Page 32 - debkxi
P. 32
8.2 Double Entry Book Keeping—CBSE XI
• Opening Entry: In case of an existing business, assets and liabilities existing in the previous
year’s Balance Sheet will have to be brought forward to the current year. These assets and
liabilities are brought in the books of account of new financial year by means of a Journal
entry termed as Opening Entry.
• Steps in Journalising
Step 1: Identify the accounts involved in the transaction.
Step 2: Determine the nature of accounts, i.e., Asset, Liability, Capital, Expense or Revenue.
Step 3: Apply the rules for ‘Debit’ and ‘Credit’.
Step 4: Draw ruling of a Journal and record the transaction.
• Advantages of Journal
1. It reduces the possibility of errors.
2. It provides an explanation to an entry by way of narration.
3. It provides a chronological record of transactions.
4. It provides the base for posting of transactions in ledger accounts.
5. It helps in locating the errors.
• Disadvantages of Journal
1. Unsuitable for Large Volume of Transactions.
2. Not a simple system of recording.
3. Cash Balance is not revealed.
4. Not a substitute of ledger.
IMPORTANT JOURNAL ENTRIES
Transaction Journal Entry
1. Amount brought into the business as capital Cash or Bank A/c ...Dr.
To Capital A/c
2. Cash and other assets brought into business Building A/c ...Dr.
Plant and Machinery A/c ...Dr.
Furniture A/c ...Dr.
Cash or Bank A/c ...Dr.
To Capital A/c
3. Goods purchased on credit Purchases A/c ...Dr.
To Supplier’s A/c
4. Sale of goods on credit Customer’s A/c ...Dr.
To Sales A/c
5. Goods purchased for cash Purchases A/c ...Dr.
To Cash or Bank A/c