Journal Entries & Ledger
Accounting is the process of recording, summarizing, and reporting financial transactions of a business. It begins with the Journal, which is often called the book of original entry. Every time a business transaction happens, we write it down in the journal first. We follow the 'Double Entry System' of accounting. This system means that every transaction affects at least two accounts. For every 'Debit' entry, there must be an equal 'Credit' entry. This keeps the business books balanced.
Concepts (3)
A journal entry is the formal record of a business transaction. It follows the rule of 'Debit what comes in' and 'Credit what goes out'. Each entry has a date, the names of the accounts affected, and the amount.
A journal entry is the formal record of a business transaction. It follows the rule of 'Debit what comes in' and 'Credit what goes out'. Each entry has a date, the names of the accounts affected, and the amount. For example, if a business buys a car for ₹5 lakhs in cash, the 'Car Account' is debited and the 'Cash Account' is credited. This shows exactly where the money went and what the business received.
Ledger posting is the process of transferring entries from the journal to the ledger. While the journal lists transactions by date, the ledger lists them by category.
Ledger posting is the process of transferring entries from the journal to the ledger. While the journal lists transactions by date, the ledger lists them by category. This allows a banker to see the total 'Cash' balance or total 'Loan' balance in one place. For example, all cash sales from January to December will be summarized in the Cash Account of the ledger.
Intangible investments are assets that do not have a physical form but provide long-term value. In exams, students often fail to identify them.
Intangible investments are assets that do not have a physical form but provide long-term value. In exams, students often fail to identify them. Examples include Brand Recognition, Intellectual Property (patents/copyrights), and Mailing Lists of clients. Unlike inventory (which you can touch), these items represent the 'goodwill' and knowledge of a company. They are recorded under Investing Activities.
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