Chapter recording-of-transactions-i: Recording of Transactions - I Short Questions | accountancy Class 11 CBSE

Chapter recording-of-transactions-i: Recording of Transactions - I Short Questions | accountancy Class 11 CBSE | ByteNotes.in

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Question 1

Quick Recall

What is a business transaction? State its two essential characteristics.

A business transaction is an exchange of economic consideration between parties that produces a two-fold (give and take) effect on the business.
It must involve at least two accounts because every transaction has a dual aspect — one account receives value while another gives value.
Each transaction must be evidenced by a source document or voucher which provides proof and forms the basis for recording in the books of account.

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Question 2

Quick Recall

What is a source document? Give three examples.

A source document is a document that provides evidence of a business transaction and serves as the basis for recording it in the books of account.
Common examples include cash memos (issued on cash purchases/sales), invoices or sales bills (issued on credit transactions), and pay-in slips (issued when money is deposited into a bank).
Other examples are cheques, salary slips, and receipts; all are arranged chronologically, serially numbered, and kept in a separate file.

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Medium

Question 3

Quick Recall

Distinguish between a transaction voucher and a compound voucher.

A transaction voucher is prepared for a simple transaction that involves exactly one debit entry and one credit entry.
A compound voucher is prepared for transactions where there are multiple debits against a single credit (Debit Voucher) or a single debit against multiple credits (Credit Voucher).
A transaction voucher handles straightforward two-account transactions whereas a compound voucher handles more complex situations, such as purchasing goods partly for cash and partly on credit.

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Question 4

Quick Recall

State the essential elements that must appear on every accounting voucher.

Every accounting voucher must contain the name of the firm, the date of the transaction (not the recording date), and a serial voucher number.
The names of accounts to be debited and credited, the corresponding amounts in figures, and a brief description (narration) of the transaction must also be included.
The signatures of both the person who prepares the voucher and the authorised person approving it are mandatory for the voucher to be valid.

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Question 5

Quick Recall

Write the accounting equation and explain what each term represents.

The accounting equation is: Assets (A) = Liabilities (L) + Capital (C). Assets represent all the resources owned by the business.
Liabilities represent the claims of outsiders (creditors) against the assets of the business, i.e., what the business owes to third parties.
Capital represents the owner's equity or the proprietor's claim against the assets, equal to the amount invested by the owner adjusted for profits, losses, and drawings.

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Question 6

Quick Recall

Why is the accounting equation also called the Balance Sheet Equation?

The accounting equation (A = L + C) is called the Balance Sheet Equation because each of its elements — assets, liabilities, and capital — directly corresponds to the components of the balance sheet.
The balance sheet is a statement of assets, liabilities, and capital on a particular date, and its two sides must always be equal, just as the two sides of the accounting equation.
Since every business transaction affects the balance sheet while maintaining this equality, the accounting equation is essentially a condensed version of the balance sheet.

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Question 7

Quick Recall

State the rule of debit and credit for asset accounts and for liability accounts.

For asset accounts: an increase in an asset is recorded on the debit (left) side, and a decrease in an asset is recorded on the credit (right) side.
For liability accounts: an increase in a liability is recorded on the credit (right) side, and a decrease in a liability is recorded on the debit (left) side.
These two rules are symmetrical — assets and liabilities respond in opposite directions to debit and credit, which is a direct consequence of the fundamental accounting equation A = L + C.

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Question 8

Quick Recall

State the rule of debit and credit for expense accounts and for revenue accounts.

For expense/loss accounts: an increase in expenses or losses is recorded as a debit (left side), and a decrease in expenses or losses is recorded as a credit (right side).
For revenue/gain accounts: an increase in revenue or gain is recorded as a credit (right side), and a decrease in revenue or gain is recorded as a debit (left side).
These rules reflect the fact that expenses reduce capital and revenues increase capital, keeping the accounting equation in balance.

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Question 9

Quick Recall

Does debit always mean increase? Give a reason for your answer.

No, debit does not always mean increase. Its effect depends entirely on the nature (category) of the account being debited.
Debiting an asset or expense account records an increase, while debiting a liability, capital, or revenue account records a decrease.
This is why a thorough understanding of account categories is essential before applying debit and credit rules — the term 'debit' signifies only the left side of an account, not necessarily an increase.

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Question 10

Quick Recall

What is a journal? State any two features of a journal.

A journal is the book of original entry in which every business transaction is recorded for the first time in chronological order along with the accounts to be debited/credited and a narration.
One key feature is that it records transactions sequentially (date-wise), providing a complete, transaction-by-transaction history that is important as legal evidence.
Another feature is that every entry in the journal contains equal debit and credit amounts, thereby maintaining the double entry requirement and facilitating accurate posting to the ledger.

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Question 11

Quick Recall

Distinguish between a simple journal entry and a compound journal entry.

A simple journal entry involves only two accounts — one is debited and one is credited — making it suitable for straightforward transactions such as goods purchased for cash.
A compound journal entry involves more than two accounts — either multiple accounts are debited against one credit, or one account is debited against multiple credits, or both sides have multiple accounts.
An example of a compound entry is purchasing office furniture worth ₹25,000 where ₹5,000 is paid immediately in cash and ₹20,000 remains payable — Furniture A/c Dr. ₹25,000; Cash A/c Cr. ₹5,000; Creditor A/c Cr. ₹20,000.

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Question 12

Quick Recall

What is a narration in a journal entry? Why is it important?

Narration is a brief description written below each journal entry explaining the nature and purpose of the transaction recorded in that entry.
It is important because it helps the reader understand the reason for the entry without referring back to the original source document, serving as a quick reference.
Narration also provides legal and audit support by confirming that the recording matches the underlying transaction, reducing errors and facilitating verification.

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Question 13

Quick Recall

What is posting? Why is the Journal Folio (J.F.) column important?

Posting is the process of transferring entries from the books of original entry (journal) to the respective accounts in the ledger, grouping all transactions for each account at one place.
The Journal Folio (J.F.) column in the ledger records the page number of the journal from which the entry was posted, enabling easy cross-referencing between the two books.
Similarly, when posting is done, the ledger page number is entered in the J.F. column of the journal, creating a two-way reference trail that helps in locating, verifying, and auditing entries.

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Chapter recording-of-transactions-i: Recording of Transactions - I | Short Questions

What is a business transaction? State its two essential characteristics.

What is a source document? Give three examples.

Distinguish between a transaction voucher and a compound voucher.

State the essential elements that must appear on every accounting voucher.

Write the accounting equation and explain what each term represents.

Why is the accounting equation also called the Balance Sheet Equation?

State the rule of debit and credit for asset accounts and for liability accounts.

State the rule of debit and credit for expense accounts and for revenue accounts.

Does debit always mean increase? Give a reason for your answer.

What is a journal? State any two features of a journal.

Distinguish between a simple journal entry and a compound journal entry.

What is a narration in a journal entry? Why is it important?

What is posting? Why is the Journal Folio (J.F.) column important?

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