Accounting Fundamentals: Journal, Ledger, Trial Balance, Bills & Notes

Journal Entries: Recording Business Transactions

Format of Journal Entries

Examples of Journal Entries

1. Started Business with Cash ₹1,00,000

   • Cash A/c Dr ₹1,00,000
     To Capital A/c ₹1,00,000
   • (Being business started with cash)

2. Purchased Goods for Cash ₹20,000

   • Purchases A/c Dr ₹20,000
     To Cash A/c ₹20,000
   • (Being goods purchased for cash)

3. Sold Goods to Priya for ₹10,000 on Credit

   • Priya A/c Dr ₹10,000
     To Sales A/c ₹10,000
   • (Being goods sold to Priya on credit)

4. Paid Rent ₹5,000

   • Rent A/c Dr ₹5,000
     To Cash A/c ₹5,000
   • (Being rent paid in cash)

Ledger Posting: Classifying Transactions

Format of Ledger Accounts

Steps for Ledger Posting

1. Transfer from Journal: Post entries from the journal to their respective ledger accounts.
2. Debit Side: On the debit side of the ledger account, write "To" followed by the name of the account being credited in the journal entry.
3. Credit Side: On the credit side of the ledger account, write "By" followed by the name of the account being debited in the journal entry.

Example: Cash Account Ledger

Trial Balance: Summarizing Balances

Format of Trial Balance

Steps for Preparing a Trial Balance

1. List all accounts with debit balances, typically assets, expenses, and losses.
2. List all accounts with credit balances, typically liabilities, incomes, and gains.
3. Ensure that the total debits equal the total credits to verify arithmetical accuracy.

Bills of Exchange: Understanding the Format

Key Parties in a Bill of Exchange

• Drawer: The person who writes the bill (the creditor).
• Drawee: The person on whom the bill is drawn (the debtor).
• Payee: The person to whom the payment is to be made.

Example Format of a Bill of Exchange

Stamp
Date: __________

Three Months After Date, pay to [Name of Payee] or Order, the sum of Rupees ________ only for value received.

To,
[Name and Address of Drawee]

____________________
(Signature of Drawer)

Promissory Note: Understanding the Format

Key Parties in a Promissory Note

• Maker: The person who promises to pay the amount.
• Payee: The person to whom the amount is payable.

Example Format of a Promissory Note

Stamp
Date: __________

I, [Name of Maker], promise to pay [Name of Payee] or order the sum of Rupees ________ only on [Due Date] for value received.

____________________
(Signature of Maker)