This document discusses the basic accounting process and books of accounts. It explains that transactions are first recorded in vouchers and then the general journal. The general journal records are then posted to individual accounts in the general ledger. The general ledger contains T-accounts for each ledger account, where debits and credits from transactions are recorded. The balance of each ledger account, which is the difference between total debits and credits, represents the net amount for that account.

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Learning Objective
• This lecture will cover following areas:
 An overview of the flow of transactions.
 An introduction to the basic books of accounts.
 The General Ledger, and
 The ledger balance

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Lecture – 06
The Flow Of Transactions
General Journal
General Ledger Cash/Bank Book
Trial Balance Profit & Loss Account Balance Sheet
The Voucher
Occurrence of an Event

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Lecture – 06
The Voucher
The Voucher
Occurrence of an Event
• Voucher is a document in a specific format that records the
details of a transaction.
• It is accompanied by the evidence of transaction.

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Lecture – 06
A Sample Voucher
Name Of Company
Type Of Voucher
Date: 1-1-20-- No: 01
Description Code
#
Debit
Amount
Credit
Amount
Cash 01 100,000
Capital 02 100,000
Total: 100,000 100,000
Narration: Capital Introduced in Cash by Owner
Prepared By: Checked by:

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Lecture – 06
The General Journal
• The Journal used to be a chronological (day-to-day) record
of business transactions. All vouchers were first recorded in
books.
• It was also called the Book of Original Entry or Day Book.
• But in present day accounting and specially with the
introduction of computers for accounting this book is not in
use any more.
• We will therefore not study the use of Journal in detail but
we should know that it is a book that keeps day-to-day
record of transactions.
General Journal

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Lecture – 06
The Present Day Flow Of Transactions
General Journal
Trial Balance Profit & Loss Account Balance Sheet
The Voucher
Occurrence of an Event
General Ledger Cash/Bank Book

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Lecture – 06
General Ledger – The ‘T’ Account
• Ledger – is a book that keeps separate record for each
account (Book of Accounts).
• We know that Account or Head of Account is systematic
record of transactions of one type.
• An account in its simplest form is a T-shape and looks like
this:
Title of Account
Left hand side.
The Debit side.
Right hand side.
The Credit side.
A ‘T’ account

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Lecture – 06
A Standard General Ledger
• Since the ledger keeps record of transactions that effect one
head of account, therefore, it should provide all the
information that a user may need.
• Usually the ledger is required to provide following
information:
 Title of account
 Ledger page number, called Ledger Folio / Account
Code
 Date of transaction
 Voucher number
 Narration / particulars of transition
 Amount of transaction

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Lecture – 06
A Standard General Ledger
Capital Account (Title of Account)
Account Code 02
Date Voucher
Number
Particulars /
Narration
Debit
Amount
Credit
Amount
20--
Jan 01 01 Capital Introduced in cash by Owner 100,000

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Lecture – 06
Recording From Voucher To General Ledger
Voucher
Date: 1-1-20-- No: 01
Description Code
#
Debit
Amount
Credit
Amount
Cash 01 100,000
Capital 02 100,000
Narration: Capital Introduced in Cash by Owner
Capital Account (Title of Account)
Account code 02
Date Voucher
Number
Particulars /
Narration
Debit
Amount
Credit
Amount
20--
Jan 01 01 Capital Introduced in cash by Owner 100,000

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Completing The Recording – Both Effects
Description Code
#
Debit
Amount
Credit
Amount
Cash 01 100,000
Capital 02 100,000
Narration: Capital Introduced in Cash by Owner
Cash Account
Account Code 01
Date Voucher
Number
Particulars /
Narration
Debit
Amount
Credit
Amount
20--
Jan 01 01 Capital Introduced in cash by Owner 100,000
Capital Account
Account Code 02
Date Voucher
Number
Particulars /
Narration
Debit
Amount
Credit
Amount
20--
Jan 01 01 Capital Introduced in cash by Owner 100,000
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A Simple Presentation Of A Recorded Transaction
Capital Account Code 02
Cash 100,000
Cash Account Code 01
Capital 100,000

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Lecture – 06
The Ledger Balance
• In the earlier lecture we discussed that in order to have the
total figure in respect of each head of expense/income,
asset/liability we need to maintain different accounts.
• We had also said that each account may have figures on the
debit as well as the credit side.
• Therefore, the difference between the debit and the credit
sides, known as the BALANCE, would represent the
required total of the particular account.
• The total all balances on the Debit side is ALWAYS equal
to the total of all balances on the Credit side. This is called
the balancing of books of accounts. We will study about
this concept at a later stage.
• The balance may be written out after every transaction in a
third column or calculated at the end of a specific time
period (an accounting period).

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The Ledger Balance
Cash Account
Account Code 01
Date Voucher
Number
Narration /
Particulars
Debit
Amount
Credit
Amount
Balance
Dr/(Cr)
20--
Jan 01 01 Capital Introduced in cash by Owner 100,000 100,000
Jan 01 02 Cash Paid for Purchase of Building 50,000 50,000
Jan 02 03 Cash Paid for Purchase of Furniture 10,000 40,000
• A Debit balance is shown without brackets and a Credit
balance in brackets (XYZ).
Capital Account
Account Code 02
Date Voucher
Number
Narration /
Particulars
Debit
Amount
Credit
Amount
Balance
Dr/(Cr)
20--
Jan 01 01 Capital Introduced in cash by Owner 100,000 (100,000)