Recording of Transactions

Recording of Transactions

First step of processing of financial information is recording the financial transactions in the books of accounts. Transaction is recorded in terms of debit and credit rules. The book in which these transactions are recorded or entered is known as Journal.

Recording Rules

Transactions are recorded with help of basic rules of debit & credit and specific rules for each element. There are two basic rules for recording i.e. every transaction has debit & credit aspect. Second rule is that debit aspect of transaction is equal to credit aspect.

We can broadly classify recording of transaction into following

·         Recording Of Expenses

·         Recording of income

·         Recording Assets

·         Recording of liabilities

1.    Rules of Expenses Recording

Rule for expense recording is very simple i.e. expense is debit. More technical form of this rule is increase in expense is debit, where decrease in expense is credit. For example a salary of $ 200 paid in cash may be recorded as under;

Date	Particulars	Dr.	Cr.
	Salary  a/c	$ 200
	Cash  a/c		$ 200

2.    Rules for Asset Recording

Rules for asset recording is similar to expense recording i.e. increase in asset would be debit, while decrease in asset would be credit. For example a plant purchased for $ 500 0n cash may recorded as under

Date	Particulars	Dr.	Cr.
	Plant  a/c	$ 500
	Cash  a/c		$ 500

3.    Rules for Income Recording

Rules for income are very easy i.e. income is credit. The more technical explanation is increase in income would be credited while decrease would be debited. This rule is opposite to rule for expense. For example a sales income of $ 300 may be recorded as under

Date	Particulars	Dr.	Cr.
	Cash  a/c	$ 300
	Sale  a/c		$ 500

4.    Rules for Liability Recording

Rules for liability recording are similar to income recording i.e. increase in liability would be credit, while decrease would be debit. For example purchases on credit from saleem is recorded as under

Date	Particulars	Dr.	Cr.
	Purchases a/c	$ 400
	Saleem  a/c		$ 400