions

A.

Assets increase, liabilities increase

B.

Assets increase, capital increases

C.

Assets decrease, capital decreases

D.

Liabilities increase, capital increases
Correct Answer: B

Solution:

When goods are sold on credit, accounts receivable (assets) increase and sales revenue (capital) increases.

Chapter Concept:

Accounting Equation

A.

Journal

B.

Ledger

C.

Cash Book

D.

Trial Balance
Correct Answer: B

Solution:

The ledger is the principal book where all accounts are maintained.

Chapter Concept:

Ledger Accounts

A.

Increase in asset is debited.

B.

Increase in asset is credited.

C.

Increase in asset is neither debited nor credited.

D.

Increase in asset is debited and credited simultaneously.
Correct Answer: A

Solution:

According to the rules of debit and credit, an increase in an asset account is debited.

Chapter Concept:

Rules of Debit and Credit

A.

₹1,00,000

B.

₹1,05,000

C.

₹1,10,000

D.

₹1,15,000
Correct Answer: C

Solution:

The total amount recorded in the creditors' account would be ₹1,10,000, which includes the cost of goods and the GST (5% CGST + 5% SGST).

Chapter Concept:

GST Accounting Entries

A.

To record transactions in the journal.

B.

To group all transactions related to a particular account in one place.

C.

To prepare the trial balance.

D.

To record transactions in chronological order.
Correct Answer: B

Solution:

Posting involves transferring entries from the journal to the ledger, grouping all transactions related to a particular account in one place for meaningful analysis.

Chapter Concept:

Ledger Accounts

A.

Debit Purchases A/c ₹1,00,000; Debit Input CGST A/c ₹5,000; Debit Input SGST A/c ₹5,000; Credit Creditors A/c ₹1,10,000

B.

Debit Purchases A/c ₹1,00,000; Credit Creditors A/c ₹1,00,000

C.

Debit Purchases A/c ₹1,05,000; Credit Creditors A/c ₹1,05,000

D.

Debit Purchases A/c ₹1,10,000; Credit Creditors A/c ₹1,10,000
Correct Answer: A

Solution:

The correct entry includes debiting Purchases A/c for ₹1,00,000 and Input GST accounts for ₹5,000 each, while crediting Creditors A/c for the total amount of ₹1,10,000.

Chapter Concept:

GST Accounting Entries

A.

A journal is used for analytical records, while a ledger is for chronological records.

B.

A journal is the book of original entry, while a ledger is the book of second entry.

C.

A journal is used for recording financial statements, while a ledger is used for recording transactions.

D.

A journal is used for recording cash transactions, while a ledger is used for credit transactions.
Correct Answer: B

Solution:

The journal is the book of original entry where transactions are first recorded, whereas the ledger is the book of second entry where transactions are classified into accounts.

Chapter Concept:

Ledger Accounts

A.

Name of the firm

B.

Date of transaction

C.

Signature of the accountant

D.

Color of the paper
Correct Answer: D

Solution:

The color of the paper is not an essential element in the preparation of accounting vouchers.

Chapter Concept:

Preparation of Accounting Vouchers

A.

A transaction involving a single debit and multiple credits

B.

A transaction involving multiple debits and a single credit

C.

A transaction involving one debit and one credit

D.

A transaction involving no monetary exchange
Correct Answer: C

Solution:

A Transaction Voucher is prepared for transactions that involve one debit and one credit.

Chapter Concept:

Preparation of Accounting Vouchers

A.

₹1,500

B.

₹750

C.

₹1,000

D.

₹500
Correct Answer: B

Solution:

The net GST payable is ₹750 for each GST type (CGST and SGST) after offsetting the input GST from the output GST.

Chapter Concept:

GST Accounting Entries

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Recording of Transactions - I

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True or False

Correct Answer: True

Solution:

The rules of debit and credit state that a decrease in liabilities is debited.

Chapter Concept :

Rules of Debit and Credit

Correct Answer: True

Solution:

Double-entry accounting requires that each transaction be recorded in at least two accounts to maintain the accounting equation.

Chapter Concept :

Journal Entries and Posting

Correct Answer: False

Solution:

Posting is the process of transferring entries from the journal to the ledger, not the other way around.

Chapter Concept :

Ledger Accounts

Correct Answer: False

Solution:

Separate accounts for input and output GST are necessary to accurately track the GST paid on purchases and the GST collected on sales, facilitating the calculation of net GST payable.

Chapter Concept :

GST Accounting Entries

Correct Answer: True

Solution:

The accounting equation is a fundamental principle in accounting that states assets are equal to liabilities plus capital. This equation is essential for preparing the balance sheet and understanding the financial position of a business.

Chapter Concept :

Accounting Equation

Correct Answer: True

Solution:

The journal is indeed the book of original entry where transactions are first recorded.

Chapter Concept :

Journal Entries and Posting

Correct Answer: False

Solution:

According to the rules of debit and credit, an increase in an asset is recorded as a debit.

Chapter Concept :

Rules of Debit and Credit

Correct Answer: True

Solution:

The input tax credit mechanism allows businesses to reduce their tax liability by offsetting the taxes paid on inputs against the taxes collected on sales.

Chapter Concept :

GST Accounting Entries

Correct Answer: False

Solution:

A complex journal entry involves multiple debits and multiple credits, not just one of each.

Chapter Concept :

Complex Journal Entries

Correct Answer: False

Solution:

There is no set format for accounting vouchers; they are designed based on the nature, requirement, and convenience of the business.

Chapter Concept :

Preparation of Accounting Vouchers

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