Question

discuss the steps in professing business transactions. what kinds of transactions can be recorded in a general journal? should a transaction be recorded first in a journal or the ledger? why?

Answer 1

A) Steps in professing business transactions are as follows.

Stage 1: Once the transacation has competed it should be analyze and record in Journal. It is also called as primary book or first book or rough book. The entries recorded in the journal are called journal entries.

Stage 2: After sucesful entry of various entries into journal immediately these entries are recorded in the ledger based on the double entry system of accounting.and balancing various ledgers with ledger balances as Carried down (c/d) and brough doen.(b/d). The previous one is the closing balance of the ledger for the current month and later is the opening balance of the same ledger for the next month.

Stage 3: After the ledger balances, by taking all the balances into account prepare the trial balance. Both the sides of the trial balance must be equal.

Stage 4: If any entries are not entered those entries must be considered as adjusting entries at the end of the period.

Stage 5: After this preparationn of trial abalance with debit and credit side along with some adjusted entries on the bottom side which have to considered while preparing final accounts.

Stage 6: Prepaaration of Final accounts at the end of the period that includes trading account, profit and losss account and balance sheet.

Any transaation that is done by the business must be recorded int the journal irrespecptive of the natire of transaction. For example purchases, sales, purchase returns, sales returns, rent paid or received, commission paid or received, interest paid or received etc. Like that all the transactions that are completed by a business in a day are entered into this journal based on the day of transaction. That is why it is called as primary book, first book and rough book.

First all the trasnactions, immeditealy after its existence will be recoerd in the journal. Basic criteria adopted for entering into the journal is date. After succesful complteion of all the journal entries into journal those are recorded into ledger by taking into consideration of its nature. Like purchases ledger, sales ledger, rent ledger, salaroes ledger and wages ledger etc.,

Journal isprimary book and ledger is secondary book. Date is the primary criteria for entering into journal where as in ledger nature of ledger is the criteria. Journal is primary book or rough book and only the date is criteria where as ledger is secondary book and main book. It is a permanenet record for the business for its life.