MP Board Book for Class 11th Accountancy Chapter 3- Recording of Transactions

MP Board Book for Class 11th Accountancy Chapter 3- Recording of Transactions

Accountancy- Accountancy is a subject which teaches the commerce students about recording, classifying and reporting of some important transactions.

Assets- Assets is the resource which is generally owned by the company or a person. Eg - tangible assets, intangible assets, equity assets etc.

Liabilities- Liability is the state which makes the person responsible for repaying money or it feels like a burden to pay.

Capital- Capital is considered as business resources to find their operations like machinery and equipment. It gets included in liabilities.

• Asset = Liability +Capital
• Capital = Asset- Liability
• Liability=  Asset- Capital

Debt- Debt is a word that is used in accountancy, when the money is being taken out from the bank account of a person.

Credit- Credit is a word that is used in accountancy, when the money is being put into the bank account of a person.

Rules for Debit and Credit

• Increase in asset (cash, investments, machinery)  is debited and decrease in asset (cash, investments, machinery)  is credited.
• Increase in expenses is debited and decrease in expense is credited. Expenses is generally counted under liabilities 
• Increase in liability( bank debt, mortgage debt, taxes) is credited and decrease in liability ( bank debt, mortgage debt, taxes)  is debited.
• Increase in capital( company car, patents ) is credited and decrease in capital ( company cars, patents) is debited.
• Increase in revenue ( rent, interest income)  is credited and decrease in revenue( rent, interest income)  is debited.

Ledger- 

It is the principal book of the accounting system. It contains different accounts where transactions relating to the account are recorded.

Journal-

Journal is the basic book of the original entry. This is the book in which originally all the transactions are being recorded in chronological order.

How to enter a transaction into the journal book-

• First create a proper format which includes date, particulars, ledge, amount(dr), amount (cr).
• Use the rules of debit and credit.
• Example- Cash Ac-Dr           

                                   To Sales Ac

In conclusion we have learned about the basic definition of accountancy, assets, liability, capital, debit, credit, ledger, journal. We have also discussed the rules of debit & credit, how to enter the transactions in the journal book.