Transactions are the basic part of any business, and posting transaction in accounting helps a business to know about the real event of a business. In this post, you will learn how to record, summarize, and post transactions in accounting.
Generally, transactions are recorded in source documents. The information on these records is recorded in prime entry books. Basically, there are seven books of prime entry.
Source Document: a document that records all information about a business.
Source documents are very important in analyzing business inflows and outflows. It has to keep track of source documents – events – in order to keep track of what is happening. Such records are kept in prime entry books.
A corporation receives and sends a lot of primary sources in the course of doing business. The information contained in these primary documents must be recorded; otherwise, the company may forget to ask for a payment, give payment to others, or even they can pay things double.
Books Of Prime Entry In Accounting
- Sales day book: posting transactions about credit sales.
- Sales return day book: records returns from customers (credit sales return).
- Purchase day book: posting transaction for purchase that is on credit.
- Purchase return day book: records credit purchase return.
- Cash day book: records all those transactions which are done in cash.
- Petty cash book: records small amounts of cash transactions
- Journal book: posting transactions only for adjustments
Proper and true record-keeping, summarizing, and posting processes empower an entity or a company to keep access to their daily operations and help them find vital commercial information, such as:
- Sales of goods and services by volume and value
- Associated expenses
- Amounts due from customers
- Amounts due to suppliers
- Cash balances
- And profits or losses made over time.
Double Entries For Books Of Prime Entry
Sales day book
Honey made a sale of a car on credit at $50000 to Mumford.
| Description | DR | CR |
| Receivable (Mumford) | $50000 | |
| Sales (car) | $50000 |
Sales return day book
Mumford use the car for two days and he felt that the car is not running well so he returns the car to honey’s back.
| Description | DR | CR |
| Sales return (car) | $50000 | |
| Receivable (Mumford) | $50000 |
Purchase day book
X purchased manufacturing material from y supplier on credit at a cost of $4000
| Description | DR | CR |
| Purchase | $4000 | |
| Payable (Y) | $4000 |
Purchase return day book
X uses some of the material and returns the rest of that material which costs $3000
| Description | DR | CR |
| Payable (Y) | $3000 | |
| Purchase return | $3000 |
Cash day book
Henry purchases some furniture for office use at a cost of $10000.
| Description | DR | CR |
| Furniture (office equipment) | $10000 | |
| Cash | $10000 |
What Is a Personal And Impersonal Account In Accounting
A personal account is one that a single person uses for their own needs. It’s a word used to distinguish them from accounts used for corporate or business purposes. Clients, suppliers, wage and salary accounts, owner withdrawals, and capital accounts are all examples of personal accounts.
We have several forms of costs for multiple purposes in the nominal book accounts, such as property, healthcare, telephones, and others. These expenses are characterized as impersonal accounts since they are not tied to the individual to whom the benefits are paid but rather to the reason for payment.
Asset Accounts, Monetary Records, Income and Expenditure Accounts are all examples of impersonal accounts.
What Is Control Account In Accounting System
A control account is an account in the general ledger that keeps track of the overall worth of a number of comparable but separate items.
Control accounts are mostly used to keep track of payables and receivables. They must comply with the sum of the particular balances and serve as a verification to confirm that all events in the individual ledger accounts have been recorded appropriately.
What Is Receivable Control Account
The entire debtors or receivable account (also known as the receivables ledger control account) is a record in which records of transactions affecting all debtors are preserved. Amounts from the sales day book and the cash book are posted. The overall amount owing to the organization at any one moment from its credit customers will be the balance on the total receivables account, which will agree with the total of the receivables ledger accounts.
What Is a Payable Control Account
The payables ledger control account is where records of an event involving total credit purchases or payables are recorded, and amounts from the cash book are posted. At any one time, the value of the total current liabilities or payable account will equal the sum amount owed by the company to its suppliers, and it will match with the amount of the payables ledger accounts.
General Questions
What do you mean by transaction in accounting?
A financial transaction is defined as exchanging of values. There are two types of transactions are there one is a cash transaction and the second is a credit transaction.
What is a financial transaction in the bank?
Whenever an individual or an organization deposits or withdrew funds from their account is said to be a financial transaction.
Define cash transactions in accounting
A cash transaction is a financial transaction in which cash is involved or settlements are made on the point of the event where it happened.
Define credit transactions in accounting
A credit transaction is a transaction in which cash is not involved or it is an obligation that is settled after a certain time of an event.
How does analysis of transactions help a business in its accounts?
Recording business transactions helps a business to know the real event that happened in the business. It helps to prepare the true financial statements of the business that shows how a business is performing.
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