Recording of Transactions Test - 4

Debtors are assets and bank balance is also asset in business. When Company Receive cheque from debtor it will increase the bank balance on the same time debtors gets reduced. Hence Both the effect on assets side. there is Increase in bank or decrease in debtors , So there will be No effect.

Yes. Because when we deduct expense incurred from revenue earned we get net Income.

So, Net income = Revenue - Expenses

capital is the amount invested by owner. when owner introduce some additional amount it will increase cash or bank balance (which is assets) and Capital .

when owner withdrew business assets for personal use it is called Drawing. It will affect the Asset and Equity. Drawing made out of business will  decrease business assets and Equity but it will not affect liabilities of business.

This equation is the base of accounting. This shows that the assets of the business is always equal to liability and capital .

This is the basic accounting equation of assets, liability and capital. It is the foundation of double entry system. Always the assets will be equal to liabilities + capital.

The genral equation in accountancy is Capital = Assets - Liabilities.

Total Liabilities are sum total of Capital or other Liabilities.

purchase book is a book in which only credit purchase transaction can be recorded.

Capital is an amount invested by owner. When owner introduced fresh capital again in business it will increase assets and capital amount.

 Fresh capital will increase cash or bank balance which is an asset and capital also get increase.

When a person wants to deposit cash or cheques in his bank account he customarily fills out a slip to show the number of his account, the date, and the details of the deposit. This works as a source document for the entity.

Amount Invested by owner is Called Capital. It is an liabilitiy on Business which  business have to pay at the winding up of business So Owner is called Creditor for the Capital amount.

We prepare seprate books of credit transaction for purchase, sale , purchase return or sale return. So, when we return goods to the which are purchase on credit from supplier it will be recorded in purchase return book.

When a seller sell some goods on cash he provides a receipt of sale that receipt or source document on the basis of which we record transaction in accounts is called cash memo.

Purchaser have to pay the amount in future when goods are purchased on credit which increases the liability.

Creditors are liability for the entity. When company pays them then it will reduce the bank and creditors also.

when we made payment of expense it will reduce business cash or bank balance which is an asset. So, This will reduce Business Assets.

Cash Book records all transaction made in cash whether cash received or payment made. Cash book can be single columm (having only cash Balance) or Double Columm (having Cash or Bank columm) So there is no need to prepare Cash or Bank Account.

Assets are the property owned by business having monetary value. Assets can be in tangible assets or intangible assets.

 Example:- Cash, Bank, Stock, Debtors, Goodwill Etc.

Invoice means a list of goods sent or services provided, with a statement of the sum due for these. 

Transfer Voucher is prepared for non cash transaction. Hence for recording of Purchase return and sales Return entry it is prepared.