Page 79 - DMGT104_FINANCIAL_ACCOUNTING

Unit 5: Preparation of Journal, Ledger and Balancing

Notes

Task Identify nature of the transactions:

Ramchander has purchased goods on credit from M/s Royals Aventis for 15,000. The
portions of the goods were found to be damaged which worth of 5,000. Ramchander
immediately returned the damaged goods to Royals.

1. Identify the various types of accounts involved in the above illustrated transactions.
2. Pass the journal entries with regards to the nature of accounts involved.

Self Assessment

Fill in the blanks:
1. Journalising is the process of entering transactions in …………………….
2. Another name for Journal is …………………….

3. Transactions, when recorded in Journal, are known as …………………….
4. The explanation of a Journal entry is known as …………………….
5. In a Journal entry preposition …………………… is used before the name of the account to
be credited.
6. Journal is a …………………… of original entries for accounting data.
7. The journal is known as the …………………….
8. The process of transferring the entries from Journal to Ledger accounts is called
…………………….
5.2 Ledger

Journal of a business is very useful but it does not reply the different queries as how much
amount is due from debtors, how much is to be paid to creditors and what is the balance of a
particular account etc. For the reply of all these queries the ledger is prepared from the Journal
entries. Ledger is the set of accounts in which all types of account (personal, real or nominal) are
kept. There can be two forms of ledger:
(a) Bound Ledger
(b) Loose Leaf Ledger
A ledger in traditional way, is normally kept in the form of bound note books. In bigger
business enterprises, it is not easy to maintain a large and variety of transaction in a single book.
To overcome this difficulty, loose leaf shuts takes the place of bound books.

Under loose leaf ledger, appropriate sheets are introduced. Additional pages may be added to
any extent, completed account may be removed to reduced volume, any account may be
rearranged so as to suit the needs of the enterprises. This mode of maintaining ledger in the
form of loose sheets is called loose leaf ledger.

Posting

The process of transferring the entries from Journal to Ledger accounts is called posting. In other
words account wise selection of debit or credit items and recording them into the relevant side
of the relevant account is called posting. The process of posting is done after a period as week,

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