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Accountancy > Recording Transactions > Books of Original Entry
Recording Transactions

Books of Original Entry

The art of accounting and its related study is a very interesting and vital component of maintaining accounts. The books of double entry hold a very vital and important role in the preparation of accounts. It is because of these books that an accountant is able to compile financial data about a firm. To understand accounting treatments, let us read further.

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Books of Original Entry in Accounts

If we follow the order in which an accounting entry finds a record in original documents, we will come across journals and ledgers. The Books of original entry usually refers to the accounting journal. In this, you record any business transaction that occurs at a firm initially.

Keeping in mind the double entry system of accounting, the information in these books is summarized and then posted into a general ledger. From such ledgers, firms create financial statements. Each accounting journal contains detailed records for the types of accounting transactions pertaining to a specific area.

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There are several types of journals, such as

Generally speaking, the general ledger does not fall under the category of a book of original entry. This is so because it only contains summarized entries posted to into it from one of the accounting journals. However, if one records the transactions directly into the general ledger, it then becomes one of the books of original entry.

So the double entry system of accounting starts with recording the transactions in the journals, and then their eventual posting in their respective accounts. And hence journals are generally the first step of the double entry system.

double entry system

Books of original entry also serve various functions. They aid in investigating individual accounting transactions. Auditors too access the books for proper audit. The job of such auditors is to verify that a selection of business transactions was recorded correctly and appropriately.

This concept however only applies to manual record keeping. A computerized accounting system no longer makes reference to any of the accounting journals. Instead, it focuses on recording all business transactions in a central database.

Solved Question for You

Question: Give examples of business transactions and show how they will appear as journal entries.

Answer – Consider the following business events:

Date Transaction
Jan 2 An amount of INR 36,000 was paid as advance rent for three months.
Jan 3 Paid INR 60,000 cash on the purchase of equipment costing INR 80,000. The remaining amount being a one year note payable with interest rate of 9%.
Jan 4 Purchased office supplies costing INR 17,600 on account.
Jan 13 Provided services to its customers and received INR 28,500 in cash.
Jan 13 Paid the accounts payable on the office supplies purchased on January 4.
Jan 14 Paid wages to its employees for first two weeks of January, aggregating INR 19,100.
Date Particulars Debit Credit
Jan 2 Prepaid Rent Dr 36,000
Cash 36,000
Jan 3 Equipment Dr 80,000
Cash 60,000
Notes Payable 20,000
Jan 4 Office Supplies Dr 17,600
Accounts Payable 17,600
Jan 13 Cash Dr 28,500
Service Revenue 28,500
Jan 13 Accounts Payable Dr 17,600
Cash 17,600
Jan 14 Wages Expense Dr 19,100
Cash 19,100

 

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