AccountingCapital Latest Questions

Vaishnavi_Shetty
  1. This answer was edited.

    Posting Reference A posting reference column is used to indicate that the entry is posted in the respective ledger accounts and it links journal with the respective ledger account. The abbreviation used for posting reference is "PR". It is also called a folio. Purpose of PR Column When an entity traRead more

    Posting Reference

    A posting reference column is used to indicate that the entry is posted in the respective ledger accounts and it links journal with the respective ledger account. The abbreviation used for posting reference is “PR”. It is also called a folio.

    Purpose of PR Column

    When an entity transacts in a large number on daily basis it becomes a troublesome task then for the bookkeeper to ascertain whether the entries are posted in appropriate ledgers. And it may so happen that the entry is posted twice. Later on, tracking that transaction and correcting the same becomes a tedious and time-consuming job.

    Hence, to avoid these issues its recommended to maintain a posting reference column. Thereby simplifying the job of a bookkeeper.

    It can be seen in the third column of the journal book generally. You can also see the same in the image inserted below-

     

    Posting Reference column

     

    Example

    when an entity purchases an immovable property for an amount of 100,000 it shall be recorded in the books of accounts as –

    Understanding with the help of an example

    The reference of the page number of the journal book shall be given in the respective ledger accounts to interlink the same. The ledger given below indicates the same-

    Interlinking journal book with ledger account

    Similarly, Cash Account shall also have a PR column wherein the reference of the page consisting of the primary journal entry shall be given. The below-given image presents the same

    Posting Reference

    I hope this was helpful.


    Aastha Mehta.

     

     

     

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Maneet Kaur
  1. This answer was edited.

    Yes. Let's take a set of transactions and prepare all the requisite information asked. Following are the transactions for the period April 20x1 to March 20x2 in the books of Michael Traders 1-Apr Michael started business with cash 600,000, cash at Bank of America 700,000, furniture 200,000. 1-Apr PuRead more

    Yes.

    Let’s take a set of transactions and prepare all the requisite information asked.

    Following are the transactions for the period April 20×1 to March 20×2 in the books of Michael Traders

    1-Apr Michael started business with cash 600,000, cash at Bank of America 700,000, furniture 200,000.
    1-Apr Purchased Plant & Machinery worth 250,000 by cheque.
    25-Apr Purchased goods from ABC Ltd worth 800,000 @10% trade discount.
    5-May Cash Sales 1,000,000 @5% trade discount to XYZ Traders
    15-May Deposited cash with Bank of America 500,000.
    5-Jun Paid ABC Ltd 300,000 in cash.
    10-Jun Received commission 75,000 by cheque.
    25-Jun Cash Purchases 250,000.
    5-Jul Sold goods to XYZ Traders 475,000.
    15-Jul Received 275,000 by cheque from XYZ Traders.
    5-Aug Loan taken from Bank of America 200,000
    25-Aug Purchased goods from ABC Ltd 50,000.
    27-Aug Withdrew cash from bank 10,000.
    5-Sep Received commission 55,000 in cash.
    10-Sep Paid ABC Ltd 70,000 by cheque.
    20-Sep Received 90,000 in cash from XYZ Traders.
    1-Oct Bank loan repaid 50,000.
    25-Oct Cash Purchases 25,000.
    5-Nov Sold goods to XYZ Traders 47,000.
    15-Nov Withdrew cash from bank 15,000.
    5-Dec Received interest from bank 5,000.
    25-Dec Purchased goods from ABC Ltd 75,000.
    5-Jan Cash Sales 100,000.
    15-Jan Deposited cash with Bank of America 35,000.
    25-Feb Cash Purchases 450,000.
    28-Feb Office was taken on rent in the month of Feb. Office rent paid in cash 50,000.
    28-Feb Employees were hired in the month of Feb. Paid salary by cheque 30,000 & cash 30,000 for the month of Feb 20×2.
    5-Mar Sold goods to XYZ Traders 675,000.
    31-Mar Paid office rent by cheque 50,000.
    31-Mar Paid salary in cash 30,000 for the month of March 20×2.

    You are required to:
    (i) Journalize the above transactions and post them in Ledgers and prepare a Trial Balance.

    (ii) Prepare Trading A/c, Profit & Loss A/c and Balance Sheet taking into consideration:
    1. Closing Stock as on 31st March 20×2 is 200,000.
    2. Salary outstanding for the month of March 20×2 is 30,000.
    3. [email protected]% to be charged on Furniture & Fixtures and @15% on Plant & Machinery.

    1. Journal Entries

    April & May Journal

    June-Aug Journal

    Sep-Nov Journal

    Dec-Jan Journal

    Feb-March Journal

    2. Ledgers

    Ledger-Micheal Capital A/c

    Ledger-Purchases & Sales A/c

    Ledger-Furniture A/c & Plant & Machinery A/c

    Ledger-Creditor & Debtor A/c

    Ledger-Bank Loan A/c

    Ledger-Salary & Office Rent A/c

    Ledger-Interest & Commission received A/c

    Ledger-Cash A/c

    Ledger-Bank of America A/c

    3. Trial Balance

    Trial Balance

    4. Trading A/c & Profit and Loss A/c

    Trading A/c and Profit & Loss A/c

    5. Balance Sheet

    Balance Sheet

    An excel sheet of the entire transactions along with the requisite information asked has been attached for your reference.

    30-transactions-of-Journal-Ledger-Trial-Balance-Financial-Statements

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    • 194
Singh Arjun
  1. Yes, the cash book is both a journal and a ledger.  To make the concept simpler, I would like to familiarize you with the meaning of journals and ledgers, which shall help in determining the reasons for a cashbook to be both a journal as well as a ledger. Journal A journal is a descriptive financialRead more

    Yes, the cash book is both a journal and a ledger. 

    To make the concept simpler, I would like to familiarize you with the meaning of journals and ledgers, which shall help in determining the reasons for a cashbook to be both a journal as well as a ledger.

    Journal

    A journal is a descriptive financial record of a business that is used for future reconciling as well as a transfer to other books of accounts such as the ledger. It is a book of original entry.

    Cashbook is considered to be a journal because all the cash/bank receipts and payments are recorded in this book in a descriptive form similar to journal posting.

    Ledger

    In simple words, a ledger refers to recording individual accounts in a summarized form that are posted from a journal. It is a book of principal entry.

    A cashbook is considered to be a ledger because all the cash transactions that are made during a particular financial period are recorded in this book in a chronological order. When a cashbook is prepared there is no need for a cash a/c as the book serves the same purpose and therefore can be used as a substitute.

    Format of a Cashbook

    Cashbook

    Date Particulars V.No. L.F. Cash Date Particulars V.No. L.F. Cash
      To Capital a/c         By Advertisement a/c      
      To Sales a/c         By Purchases a/c      
      To Mr. C’s a/c         By Stationery a/c      
      To Bank a/c         By Office expenses a/c      
                By Rent a/c      
                By Salary a/c      
                By balance c/d      
                       

    Note: As we can see the format and posting of a cashbook are similar to that of journal and ledger accounts.

    Hope this helps.

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