Recording of Transactions – Class 11

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Recording of Transactions

The Accountancy topics taught in Class 11 aim to impart a sound understanding of the field with respect to the upcoming advanced studies. One such topic is Recording of Transactions that familiarizes us with core knowledge of how we can prepare different types of entries for various accounts. For all those who are exploring handy study material for this topic, here in this blog we have devised comprehensive notes for this topic.

Chapter 1

Nature of transactions and source documents are the first sort of topics covered under this chapter.

Learn Basics: Debit and Credit Rules

As explained in the Class 11 Accountancy chapter, an account is a summarized and brief record of a transaction found at a single place. It is related to a particular accounting head. An account is categorized into two sides, i.e., debit and credit. 

Approach Used in the Rules of Debit and Credit

The approach used in a dual system of accounting is the Traditional Approach. Under this approach, accounts are mainly divided into two main heads: – 

Personal Account 
It refers to those accounts that are related to a particular person or individual. Persons include companies, firms, LLPs, etc. Personal account can be further classified into three divisions:- 

  • Natural persons include accounts prepared for individuals. For example, Ram Account, Priya Account, etc. 
  • Artificial Persons refer to those accounts who are treated as persons in the court of law Therefore, it means they possess a distinct legal identity. Examples would include accounts prepared for companies, for example., Reliance Ltd Account, etc. 
  • Representative persons refer to those accounts that represent persons or individuals. For example, Capital Account (it represents the owner) and Accrued Salary Account (it represents the employee whose salary is outstanding)

Impersonal Account 
This category includes accounts that are not related to any person. They can be categorized into Real Account and Nominal Account.

  • Real Accounts: It includes fixed assets and cash accounts. Examples of real accounts are Machinery Account, Patents Account, Building Account, etc. 
  • Nominal Accounts – These accounts do not have balances at the end of the accounting period. They include accounts of expenses and incomes. For example, Salary Account, Dividend Account, Interest Account, Rent Account, etc. come under the Nominal Account category. 

Debit and Credit Rules mentioned under Traditional Approach

As per the chapter, recording of transactions, there are some predetermined rules which one must follow to while preparing the entries for accounts and they are- 

Personal Account

Debitthe receiver
Credit the giver

Real Account

Debit what comes in
Creditwhat goes out

Nominal Account

Debitall expenses / losses
Creditall incomes/gains

Source Documents

Source documents are the first-hand evidence that suggests a particular transaction has taken place. They are always in the form of a written document.

Types of Source Documents

The types of source documents that are mentioned in Class 11 recording of transactions are: 

  • Invoices: The seller issues it at the time of sale of goods. It contains details like date of sale, quantity, item names, amount, tax rate and amount, etc.
  • Debit Notes: Debit notes are essential for passing purchase return entries. Issued by the buyer, they come into the picture when the goods purchased are returned to the seller
  • Credit Notes: Credit notes are important for passing sales return entries. They are prepared by the seller when he receives goods that are sold to the buyer
  • Cash Memos: The seller prepares them at the time of sale of goods for cash  

Accounting Vouchers

Accounting vouchers are crucial for passing entries for business transactions. It is a piece of essential evidence proving the existence of a business transaction. 

Types and Classification of Accounting Vouchers

As per the chapter recording of transactions, the following accounting vouchers are explained:- 

  • Cash Vouchers: Cash vouchers are mainly prepared for cash transactions. Cash vouchers are further classified into Debit Vouchers and Credit Vouchers. Debit Vouchers show payments made in cash and Credit Vouchers depict cash receipts
  • Non-Cash Vouchers: Such vouchers are called Transfer Vouchers, mainly used for transactions that do not involve cash

Recording of Transactions-I: Theoretical Questions

Here are some theory based questions which you must practice

1. Where shall a transaction be recorded first, and why?

Answer: An entry for a business transaction in the process of accounting is first passed in the Journal. It helps in keeping track of all the debit and credit entries pertaining to each transaction. 

2. What are the fundamental steps of the accounting process?

Answer: In the Class 11 Accountancy syllabus, the fundamental steps of the accounting process are elaborated extensively. These steps are: – 

  • Identifying and scrutinizing business transactions from source documents.
  • Recording the particular business transaction
  • Classifying, analysing, and summarizing their effects and communicating the financial results to the financial statements’ users.

3. What effects of entry would you have to provide to- Increase revenue, decrease expenditure, increase drawings, increase capital?

Answer: Debit effects need to be given to increase drawings, and credit effects need to be given to increase revenue and capital and decrease expenses. 

Recording of Transactions-I: Practical Questions

Pass the following entries in the Journal of Hayden and Bros.

  • Rs. 1000 due from R are now bad debts
  • R has become insolvent. He owed Rs. 2000. 60 paise in a rupee is recoverable from his estate
  • Interest on capital for 9 months at 6% p.a. Rs. 150,000
  • Provide depreciation on the machine for two months. The cost of the machine is 30,000.
  • Goods of Rs. 2000 were taken by the proprietor. 


S.No. ParticularsLFDebitCredit
a)Bad Debts A/c Dr.1,000
To R A/c1,000
(Being due from R converted into bad debts.)
b)Bad Debts A/c800
Cash A/c Dr.1,200
To R A/c2,000
(Being 60 paise in a rupee received from R.)
c)Interest on Capital A/c Dr6,750
To Capital A/c6,750
(Being interested in capital provided for 9 months at 6% p.a.)
d)Depreciation A/c Dr.500
To Machinery A/c500
(Being depreciation provided for two months)
e)Drawings A/c Dr.2,000
To Purchases A/c2,000
(Being goods withdrawn by the proprietor for personal use.)

Worksheet on Recording of Transactions

Q1. Prepare the accounting equations with the below information: 

 Raj started business with the cash amounts to INR 2,00,000
 Bought some goods from Rahul for the cash amounts to INR 50,000
 Sold goods to Bhuvan with the cash amounts to INR 15,000
 Bought furniture on credit worth INR 6,000

Q2. Prepare the following entries: 

Kunal started his venture worth INR 3,00,000
Bought furniture for cash INR 30,000
He gave commission of INR 2500
Purchased goods on credit INR 45,000
He sold his goods (Cost 15,000) for cash amounting to INR 22,000

Q3. Bharat has the following transactions, prepare the accounting equations:

Business opening amount INR 1,80,000
Purchased goods from Rajat 50,000
Sold goods on credit to Paras (Costing 16,000) INR 20,000
Purchased furniture INR 10,000
Cash paid to Rajat fully INR 48,500
Cash received from Paras INR 23,000
Rent Paid INR 1500
Drawings INR 3500

Q4. Prepare the following entries into the journal of Priya:

Started business with cash INR 2,50,000
Bought machinery on credit INR 35,000
Bought goods for cash INR 25,000
Purchased car for personal use INR 85,000
Paid to creditors in full settlement INR 35,000
Sold goods for cash amounting to INR 9,000
Paid Rent INR 1500
Commission received in advance INR 2000

Q5. M/s Royal Traders have the following equations: 

Commenced business with cash INR 1,50,000
Bought goods for cash INR 15,000
Rent received INR 4,500
Salary outstanding INR 3,000
Prepaid insurance INR 1200
Received royalty INR 900
Sold goods for cash (costing INR 4,000) for INR 8,000
Goods destroyed by fire INR 700

List of Practice Questions 

The following questions can be referred to by Class 11 as practice questions for the topic recording of transactions.

  1. Explain the significance of source documents as evidence in accounting.
  2. Why are some of the accounting systems referred to as Double Accounting Systems?
  3. How are debit and credit entries listed in the journal?

Chapter 2

Now that you are through with the first part of the recording of transactions chapter, let us move further and have a look at the topics that are mentioned in the second chapter.

Journals Under Recording of Transactions

The second part of the chapter recording of transactions begin with an explanation of types of books. The primary books that used by a business for recording transactions are: –

  • Cash Book
  • Petty Cash Book
  • Sales Book
  • Purchases Book
  • Sales Return Book 
  • Purchases Returns Book 

There are many other special-purpose books that are maintained by a business. It depends on the nature of transactions, the volume of transactions, and the scale on which the business operates. But, the aforementioned listed books are essential to maintain day-to-day financial activities.

Process of Recording Transactions 

Recording a particular transaction in the books is performed using the Double Entry System of Bookkeeping. It means that every transaction will have a debit effect and a credit effect. To understand the debit and credit effects, one needs to be through with the three categories in which the accounts are divided. These three categories have a standard and dedicated golden rule that applies uniformly in every transaction. 

Recording of Transactions – II: Theoretical Questions 

The following questions are mentioned in the chapter recording of transaction accountancy book class 11. Students must learn the below-mentioned topics to form a basic conceptual understanding. 

Why are Special-Purposes Books used for recording transactions?


  • Special-purpose books like Sales Book and Purchases Book are used to record transactions that are recurrent and routine. 
  • Businesses having large volumes of transactions often maintain special-purpose books besides primary books. 
  • The journal is subdivided further for quick, accurate, and efficient posting of entries. Maintaining special purpose books enables a clear division of duties among the team members. 

How is cash a book a journal as well as a ledger?


  • Cashbook serves the purpose of both journal and ledger. 
  • Entries are posted directly from sources into a cash register. Therefore, there is no need to post them in a journal. 
  • Additionally, cash and bank balances can be determined from the cash transactions posted directly. Hence, there is no necessity to prepare a cash account, which is part of a ledger. 

State the distinctions between return inwards and return outwards.


Basis of DifferencesReturn Inwards Return Outwards
MeaningReturn inwards means the return of goods sold to the customers.Return outwards refers to returning the goods purchased to the suppliers.
TerminologiesReturn inwards means sales returns.Return outwards means purchase returns.
Treatment Sales returns are deducted from sales in the trading account.Purchase returns are deducted from purchases in the trading account.
Documents issuedCredit notes are prepared and issued by the seller. The buyer prepares a debit note. 
BalanceReturn inwards has a debit balance. Return outwards has a credit balance. 

State the fundamental steps in the process of accounting.

Solution: The fundamental steps in the process of accounting are graphically depicted below: – 
Identification of the financial transactions from source documents like vouchers.

Recording the transactions in the primary book, i.e., journal.

Transferring the respective accounts into ledgers.

Transferring balances of different ledgers into the trial balance.

Preparing financial statements.

Communication of the financial results to different users of the financial statements.

What are the purposes of posting contra entries?


  • Contra entries are passed to show the movement of cash deposit and cash withdrawals into and from banks. 
  • The purpose of passing contra entries is to show the relevant effects on both cash and bank balances. 
  • Contra entries do not affect the financial position of a business.
  • A contra entry is posted on both sides of the Two-Column Cash Book. 
  • It is indicated by “C” in the ledger folio column

Explain the concept of accounting equations with the help of an example.


  • An accounting equation is formulated based on the dual concept of accounting.
  • It means that every transaction affects both debit and credit balances simultaneously.
  • Therefore, the accounting equation simply means that total assets are always equal to owners’ funds (capital) and external liabilities. 
  • Example: – Business is commenced with cash Rs. 100,000. In this example, the cash account is debited (assets), because, Rs. 100,000 is invested in the business, and the capital account is credited (liability) by the same figure since capital is introduced in the business. 

Recording of Transactions – II: Practical Problems

Derived from the recording of transactions chapter, mentioned below are some necessary practical questions which you must practice to ace the topic-

Post the following transactions in a cash book for October 2009:

DateParticularsAmount (INR)
01Cash in hand 12,000
09Cash received from A4,000
11Payment of Rent Expense2,000
12Cash paid for goods purchased6,000
16Cash received for goods sold9,000
19Cash paid for stationery bought300
21Cash paid to B for full account settlement2,000
25Payment of Salary1,000
30Payment of Hire Charges500

Solution: –
Cash Book
Dr.                                                                                                                                                           Cr.

Date ParticularsL. F.Amount (INR)Date ParticularsL. F.Amount (INR)
Oct 01Balance b/d12,000Oct 11Rent2,000
Oct 09A4,000Oct 12Purchases6,000
Oct 16Sales9,000Oct 19Stationery300
Oct 21B2,000
Oct 25Salaries1,000
Oct 30Hire Charges500
Balance c/d13,200

Journalise the transactions mentioned below in the books of A:

DateParticularsAmount (INR)
April 01Business commenced with cash75,000
April 06Goods purchased with cash10,000
April 10Goods sold to S5,000
April 15 Furniture purchased with cash3,000
April 17 Cash received from S on full account settlement4,000
April 20Payment of Rent Expense1,000
April 25 Payment of Salary1,500

Solution: – 
Books of A

DateParticularsL. F.Debit (INR)Credit (INR)
April 01
Cash A/c                                                      Dr.     To Capital A/c(Being business commenced with cash)75,000
April 06Purchases A/c                                             Dr.     To Cash A/c(Being goods purchased with cash)10,000
April 10S A/c                                                             Dr.     To Sales A/c(Being goods sold to S)5,000
April 15Furniture A/c                                              Dr.    To Cash A/c(Being furniture purchased.)3,000
April 17Cash A/c                                                      Dr.Discount Allowed A/c                               Dr.    To S A/c (Being account settled with S.)4,0001,000

April 20Rent A/c                                                      Dr.     To Cash A/c(Being rent paid.)1,000
April 25Salary A/c                                                    Dr.     To Cash A/c(Being salary paid.)1,500


What type of transactions are recording in accounting?

Cash transactions, credit transactions and non-cash transactions are the types of recordings in accounting.

What are the 4 steps to recording business transactions?

First, Identify and Analyse transactions
Then, record transactions
Thirdly, Post information of journal to a ledger
Finally, Prepare a trail balance (unadjusted)

Where are business transactions recorded?

Business transactions are usually stored in books called journals and ledgers.

Hopefully, through our notes based on the recording of transactions, we have assisted you in learning one of the most essential topics of class 11 Accountancy. Do you want to take initial steps to step up a career in the field of your choice? Reach out to our experts at Leverage Edu and they will brief you, how you can do it.

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