Question

Describe how accounts are used to record information about the effects of transactions?

Answer 1

Explanation:

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Answer 2

Every transaction is recorded in the original book of entry (journal) in order of their occurrence; however, if we want to know that how much we receive from our debtors or how much to pay to the creditors, it is not possible to determine at a single movement. Hence, we prepare accounts to know the position of business activities in the meantime.

There are some steps to record transactions in accounts

Step 1 − Locate the account in ledger, i.e., Mr A’s Account.

Step 2 − Enter the date of transaction in the date column of the debit side of Mr A’s Account.

Step 3 − In the ‘Particulars’ column of the debit side of Mr A’s Account, the name of corresponding account is to be written, i.e., ‘Sales’.

Step 4 − Enter the page number of the ledger in the Journal Folio (J.F.) column of Mr A’s Account.

Step 5 − Enter the amount in the ‘Amount’ column.

Step 6 − Same steps are to be followed to post entries in the credit side of Mr A’s Account.

Step 7 − After entering all the transactions for a particular period, balance the account by totalling both sides and write the difference in shorter side, as ‘Balance c/d’.

Step 8 − Total of account is to be written on either sides.