Recording of Transactions - I Test 25

Purchases will be credited if goods are given as charity. When accounting for goods given as charity, purchases are reduced with the exact cost of goods contributed. The amount is reduced from purchases in the trading account. It is shown as an expense on the debit side of the income statement.

Posting is the process of transferring the entries from the book of original entry (journal) to the ledger. In other words, posting means grouping of all the transactions in respect to a particular account at one place for meaningful conclusion and for further accounting process. Posting from the journal is done periodically, may be, weekly or fortnightly or monthly as per the requirements and convenience of the business.

On sale of equipment, the assets are moving out of the business against which cash is received. This will affect as reduction in fixed assets and increase in cash. 

Accounts recording transactions with a person or group of persons are known as personal accounts. These accounts are necessary, in particular, to record credit transactions. Personal accounts are of the following types: 

Dual aspect is the foundation or basic principle of accounting. This concept states that every transaction has a dual or two-fold effect and should therefore be recorded at two places.

The duality principle is commonly expressed in terms of fundamental Accounting Equation, which is as follows :

Assets = Liabilities + Capital

In other words, the equation states that the assets of a business are always equal to the claims of owners and the outsiders. The claims also called equity of owners is termed as Capital(owners’ equity) and that of outsiders, as Liabilities(creditors equity).

The term credit has its roots set in the latin word 'creditum' which means "that which is entrusted or loaned" which also came from 'credere' which means "to trust or entrust".

'Debit' is a formal bookkeeping and accounting term that comes from the Latin word "debere", which means "to owe". 

In bookkeeping, a debit is an entry on the left side of a double-entry bookkeeping system that represents the addition of an asset or expense or the reduction to a liability or revenue.

All business transactions are evidenced by an appropriate document such as invoice, memo, bill, receipt, cheque etc. Such document which provides complete information of the financial transactions to be recorded are known as source documents.  

Capital profit is a capital gain which is arise from the sale of capital asset such as stock, bond,real estate etc.