Quick Revision Notes

Class: 11th Accountancy

Chapter: Recording of Transactions - I

1. Introduction to Accounting Process

Accounting Cycle: The sequence of accounting procedures starting from the identification of transactions to the preparation of final accounts.
- Transaction $\rightarrow$ Journal $\rightarrow$ Ledger $\rightarrow$ Trial Balance $\rightarrow$ Final Accounts
Source Documents (प्रमाणक / आधार प्रलेख): Written documentary evidence of a business transaction (e.g., Cash memo, Invoice, Receipt, Voucher, Pay-in-slip).

2. Meaning of Key Terms

Transaction (व्यवहार): An economic activity of a business that changes its financial position (can be measured in terms of money).
Account (खाता): A summarized record of transactions relating to a particular person, item, or expense/income in a ledger.
Capital (पूंजी): Amount invested by the owner in the business.
Drawing (आहरण): Cash or goods withdrawn by the owner for personal use.
Assets (संपत्तियां): Economic resources owned by the business (e.g., Land, Building, Machinery, Cash, Debtors).
Liabilities (दायित्व): Obligations or debts that the business has to pay to outsiders (e.g., Creditors, Bank Loan).

3. Rules of Debit and Credit (Golden Rules of Accounting)

Accounting transactions are recorded based on the Dual Aspect Concept. Every transaction has two-fold effects: one Debit (Dr.) and one Credit (Cr.).

Accounts are classified into two approaches:

Traditional Approach (English Approach)
Modern Approach (Accounting Equation Approach)

4. Traditional Approach (Classification of Accounts)

                  ┌────────────────────────┐
                  │    Types of Accounts   │
                  └───────────┬────────────┘
                              │
         ┌────────────────────┴────────────────────┐
         ▼                                         ▼
┌──────────────────┐                     ┌──────────────────┐
│ Personal Accounts│                     │ Impersonal Accts │
└────────┬─────────┘                     └─────────┬────────┘
         │                                         │
         │                    ┌────────────────────┴────────────────────┐
         │                    ▼                                         ▼
         │            ┌───────────────┐                         ┌───────────────┐
         │            │ Real Accounts │                         │Nominal Accts  │
         │            └───────────────┘                         └───────────────┘
         │
         ▼
Natural, Artificial, Representative

Golden Rules Table:

Type of Account	Rule (Debit)	Rule (Credit)
Personal Account (व्यक्तिगत खाते)	Receiver (पाने वाले को)	Giver (देने वाले को)
Real Account (वास्तविक खाते)	What comes in (जो वस्तु व्यापार में आए)	What goes out (जो वस्तु व्यापार से जाए)
Nominal Account (नाममात्र खाते)	All Expenses & Losses (सभी खर्च एवं हानियां)	All Incomes & Gains (सभी आय एवं लाभ)

5. Modern Approach (Based on Accounting Equation)

Based on the fundamental accounting equation: $\text{Assets} = \text{Liabilities} + \text{Capital}$

Nature of Account	To Increase, Record As	To Decrease, Record As
Asset (संपत्ति)	Debit (Dr.)	Credit (Cr.)
Liability (दायित्व)	Credit (Cr.)	Debit (Dr.)
Capital (पूंजी)	Credit (Cr.)	Debit (Dr.)
Revenue / Income (आय)	Credit (Cr.)	Debit (Dr.)
Expense / Loss (व्यय)	Debit (Dr.)	Credit (Cr.)

6. The Accounting Equation

Formula: $$\text{Assets} = \text{Capital} + \text{Liabilities}$$ $$\text{Capital} = \text{Assets} - \text{Liabilities}$$ $$\text{Liabilities} = \text{Assets} - \text{Capital}$$
Effect of Transactions on Accounting Equation:
- Introduction of Capital: Increases Assets (Cash) and Increases Capital.
- Purchase of Asset for Cash: Increases one Asset (Machinery) and Decreases another Asset (Cash).
- Purchase of Goods on Credit: Increases Assets (Stock) and Increases Liabilities (Creditors).
- Expenses Paid: Decreases Assets (Cash) and Decreases Capital (since expenses reduce profit).

7. Journal (רोजनामचा - Original Entry Book)

Journal: The book of prime/original entry where transactions are recorded first chronologically.
Format of Journal:

Date (दिनांक) Particulars (विवरण) L.F. (खाता पृष्ठ) Debit Amount (₹) Credit Amount (₹)
Compound Journal Entry: An entry in which more than one account is debited or credited.
Opening Entry: The first entry recorded in the beginning of a new financial year to bring forward closing balances of assets, liabilities, and capital of the previous year.
- Formula: $\text{Assets} = \text{Liabilities} + \text{Capital}$ (Assets accounts are debited; Liabilities and Capital accounts are credited).

8. Important Accounting Treatments & Entries

Bad Debts (डूबे ऋण): When an amount is irrecoverable from a debtor.
- Entry: Bad Debts A/c $\dots$ Dr. To Debtor's A/c
Outstanding Expenses (अदत्त व्यय): Expenses incurred but not yet paid.
- Entry: Expense A/c $\dots$ Dr. To Outstanding Expense A/c
Prepaid Expenses (पूर्वदत्त व्यय): Expenses paid in advance.
- Entry: Prepaid Expense A/c $\dots$ Dr. To Expense A/c
Depreciation (मूल्यह्रास): Reduction in the value of an asset due to use or wear and tear.
- Entry: Depreciation A/c $\dots$ Dr. To Asset A/c
Goods given as Charity / Advertisement:
- Entry: Charity/Advertisement A/c $\dots$ Dr. To Purchases A/c

Recording of Transactions - I

📐 Formula & Cheat Sheet (English)