4.4 A COMPREHENSIVE ILLUSTRATION
You have learnt the meth<xj of recording transactions In journal and Ls sub-divisions. You
have also learnt their posting into the codcertled accounts in the ledger and the preparation
of a Trial Balance to check the arithmetical accuracy of the books of account: Let us now
take a comprehensive example covering all types of transactions, kord them in appropriate
books, post them into ledger, and prepare a Trial Balance.
Illustration 3
On Jnndaty 1, 1988 the balances of Tenali Traders stood as follows :
Cash in hand Rs. 2,0(10, dash at bank Rs, 12,3M), Stock in trade Rs. 51,700, Furniture
Rs, 8,200; Debtors Rs. 6,600 (Shyam Rs. 3,5(X1, Shanker Rs, 2,600, Laxman Rs. 500);
Creditors Rs. 7,100 (Reddy & Co. Rs, 3,020, Kishore
Rs. 4,080); Capital Rs. 73,700.
Their Transactions during the month of January were as follows :
4.5 LET US SUM UP
In addition to Cash Book, the firms maintain some other special purpose subsidiary books to
record credit transactions relating to goods. They are: (i) Purchases Journal, (ii) Purchases
Returns Journal, (iii) Sales Joumal, and (iv) Sales Returns Journal. The Purchases Journal is
meant for recording all'credit purchases of goods and the Sales Journal for credit sales of
goods. The goods returned to suppliers is recorded in Purchases Returns Journal and the
goods returned by customers in Sales Returns Journal. The transactions recorded in these
books are posted individually to the concerned personal accounts in ledger. The postings
into Purchases Account, Purchases Returns Account, Sales Account and Sales Returns
Account are made only for the totals of respective books periodically.
All transactions which cannot be recorded in any of the special journals will be recorded in
the Journal Proper. Some examples of such transactions are: opening entry, closing entries,
transfer entries, adjustment entries, rectification enmes, credit purchases and credit sales of
fixed assets.
4.6 KEY WORDS
Adjustment Entry: An entry passed to bring into account unrecorded items like closing
stock, outstanding expenses, outstanding incomes, etc. at the time of preparing final
' accounts.
Closing Entries: Entries passed at the end of each accounting year to close the nominal
accounts by transferring them to the Trading and Profit and Loss Account.
Credit Note: A statement sent by the seller to his customer intimating that his account has
been credited with the amount of goods returned by him or any other allowance granted to
him.
Debit Note: A statement sent by the buyer to his supplier intimating that his accoune has
been debited with the amount of goods returned to him.
Invoice: A bill or a statement issued by the seller to the buyer giving details of goods sold.
Opening Entry: An entry passed to open a new set of accounts.
Rectification Entry: An entry passed to rectify an error.
Transfer Entry: An entry passed to transfer an amount from one account to another account.
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