Recording of Transactions-I

In the preceding pages, you learnt about debits and credits and observed how transactions affect accounts. This process of analysing transactions and recording their effects directly in the accounts is helpful as a learning exercise. However, real accounting systems do not record transactions directly in the accounts. The book in which the transaction is recorded for the first time is called journal or book of original entry.

The source document, as discussed earlier, is required to record the transaction in the journal. This practice provides a complete record of each transaction in one place and links the debits and credits for each transaction. After the debits and credits for each transaction are entered in the journal, they are transferred to the individual accounts. The process of recording transactions in journal is called journalising.

Once the journalising process is completed, the journal entry provides a complete and useful description of the event’s effect on the organisation. The process of transferring journal entry to individual accounts is called posting . This sequence causes the journal to be called the B ook of Original Entry and the ledger account as the Principal Book of entry. In this context, it should be noted that on account of the number and commonality of most transactions,