1. Business transactions means the______
entered by two parties for recording in the
book .
Answers
Answer:
this is ur answer ☺️
Explanation:
Having learned the basics of the balance sheet in the earlier parts of my articles, let us now turn to the business accounting process and get to know how business transactions are recorded in the books of accounts of an enterprise.
You now know that financial statements tell us how a business is performing and where it stands. The financial statements are, however, the final product of the accounting process, raw material for which is the entries of business transactions recorded in the books of account.
The financial statements are a summary of such entries. In other words, what is cooked in the books is dished up in the financial statements.
The balance sheet is like a balancing apparatus for weighing, one with a central pivot, beam, and two scales. It is a statement that is in a state of equilibrium, having equal distribution of amount.
A balance sheet is the reflection of the basic principle of double entry accounting system, ie equality between the totals of the two sides of an account.
In any balance sheet, the totals of the sides, the liabilities side and the assets side are same; hence it is called the balance sheet, because both the sides balance or compare and equalise. There is equilibrium or equality between the totals of the two sides.
The double entry accounting
The double entry book-keeping is the accounting system, in which each transaction is recorded twice in the ledger, once to the debit of one account, and once to the credit of another. The end result is that if all transactions are viewed together, it is seen that both sides show the same total. There is always a perfect match between the two sides.
This is also seen in any profit and loss account. The income side and the expenses side of the profit and loss account show the same totals. Dont get frightened by the jargons debit, credit and ledger. We are going to put them in the coating of plain language with examples to enable you to swallow without pain.
At this it would suffice to know that according to the double entry method of recording business transactions, every transaction is recorded twice, in two different accounts and one recording has debit effect and the other has credit effect. Also remember that only those business transactions which concern money and can be expressed in monetary terms are recorded in the books of account. For example, if a company buys a computer for Rs 50,000, this is a transaction concerning money (receipt or payment); hence, it will be recorded in the books of account. But if the company signs an agreement for technical collaboration, this is not a transaction that can be expressed in monetary terms; hence it cannot be recorded in books of account. When the company pays the foreign collaborator money for the technical knowhow, this will be recorded in the book because the payment concerns money and can be expressed in monetary terms.
Books of accounts
In accounting parlance, book-keeping implies the keeping of the books of account of a business. The records kept enable a profit and loss account and the balance sheet to be compiled. Most firms now use business software packages of programs to enable the books to be kept by computer.
There are some books of account called books of prime entry. These are the books or record in which certain types of transaction are recorded before becoming part of the double entry book-keeping system. The most common books of prime entry are the daybooks, the cashbook, and the journal.