CBSE Class 11 Accountancy Recording of Business Transactions Notes | Journal, Cash Book & Ledger
CBSE Class 11 Accountancy – Chapter: Recording of Business Transactions
CBSE Class 11 Accountancy Notes | Recording of Business Transactions | Journal | Cash Book | Subsidiary Books | Ledger
Recording business transactions is one of the most important practical parts of Class 11 Accountancy. In this chapter, students learn how business transactions are identified, recorded, classified and finally posted into the ledger.
These notes are written in simple and easy language and are useful for CBSE Class 11 Accountancy students, revision, school examinations and board-level preparation.
1. What is a Business Transaction?
A business transaction is an economic activity that can be measured in money and affects the financial position of a business.
Examples
Started business with cash ₹1,00,000
Purchased goods for cash ₹20,000
Sold goods for ₹15,000
Paid salary ₹10,000
Purchased furniture for ₹25,000
Important Point
Every activity of a business is not necessarily a business transaction.
For example:
The owner appoints a new employee.
This may be important for the business, but no transaction is recorded until there is a financial effect that can be measured in money.
2. Source Documents
A source document is a document that provides evidence that a business transaction has taken place.
It is the basic evidence used for recording transactions in the books of accounts.
Common Source Documents
| Source Document | Used For |
|---|---|
| Cash Memo | Cash purchase or sale |
| Invoice/Bill | Credit purchase or sale |
| Receipt | Money received |
| Payment Voucher | Payment made |
| Cheque | Bank payment/receipt |
| Debit Note | Purchase return |
| Credit Note | Sales return |
| Pay-in-slip | Money deposited into bank |
Why are Source Documents Important?
Source documents:
Provide evidence of transactions.
Help in recording transactions correctly.
Reduce the possibility of errors.
Provide supporting documents during verification.
Help in maintaining proper accounting records.
3. Voucher
A voucher is a document prepared as evidence of a business transaction and is used as the basis for recording the transaction in the books of accounts.
A voucher normally contains:
Date
Name of party
Particulars of transaction
Amount
Supporting document/reference
Signature or approval of authorised person
Example
Suppose a business pays ₹5,000 as office rent.
A payment voucher may be prepared showing:
Date: 18 September 2026
Particulars: Office Rent Paid
Amount: ₹5,000
The voucher provides evidence for recording the transaction.
4. Preparation of Vouchers
The preparation of a voucher generally involves the following steps:
Step 1: Identify the transaction
Understand what has happened.
Step 2: Collect the source document
For example, invoice, receipt, cash memo or bank document.
Step 3: Prepare the voucher
Record the necessary details.
Step 4: Verify the voucher
Check the amount, date and particulars.
Step 5: Authorise the voucher
The responsible person approves it.
Step 6: Record the transaction
The transaction is then entered into the appropriate book.
5. Accounting Equation Approach
The accounting equation is the foundation of accounting.
Accounting Equation
Assets = Capital + Liabilities
Where:
Assets
Assets are resources owned or controlled by the business.
Examples:
Cash
Bank balance
Furniture
Building
Machinery
Stock
Debtors
Capital
Capital is the amount invested by the owner in the business.
Liabilities
Liabilities are amounts payable by the business to outsiders.
Examples:
Creditors
Bank loan
Outstanding expenses
Example 1: Started Business with Cash ₹1,00,000
Cash increases by ₹1,00,000.
Capital also increases by ₹1,00,000.
| Assets | = | Capital + Liabilities |
|---|---|---|
| Cash ₹1,00,000 | = | Capital ₹1,00,000 |
Therefore:
₹1,00,000 = ₹1,00,000
Example 2: Purchased Furniture for Cash ₹20,000
Furniture increases by ₹20,000.
Cash decreases by ₹20,000.
Total assets remain unchanged.
| Transaction | Effect |
|---|---|
| Furniture | +₹20,000 |
| Cash | -₹20,000 |
Example 3: Purchased Goods on Credit ₹30,000
Goods/Stock increases by ₹30,000.
Creditor increases by ₹30,000.
| Assets | = | Capital + Liabilities |
|---|---|---|
| +₹30,000 | = | +₹30,000 |
6. Rules of Debit and Credit
Every transaction has two aspects.
One account is debited and another account is credited.
The basic rule is:
For every debit, there must be an equal credit.
There are three traditional classifications of accounts.
A. Personal Account
Personal accounts relate to persons, firms, companies or institutions.
Rule
Debit the Receiver
Credit the Giver
Example
Paid ₹5,000 to Ravi.
Ravi is the receiver.
Therefore:
Ravi A/c → Debit
B. Real Account
Real accounts relate to assets.
Examples:
Cash
Furniture
Machinery
Building
Rule
Debit what comes in
Credit what goes out
Example
Purchased furniture for cash ₹10,000.
Furniture comes into the business.
Cash goes out.
Therefore:
Furniture A/c Dr.
To Cash A/c
C. Nominal Account
Nominal accounts relate to expenses, losses, incomes and gains.
Rule
Debit all expenses and losses
Credit all incomes and gains
Example
Paid salary ₹8,000.
Salary is an expense.
Therefore:
Salary A/c Dr. ₹8,000
To Cash A/c ₹8,000
7. Quick Revision – Rules of Debit and Credit
| Type of Account | Debit | Credit |
|---|---|---|
| Personal | Receiver | Giver |
| Real | What comes in | What goes out |
| Nominal | Expenses & Losses | Incomes & Gains |
Easy Memory Trick
Personal → Receiver/Giver
Real → Comes in/Goes out
Nominal → Expenses/Losses & Incomes/Gains
8. Books of Original Entry
The books in which transactions are recorded for the first time are called Books of Original Entry or Books of Prime Entry.
The main books include:
Journal
Cash Book
Purchases Book
Sales Book
Purchases Return Book
Sales Return Book
Petty Cash Book
Journal Proper
9. Journal
A Journal is the book in which business transactions are recorded in chronological order, that is, in the order in which they occur.
The process of recording a transaction in the journal is called Journalising.
Format of Journal
| Date | Particulars | L.F. | Debit (₹) | Credit (₹) |
|---|---|---|---|---|
Where:
L.F. = Ledger Folio
It shows the page/reference of the ledger where the transaction has been posted.
Example: Started Business with Cash ₹50,000
Journal Entry
Cash A/c Dr. ₹50,000
To Capital A/c ₹50,000
Explanation
Cash comes into the business → Debit Cash.
Capital is introduced by owner → Credit Capital.
10. Narration
A short explanation written below a journal entry is called Narration.
Example:
Cash A/c Dr. ₹50,000
To Capital A/c ₹50,000
Being business started with cash.
Narration helps in understanding the reason for the entry.
11. Trade Discount
A trade discount is a reduction given by a seller from the list price of goods.
Important Rule
Trade discount is not recorded separately in the books of accounts.
Only the net amount is recorded.
Example
List price of goods = ₹20,000
Trade discount = 10%
Trade discount = ₹2,000
Net purchase price:
₹20,000 − ₹2,000 = ₹18,000
Therefore, goods are recorded at ₹18,000.
12. Freight and Cartage
Freight and cartage are expenses related to transportation.
The accounting treatment depends upon the nature of the expense.
Freight/Carriage Inward
Transportation cost incurred to bring purchased goods into the business is generally treated as a direct expense.
Example:
Goods purchased ₹20,000
Freight paid ₹2,000
Purchase-related cost = ₹22,000.
Freight/Carriage Outward
Transportation cost incurred for delivering goods to customers is generally treated as a selling/distribution expense.
13. GST – Basic Calculation
GST stands for Goods and Services Tax.
For simple accounting questions, students may need to calculate GST on the taxable value after deducting trade discount.
Example
Goods purchased = ₹20,000
Trade discount = 10%
GST = 18%
Trade discount:
₹20,000 × 10% = ₹2,000
Taxable value:
₹20,000 − ₹2,000 = ₹18,000
GST:
₹18,000 × 18% = ₹3,240
Total invoice value:
₹18,000 + ₹3,240 = ₹21,240
Important
For intra-state transactions:
CGST + SGST = Total GST
For inter-state transactions:
IGST = Total GST
Always follow the GST rate and treatment specified in the question.
14. Special Purpose Books
When a business has a large number of transactions of the same nature, maintaining only one journal becomes inconvenient.
Therefore, separate books are maintained for different types of transactions.
These are called Special Purpose Books or Subsidiary Books.
15. Cash Book
A Cash Book records transactions involving:
Cash
Bank
Sometimes petty cash through a separate petty cash book
It serves as both:
A book of original entry and a ledger account for cash/bank.
16. Simple Cash Book
A Simple Cash Book contains only one amount column on each side for recording cash transactions.
Basic Format
| Receipts | ₹ | Payments | ₹ |
|---|---|---|---|
| To Capital | 50,000 | By Purchases | 10,000 |
| To Sales | 20,000 | By Salary | 5,000 |
| By Balance c/d | 55,000 | ||
| Total | 70,000 | Total | 70,000 |
Important Point
Cash column cannot normally have a credit balance.
17. Cash Book with Bank Column
A two-column cash book contains:
Cash column
Bank column
It records both cash and bank transactions.
Common Transactions
Cash deposited into bank
Cheque received
Cheque issued
Cash withdrawn from bank
Contra Entry
A transaction involving transfer between cash and bank is called a contra transaction.
Examples:
Cash deposited into bank.
Cash withdrawn from bank for office use.
Such entries affect both cash and bank columns of the cash book.
They are generally marked with C in the L.F./particulars area to indicate a contra entry.
18. Petty Cash Book
A Petty Cash Book is maintained to record small and frequent expenses.
Examples:
Postage
Stationery
Conveyance
Tea and refreshments
Courier charges
Local travelling expenses
Advantages
Saves the time of the main cashier.
Makes recording of small expenses easier.
Helps in controlling petty expenses.
Provides a detailed record of small payments.
19. Purchases Book
The Purchases Book records credit purchases of goods.
Important
It does not record:
Cash purchases of goods
Purchase of furniture
Purchase of machinery
Purchase of other fixed assets
These transactions are recorded elsewhere.
Example
Purchased goods on credit from Mohan ₹30,000.
This transaction will be recorded in the Purchases Book.
20. Sales Book
The Sales Book records credit sales of goods.
It does not record:
Cash sales
Sale of furniture
Sale of machinery
Sale of other assets
Example
Sold goods on credit to Ravi ₹25,000.
This transaction is recorded in the Sales Book.
21. Purchases Return Book
The Purchases Return Book records goods returned to suppliers.
It is also called the Returns Outward Book.
Example
Goods worth ₹5,000 purchased from ABC Ltd. are returned.
The transaction is recorded in the Purchases Return Book.
The supplier generally issues a Credit Note to the buyer.
22. Sales Return Book
The Sales Return Book records goods returned by customers.
It is also called the Returns Inward Book.
Example
Goods worth ₹3,000 sold to Ravi are returned by him.
The transaction is recorded in the Sales Return Book.
The seller generally issues a Credit Note to the customer.
23. Journal Proper
Transactions that cannot be recorded in other special purpose books are recorded in Journal Proper.
Examples include:
Opening entries
Closing entries
Adjustment entries
Transfer entries
Rectification entries
Other transactions not covered by subsidiary books
24. Important Difference: Purchases Book vs Sales Book
| Basis | Purchases Book | Sales Book |
|---|---|---|
| Records | Credit purchases of goods | Credit sales of goods |
| Related to | Purchases | Sales |
| Cash transactions | Not recorded | Not recorded |
| Asset purchase/sale | Not recorded | Not recorded |
25. Important Difference: Purchase Return vs Sales Return
| Basis | Purchases Return | Sales Return |
|---|---|---|
| Meaning | Goods returned to supplier | Goods returned by customer |
| Also called | Returns Outward | Returns Inward |
| Effect | Reduces purchases | Reduces sales |
| Document | Credit Note received | Credit Note issued |
26. Ledger
A Ledger is the principal book of accounts in which all transactions relating to a particular account are collected at one place.
For example, all transactions related to:
Cash
Bank
Sales
Purchases
Salary
Debtors
Creditors
are classified into their respective ledger accounts.
27. Importance of Ledger
Ledger helps the business to:
Know the balance of each account.
Classify transactions.
Prepare the Trial Balance.
Prepare financial statements.
Find the amount due from debtors.
Find the amount payable to creditors.
28. Format of Ledger Account
A traditional ledger account has two sides:
Debit Side
| Date | Particulars | J.F. | Amount |
|---|
Credit Side
| Date | Particulars | J.F. | Amount |
|---|
J.F. = Journal Folio
29. Posting from Journal to Ledger
Posting means transferring information from the journal or subsidiary books to the appropriate ledger accounts.
Example
Journal entry:
Cash A/c Dr. ₹10,000
To Capital A/c ₹10,000
Posting in Cash Account
Cash Account is debited.
Therefore, in Cash A/c:
To Capital A/c ₹10,000
Posting in Capital Account
Capital Account is credited.
Therefore, in Capital A/c:
By Cash A/c ₹10,000
30. Golden Rule for Posting
Remember this simple rule:
The account which is debited in the journal is debited in the ledger.
The account which is credited in the journal is credited in the ledger.
The name of the other account is written in the particulars column.
31. Posting from Subsidiary Books
Transactions recorded in subsidiary books are also posted to the ledger.
For example:
Credit Purchase
Credit purchases are first recorded in the Purchases Book.
Individual supplier accounts are then credited with the relevant amounts.
The total of the Purchases Book is posted to the Purchases Account.
Similarly:
Sales Book → individual customers' accounts and Sales Account
Purchases Return Book → suppliers' accounts and Purchases Return Account
Sales Return Book → customers' accounts and Sales Return Account
32. Balancing of Ledger Accounts
Balancing means finding the difference between the total of the debit side and the total of the credit side of an account.
Steps
Total both sides of the account.
Find the difference between the two totals.
Write the difference on the side having the smaller total.
Bring the balance to the next accounting period.
Example
Suppose Cash Account has:
Debit total = ₹50,000
Credit total = ₹30,000
Difference:
₹50,000 − ₹30,000 = ₹20,000
Therefore, the account has a debit balance of ₹20,000.
This balance represents cash available with the business.
33. Balance c/d and Balance b/d
Balance c/d
c/d = carried down
It represents the balance at the end of the accounting period.
Balance b/d
b/d = brought down
It represents the balance brought into the next accounting period.
34. Complete Flow of Accounting Records
Students can remember the accounting process as:
Business Transaction
↓
Source Document
↓
Voucher
↓
Book of Original Entry / Journal / Subsidiary Book
↓
Ledger
↓
Trial Balance
↓
Final Accounts / Financial Statements
This sequence is very important for understanding the complete accounting process.
35. Common Exam Mistakes
Students should avoid the following mistakes:
Mistake 1: Recording trade discount separately
Trade discount is deducted from the list price and the net amount is recorded.
Mistake 2: Putting cash purchase in Purchases Book
Cash purchases are recorded in the Cash Book, not the Purchases Book.
Mistake 3: Recording furniture purchase in Purchases Book
Purchases Book is meant for credit purchases of goods, not fixed assets.
Mistake 4: Confusing purchase return and sales return
Remember:
Goods returned to supplier → Purchases Return
Goods returned by customer → Sales Return
Mistake 5: Forgetting narration
Where narration is required, write a short explanation below the journal entry.
Mistake 6: Wrong ledger posting
Always check whether the account was debited or credited in the original entry.
36. Quick Revision Table
| Topic | Key Point |
|---|---|
| Source Document | Evidence of transaction |
| Voucher | Documentary basis for recording |
| Accounting Equation | Assets = Capital + Liabilities |
| Journal | First systematic record of transactions |
| Cash Book | Records cash/bank transactions |
| Petty Cash Book | Records small expenses |
| Purchases Book | Credit purchase of goods |
| Sales Book | Credit sale of goods |
| Purchases Return Book | Goods returned to supplier |
| Sales Return Book | Goods returned by customer |
| Journal Proper | Transactions not recorded elsewhere |
| Ledger | Classification of accounts |
| Posting | Transfer to ledger |
| Balancing | Finding account balance |
37. Important Questions for Practice
Very Short Answer Questions
What is a business transaction?
What is a source document?
What is a voucher?
State the accounting equation.
What is a journal?
What is a ledger?
What is trade discount?
What is a petty cash book?
What is a contra entry?
What is ledger balancing?
Short Answer Questions
Explain the importance of source documents.
Explain the accounting equation with an example.
State the rules of debit and credit.
Distinguish between Purchases Book and Sales Book.
Distinguish between Purchases Return Book and Sales Return Book.
Explain the advantages of maintaining a Petty Cash Book.
What is Journal Proper? Give examples.
Explain the process of posting from Journal to Ledger.
Explain the meaning of balancing of accounts.
Explain the treatment of trade discount in accounting.
Practical Questions
Students should practise:
Journal entries
Accounting equation analysis
Simple Cash Book
Cash Book with Bank Column
Petty Cash Book
Purchases Book
Sales Book
Purchases Return Book
Sales Return Book
Journal Proper
Ledger posting
Ledger balancing
Simple GST calculations
38. Final Revision Tip
The easiest way to master this chapter is to understand the flow of a transaction instead of trying to memorise every format separately.
Remember:
Transaction → Source Document → Voucher → Journal/Subsidiary Book → Ledger → Balance
Once this flow is clear, Journal, Cash Book, Purchases Book, Sales Book and Ledger become much easier to understand.
Conclusion
Recording of Business Transactions is a foundation chapter of Class 11 Accountancy. It teaches students how business transactions are supported by documents, analysed using the accounting equation, recorded through debit and credit rules, entered into books of original entry and finally classified in the ledger.
Students should give special attention to Journal Entries, Cash Book, Subsidiary Books, Trade Discount, GST, Ledger Posting and Balancing of Accounts, as these concepts are used repeatedly in subsequent chapters.
Study regularly, practise numerical questions and always understand the reason behind each debit and credit.
👉 Class 12 All Chapters Notes
👉 Class 11 Commerce Notes
🚀 Join CommerceWallah12 Family - Free Notes Daily!
▶️ YouTube: Subscribe Now - CommerceWallah12
📸 Instagram: Follow on Instagram
💬 WhatsApp Channel: Join WhatsApp Channel for MCQs
📱 Direct Help: 9664795023
Disclaimer: Ye notes NCERT & CBSE pattern par banaye gaye hai. Koi doubt ho to Contact Us par message karein.
Comments
Post a Comment