Recording Financial Transactions

This report explains the chronological order of recording transactions with defining some bookkeeping terms. It covers how to record double entry bookkeeping transactions in a timely and accurate way, apply a range of business transactions using double entry bookkeeping, books of prime entry, journals and ledgers. It also covers how to extract ledger balances and prepare bank reconciliation statements, and perform control account reconciliation for accounts receivable and payable.

Recording Financial
Transactions

Contents
INTRODUCTION ..........................................................................................................................3
MAIN BODY...................................................................................................................................3
P1. How to record double entry bookkeeping transactions in a timely and accurate way?.........3
P2 Apply a range of business transactions using double entry bookkeeping, books of prime
entry, journals and ledgers...........................................................................................................4
P3 Using data provided, extract ledger balances into a trial balance for an organisation to
accurately record transactions....................................................................................................10
P4 Prepare a bank reconciliation statement from given data for an organisation......................11
P5 Explain the role and differences between control and suspense accounts............................13
P6. Perform control account reconciliation for accounts receivable and payable from given
data.............................................................................................................................................14
CONCLUSION .............................................................................................................................15
REFERENCES..............................................................................................................................16

INTRODUCTION
Bookkeeping is the recording of all the financial transactions including purchases, sales,
receipts and payment (Burke, 2019). In this report, the chronological order of recording
transactions will be explained with defining some book keeping terms to understand better. A
trial balance and ledger accounts will be prepared to show the accurate way of recording entries.
Additionally, bank reconciliation statement to show the bank entries and identify errors and
omissions. Lastly, control and suspense account will be differentiated and performed for
accounts receivable and payable.
MAIN BODY
P1. How to record double entry bookkeeping transactions in a timely and accurate way?
Double entry book keeping is a place where each and every transaction is recorded twice
in the books of accounts.
The double entry book keeping is divided among several steps and that are:
1. Produce document: A document that is most common is the sales invoice, the document
might differ according to the activities of the business. A business deed can be selling,
buying or providing loan in cash or kind. It is referred to as a business transaction and
this document is called as accounting source document.
2. Recording: The business document contains some important information like date,
name, descriptive transaction and the amount. These details are used to record the entry
in the day book or book keeping journals. These journals describe the transaction in a
summary form so that it is easy for the reader to understand. A transaction without
quantitative value is not recorded in the accounts (Čegar, Poljašević and Šnjegota, 2019).
3. Update accounts: The amount or the value is recorded in the books. Each and every
account has a different ledger. Sometimes one account contains many transactions so that
account might exceed a page or two. A ledger is made in a T format. In this, the amount
will be entered either on the left side or the right side depending on the type of account
and type of transaction. In double entry system, each transaction affects two accounts to
balance.
4. Debit and Credit: The amount is entered using debit credit procedure. The entry is
recorded once in debit and other in credit always. A book keeper should be well versed

with the knowledge of transactions that come on debit side and transactions on the credit
side. For example, expenses are always debited and incomes are always credited.
5. Chart of accounts: The names and numbers of ledgers are found in the chart of
accounts. All the accounts made either go in the income statement or the balance sheet.
The balance sheet accounts are, assets, liabilities and equity. Income statement consists of
all the income and expenses of the business (Harris and Wonglimpiyarat, 2019).
6. Mathematical formula of double entry: It is called as the accounting equation which is
used to maintain the structure of the ledger.
7. Preparation of Trial Balance: It is prepared to ensure that the debit and credit matches.
If any corrections are to be made, the keeper can do it now because if doesn't match then
the financial statements will be faultily produced.
8. Preparation of Financial Statements: After the trial balance matches and everything is
recorded, then financial statements like income statement and balance sheet is prepared.
These are prepared to know how the organisation is performing. A tax accountant will
prepare specialised accounts to calculate the income tax for the year. Certain steps that
are included for this process are:
 Adjusting entries are to be prepared for accruals and deferred transactions.
 Closing entries and preparing a modified trial balance.
P2 Apply a range of business transactions using double entry bookkeeping, books of prime entry,
journals and ledgers.
1. Double entry bookkeeping: It is a concept that is used in present day book keeping
which is defined as financial transaction that is recorded in two ledger accounts once in
credit side and once in debit side to satisfy the accounting equation.
Accounting equation: Assets = Liabilities + Equity
The double entry book keeping standardizes the accounting process and enhances the
accuracy of financial statements and minimizing the errors. For example, if a business takes a
loan from bank. The borrowed amount raises the liability as well as the asset of the company i.e.
there will be an increase in cash at bank and an increase in long term liabilities (Hou, Wang and
Luo, 2020).

2. Books of prime entry: A book where the entries are recorded before entering into the
double entry system. These books include, daybook, cash-book and journal. To cross-
check the transactions, looking at the ledgers might be a tedious task so instead prime
books are used to find the information. It provides a chronological record and mistakes
can be easily identified. It can also be used for future reference and provide backup in
case anything goes wrong with books of accounts.
3. Journals: It is an account that contains all the financial transactions related top the
account which is used for future reconciling and transfer of information such as general
ledger. It consists of the date and the amount of transaction which a short description.
Main information that is included in journals are, sales, expenses, cash, inventory and
debts. These transactions should be recorded hand to hand because the guess work later
might cause errors.
4. Ledgers: It is an account or record used to store book keeping entries which will later be
used for balance sheet and income statements. Posting to a ledger is the process of
recording credit and debits (Jin, Shang and Ma, 2019). A ledger is a place where all the
accounting entries are entered.
Following is the list of business transactions:
1. Capital invested in business £71800 divided among back, cash, flat and car with amounts
being 10000, 4800, 45000 and 12000 respectively on 1st October 2021.
2. Purchased a home for £5400 on 2nd October.
3. Purchased a computer and a printer fro £800 and £200 respectively on 4th October.
4. Sold goods worth £2800 on 5th October.
5. Paid £110 for repairs on 12th October.
6. Received rent of £800 on 21th October.
7. Sold goods worth £1800 to Rayan in cash and £300 in credit on 23rd October.
8. Purchased a laptop worth £1700 from bank on 24th October.
9. Paid wages £820 by bank on 26th October.
10. Paid rent £850 by bank on 30th October.
11. Drawings made of £1200 by bank on 31st October.
12. Received £150 cash from Rayan on 31st October.

Date Particulars Debit Credit
01/10/21 Bank a/c
Cash a/c
Flat a/c
Car a/c
Capital a/c
10000
4800
45000
12000
71800
02/10/21 Purchase a/c
Home
5400
5400
04/10/21 Computer
Printer
Bank a/c
800
200
1000
05/10/21 Bank a/c
Sales a/c
2800
2800
12/10/21 Repair Expenses a/c
Cash a/c
110
110
18/10/21 Home Ltd a/c
Purchase return a/c
250
250
21/10/21 Bank a/c
Rent income
800
800
23/10/21 Cash a/c
Rayan a/c
Sales a/c
1800
300
2100
24/10/21 Laptop a/c
Bank a/c
1700
1700
26/10/21 Wages a/c
Bank a/c
820
820
30/10/21 Rent expenses
Bank a/c
850
850

31/10/21 Drawings a/c
Bank a/c
1200
1200
31/10/21 Cash a/c
Rayan a/c
150
150
Bank a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
05/10/21 Sales 2800 04/10/21 Computer 800
01/10/21 Capital 10000 04/10/21 Printer 200
21/10/21 Rent income 800 24/10/21 Laptop 1700
26/10/21 Wages 820
30/10/21 Rent expense 850
31/10/21 Drawings 1200
31/10/21 Balance c/d 8030
Total 13600 Total 13600
Cash a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
01/10/21 Capital 4800 12/10/21 Repair expense 110
23/10/21 Sales 1800
23/10/21 Sales 700
31/10/21 Rayan 150 31/10/21 Balance c/d 7340
Total 7450 Total 7450
Sales a/c

Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
31/10/21 Balance c/d 5600 05/10/21 Bank 2800
23/10/21 Cash a/c 1800
23/10/21 Cash a/c 700
23/10/21 Rayan a/c 300
Total 5600 Total 5600
Capital a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
31/10/21 Balance c/d 71800 01/10/21 Bank a/c 10000
01/10/21 Cash a/c 4800
01/10/21 Flat a/c 45000
01/10/21 Car a/c 12000
Total 71800 Total 71800
Rayan a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
23/10/21 Sales a/c 300 31/10/21 Cash a/c 150
31/10/21 Balance c/d 150
Total 300 Total 300
Purchase a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount

02/10/21 Home ltd. a/c 5400 18/10/21 Home Ltd. 250
31/10/21 Balance c/d 5350
Total 5400 Total 5400
Home Ltd. A/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
18/10/21 Purchase
return
250 02/10/21 Purchase a/c 5400
31/10/21 Balance c/d 5150
Total 5400 Total 5400
Flat A/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
01/10/21 Capital 45000 31/10/21 Balance c/d 45000
Total 45000 Total 45000
Car a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
01/10/21 Capital 12000 31/10/21 Balance c/d 12000
Total 12000 Total 12000
Printer a/c
Dr. Cr.

Date Particulars Fol Amount Date Particulars Fol Amount
04/10/21 Bank a/c 200 31/10/21 Balance c/d 200
Total 200 Total 200
Drawings a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
31/10/21 Bank a/c 1200 31/10/21 Balance c/d 1200
Total 1200 Total 1200
Wages a/c
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
26/10/21 Bank a/c 820 31/10/21 Balance c/d 820
Total 820 Total 820
Laptop
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
24/10/21 Bank a/c 1700 31/10/21 Balance c/d 1700
Total 1700 Total 1700
Rent
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
30/10/21 Bank a/c 850 21/10/21 Bank a/c 800
31/10/21 Balance c/d 50

Total 850 Total 850
Repair Expenses
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
12/10/21 Cash 110 31/10/21 Balance c/d 110
Total 110 Total 110
Computer
Dr. Cr.
Date Particulars Fol Amount Date Particulars Fol Amount
04/10/21 Bank a/c 800 31/10/21 Balance c/d 800
Total 800 Total 800
P3 Using data provided, extract ledger balances into a trial balance for an organisation to
accurately record transactions.
It is an accounting written record in which the final balances of all ledger accounts are
merged into debit side and credit side columns and both total of both the sides are equal. The
preparation of trial balance of any organisation is generally done at end of an accounting year
(Khattak and et.al., 2020). The initial purpose of generating a trial balance is to make sure that
the transactions or entries recorded in the financial statements of the company are
mathematically correct.
Particulars Debit Credit
Bank 8030
Cash 7340
Flat 45000
Car 12000

Capital 71800
Sales 5600
Purchase 5150
Home Ltd 5150
Rent income 50
Repair expense 110
Rayan 150
Wages 820
Drawings 1200
Rent expense 850
Laptop 1700
Printer 200
Computer 800
Total 82550 82550
P4 Prepare a bank reconciliation statement from given data for an organisation.
It is a bank document which helps to compare the cash balance of the business and check
out with the amount which is already exist in the bank statement.
1. The transaction from the debit bank side of cash book left unticked that is Dsouza and
co. £10
2. The transaction from the credit bank side of the cash book left unticked that are Ansoff
£300 and Annie £150
3. The transactions from the debit bank side of the cash book left unticked that are directly
debit for insurance £50
4. Charges of bank £10

5. Cash book of Jennifer must update which is an important part for the hard double entry
recalls. That's why it should be correct and include all the items or transactions which is
relating to the business.
6. The three transactions of the bank statement have taken place which left unticked.
7. Due to lack of right transaction or left unrecorded, the transaction left antique.
Cash book
Dr. Cr.
1st of may balance b/d 300 15th of
April
insurance 40
50 30th of
April
bank charges 10
350 30th of
April
balance c/d 300
01/05/2022 balance b/d 300 350
In Jennifer's trial balance, balance is to be entered for the stop. It is also needed to show the
balance in her balance sheet as a current asset.
Dr. Jennifer's A/C
Cr.
17th April Bank 50
Dr. Insurance A/C Cr.
15th April Bank 50
Dr. bank charges A/c Cr.
30th April 10
Cash at bank 300
Ansoff 300
Annie 150
750

lodgements not credited -10
Balance at bank as per bank
statement 740
For the bank balance bank reconciliation has been done which is shown in the cash book
that is also shown in bank statement. Therefore, the bank columns of the cash book are accurate
which is recorded transactions.
P5 Explain the role and differences between control and suspense accounts.
Role of Control account:
 The position of debtors and creditors can be inserted from a single account by using the
control account. It is not at all possible to abstract the amount from a debtor or vendor
account.
 It can recognize errors in an account of any personal or an individual.
 It can rectify the arithmetical errors in accounts that was entered in the ledger.
 It is having the ability to bring a debtor's account against an account of creditor. In this
case, entries can affect the personal account as well as control account (Kumar, 2019).
Role of Suspense account:
 If an accountant is not sure about which account, the transaction is credited or debited
than they can pass the entry in suspense account temporarily.
 If an expense is incurred, then the benefit will be received by more than one account and
then such kind of transactions can be placed in suspense account for a short period of
time.
 It holds the money of investors for short span of time until the amount is reinvested
again.
Control Account: It is summarizing account which is recorded in the general ledger. It is also
termed as a controlling or adjustment account. All the data about a control account is formed in a
correlated subsidiary ledger. The work of control account is to keep all the general ledger clean
with details, and it contains the accurate balances which is used for preparation of financial
statements. A subsidiary general ledger empowers to track transactions to control account for

other details of transaction (Lu, 2018). There are individual transactions which are show in both
of the accounts, but it is always shown as the ending balance. The most common use of control
accounts is to prepare a summary in accounts payable and accounts receivable because it
contains many number of transactions. The balance in control account is the ending total of its
subsidiary ledger.
Suspense Accounts: It is an account which is temporarily use to record the transactions which
are there because of uncertainty of recording them. When the staff of accounting look into and
clarifies the purpose of maintaining this kind of account. It is very much beneficial to have a
suspense account, a bit of not recording the transaction at all till there is enough availability of
data for the creating an entry to rectify the accounts. If not recorded, then these larger
transactions sometimes may not be recorded till the end of a reporting period which results in
incorrect financial transactions. In accordance with investing, a suspense account is a kind of
brokerage account where an investor leaves their money so that they can position the money for
purchasing new types of investments (Muraina and Dandago, 2020). In suspense accounts, it
holds the money of the investors up to the amount cannot be invested again.
Control account Suspense account
It is a summary account which contains the
debit and credit balances of subsidiary
accounts in the ledger.
It is a temporary account which is created to
adjusted the difference between debit and
credit balance.
It is a summary account in the general ledger. It is a short time account in the ledger.
Ex: Total credit sales for a day, total cash
accumulated from customers in a day.
Ex: It occurs when one account is debited with
77 and credited with 87.
P6. Perform control account reconciliation for accounts receivable and payable from given data.
Control accounts are utilised generally to recapitulate accounts receivables and accounts
payables as these parts incorporates a notable quantity of transactions or events and are required
to be bifurcate into subsidiary ledgers instead of blocking up the main ledger with too much
specific data. Account receivable ledger control account is utilised to retain from disarrange of
the general ledger with the immense quantity of information that is routinely stored in the

accounts receivable ledger. On the contrary, the accounts payable sum up the amount or
monetary value that is due to supplier and other creditors. These are section of double entry
accounting, which concludes that any posting of transaction on the debit side of general ledger
will have a similar posting on credit side of the general ledger as well. The balance of the control
account must be similar to the balance in the subsidiary ledger accounts. A transaction or event
in double entry accounting always impacts at least one debit and one credit, and always considers
that total of the debit side is equal to the total of credit side (Rafindadi and Mika'Ilu, 2019). The
intention of double entry bookkeeping is to permit the recognition of financial errors and frauds.
Reconciliation of accounts receivable is a method of coordinating the amounts of outstanding
customer billings to the accounts receivable total disclosed in the general ledger. It is important
in as it acts as a proof that figures in the general ledger are accurate. The procedure of
reconciliation is done at the end of the month before issuing the financial statements. In case if
the reconciliation is not performed and an error pops out of the general ledger than this results in
the material inaccuracy in financial statements of organisation. There should be reconciliation of
the accounts receivables at least at the end of the financial year so that in case of any accuracies
in the receivables can be removed from financial statements before the analysation of the final
accounts by the external auditors of the entity.
Before the closure of the books of accounts at the end of each financial year, the
accountants of the organisation must confirm that total of all unpaid accounts payable is equal or
matches to account payable balance shown in the general ledger. Due to this action the
accountants becomes sure that the balance of accounts payable is correctly recorded without any
error or mistake. This process is termed as reconciliation of accounts payable. When this
procedure is performed for the first time it turns out to be difficult (Tang and Tang, 2019).
Moreover, when all the errors and mistakes are spotted by the accountants and are corrected by
them it generally becomes easier for them to make updating in reconciled books of recording of
the subsequent financial year. The most important and primary usage of control account in the
organisation is to recognise errors and mistakes that appears in general ledger. It also provides
other advantages to the business like issuing a single trial balance which will be extracted from
general ledger (Zhao, Li and Yao, 2019).

CONCLUSION
In this report, the process of recording entries using double entry system has been
detailed with defining certain terms used while recording transactions. Then, a trail balance has
been prepared from which ledger accounts have been made to show the correct recording of
transactions. Additionally, bank reconciliation statement has been made from the data of the
organisation. Lastly, control and suspense accounts have been performed and explained for
accounts receivable and payable.
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