BCA 2nd Semester ECO-02 ACCOUNTANCY-1 Unit-2 The Accounting Process NOTES Part-1
                     BCA 
2nd SEMESTER
E.C.O.-02
ACCOUNTANCY-1 
NOTES
BY:- Bright Education 
Hub
BLOCK-I 
ACCOUNTING 
FUNDAMENTAL
S
Unit-2. The Accounting Process
Journal:- 
 Journal in Latin means a day. The Journal means a 
day book. The first step in book-keeping is the 
recording of transaction. All transactions are first 
recorded in the journal and is called “Book of 
primary entry or Book of original entry”. It is 
also known as the day book because it records daily 
transactions in the order in which they take place.
 “A journal is a day book kept in the business 
where in the complete history of transaction 
of accounting nature including debit and 
credit aspect is shown chronologically”.
Format of Journal
Dat Particulars L.F Dr. (Debit) Cr. (Credit)
e . Amount Amount
The Journal is Divided Into 
Five Columns
First Columns:-
Used for writing the date of the transaction. It is 
customary to write the year at the top of the column 
only once and then in the next line the month and date 
are written.
Second columns:-
Called “Particular” column. The name of the two 
accounts effected by the transaction are to be 
recorded in this column. The name of the account to 
be debited is written first. The abbreviation ‘Dr.’ for 
debit is also written against the name of the account to 
be debited. It is written on the same line very close 
to the L.F. column.
In the next line, The name of the account to be 
credited is written. It is always preceded by 
the word ‘To’. It is not necessary to write ‘Cr.’ 
against the name of the account to be credited. In 
the next line, ‘A brief description of the 
transaction is also given within brackets, It is 
called “Narration”’. After writing the narration a 
line is drawn in the particulars column to separate 
one entry from the other.
Third Column:-
L.F. (Ledger Folio) is meant for writing the page 
number of the ledger where the concerned account 
appears. This column is filled at the time of posting 
into the ledger.
Fourth & Fifth Columns:-
They are meant for recording the amounts with 
which the two accounts have been effected. The 
amount to be debited is entered in the debit 
amount column against the name of the account 
debited, and the amount to be credited is entered 
in the credit amount column against the name of 
the account credited. Both the amounts will always 
be equal.
Question:- Purchased Machinery for Rs. 10,000 
on May 1, 1998?
Date Particulars L.F. Dr. Cr. 
(Debit) (Credit)
Amount Amount
1988 M/C  A/C                         Dr. Rs. 10,000
May To Cash A/c Rs.10,000
01 (Being M/C purchased)
In this account, the two accounts effected are 
Machinery Account and Cash Account. You know 
both are real Accounts. According to rules relating to 
real accounts, the Machinery Accounts is to be 
debited and the Cash Account is to be credited. The 
entry will be made in the journal.
Assets
Assets are those thing which belongs to us. These 
things give us profit time to time. Like :- Mobile, Book, 
Car, Stationary. There are two types of assets.
Tangible Intangible
Tangible are those Intangible/Non-Tangible are 
assets which you can those assets which you can 
touch & see. E.g.:- M/C, not touch & see but it exist. 
Book, Land, Building, E.g.:- Goodwill, Reputation, 
Car etc. Charity.
Liabilities
Liabilities are those things which does not belong to is 
us and we should return to the owner.
Transaction Relation to Goods
The term of goods refer to articles which are traded 
by the firm, articles bought for resale. For example:- 
for a book-seller books are goods, for an electrical 
store fans and other electrical items are goods, for a 
furniture dealer table and chairs are goods. Articles 
bought for using them in business are not to be 
treated as goods. They may be fixed assets or 
consumables and are to be treated as such in books 
of accounts. 
Five separate accounts are maintained, as shown 
below:-
1) Purchase Account:- For recording all purchases of 
goods.
2) Sales Account:- For recording all sales of goods.
3) Return Onwards/Outwards or Purchases 
Account :- For recording goods returned to supplier. 
Ex.:- when you return goods to the suppliers, you 
will credit the Goods Account.
4) Return Inwards Account or Sales Returns 
Account :-For recording goods returned by 
customers. Ex.:- when goods are returned by your 
customer you will debit the goods Account.
5) Stack Accounts:- For goods in stack (unsold goods) 
as at the end of the year. Like:- Bit coins.
Payment by Cheque
When payment is made by 
Cheque, you will credit the Bank 
Account because bank is the 
giver and when payment is 
received by cheque, the amount 
will be debited to the Bank 
Account because cheque is 
deposited in the bank who is the 
receiver.
Transactions with the Proprietor
 Capital Account and Drawing Account are 
maintained for his purpose.
 Whatever the proprietor brings into the business 
is treated as his capital and credited to his 
Capital Account.
 When he withdraws cash from the business for 
his personal use, he is to be debited with the 
amount withdrawn by him. Such as debit is given 
to his Drawing Account.
 Drawing Account is also debited when the 
propriter takes goods from business for 
Domestic use.
Illustration :-1 Journal the following 
transactions in the journal of Krishna.
198
8
Jan. 1. Commenced business with cash 10,000
2. Paid into Canara Bank 1,000
4. Goods purchased for cash 2,000
6. Bought furniture and Paid by 500
cheque
9. Bought goods from Anand 5000
10. Sold goods for cash 4,000
16. Sold goods for Sunil 1,000
20. Sold goods for cash to Anil 1,500
29. Drew cash for private expenses 500
31. Paid Salaries 300
Entries


Compound Journal Entry
In some cases the entry may  require two or more 
transactions of the same nature may occur on the 
same day. In such a situation instead of passing a 
separate entry for each transaction we may pass a 
single journal entry, Known as Compound Journal 
Entry.
A compound journal entry can also be passed for a 
transaction which involves more than two 
accounts.
Question:- On may 5, 1988 you sold goods on 
credit to Ram for Rs. 600 and to Shyam  for Rs. 
800 . Both of these transactions took place on 
the same day (May 5, 1988) and are of the 
same nature.
Date Particular’s Dr. Cr.
Amoun Amount
t
1988 Rs. Rs.
May, Ram’s Account                        Dr. 500
5 To Shyam Account                   500
Dr.
To Sales Account
( Being goods sold on credit to 
them)
Question:- Paid cash to Ramesh Rs.950 and he 
allowed Rs.50 as discount.
Dat Particular Debit Credi
e t
Rs. Rs.
Ramesh’s Account                   1,000
Dr. 950
To Cash Account
( To Discount Received Account) 50
( Being cash paid to him, 
discount received Rs.50)
Points To Remember
 A compound journal entry is recorded when
I. One account is to be debited and two or more 
accounts are to be credited, or
II. Two or more accounts are to be debited and 
one account is to be credited.
 Creditor :-
Creditor refers to the party that has delivered a 
product, service or loan, and is owed money by 
one or more debtor.
 Debtor :-
A debtor is a company or individual who owes 
money.
Case 1.:- In case of discount receive:-
(All the time of purchase)
Question:- Purchase account debit to Ramesh 
account.
Dat Particular L.F. Dr. Cr.
e Amoun Amoun
t t
Purchase Account          Rs. 
Dr. 1000 Rs. 
To Ramesh Account 1000
Ramesh Account           Dr. Rs. 
To Cash Account 1000 Rs.950
To Discount Received Rs. 50
Account
(Being cash paid to him,
Discount received Rs.50)
Case 1.:- In case of discount allow.
(At the time of sell)
Dat Particular L.F Dr. Cr.
e . Amoun Amoun
t t
Sunil Account          Rs.2000
Dr. Rs.2000
To Sell Account
(Cash Account)        Rs.1900
Dr.
Discount Allowed    100
Dr.
debit
To 2000
Sunil Account
Transaction Relating to Bad Debts
When a debtor becomes 
insolvent (financial Crisis), 
the business shall not be able 
to realise the full amount, 
Due from him. A part of 
remains unrealized. The 
unrealized amount is call 
(Bad Debts).
Question:- Rs.2000 was due from kawshal for the 
goods sold to him on credit.
If any amount treated as bad debts is recovered 
later on, it shall be a gain to the business.
It shall be credited to Bad Debts Recovered 
Account and debited to Cash Account.
NOTE:-
That the bad debts so recovered shall 
not be credited to the personal account 
of the debtor because his account had 
already been closed.
In the example given above, suppose Rs.800 is 
recovered from Kaushal later on, the journal entry 
will be:
Dat Particular’s L.F. Debit Credit 
e Accoun Accoun
t t
Rs. Rs.
Cash A/c                     Dr. 800 800
To Bad Debts Recovered 
A/c
(Being bad debts 
recovered)