Tag: elements of book keeping and accountancy

It is a false statement because, normally liabilities account shows the debit balance is called creditors.

Nominal accounts are fictitious assets that are associated with expenses, losses, revenues and gains of the firm, such as rent and rates account, travelling expenses A/c, the commission received A/c, interest paid A/c.

A transaction should be recorded first in a journal because journal provides complete details of a transaction in one entry. Further, a journal forms the basis for posting the transactions into their respective accounts into ledger.

A ledger is known as the book of final entry or secondary entry whereas, a Journal is known as  the book of original entry because all the transactions of a business are first of all recorded in the Journal from the source document and from the Journal, these entries are posted to the Ledger accounts. Hence, a ledger is known as the book of secondary entry or final entry, as they are posted from the Journal and the balances of these accounts are used to prepare the financial statements of the business.

Current account is the account on which overdraft facility is allowed by a bank. This facility is provided to the current account holders according to the business needs. It allows a trader to withdraw excess amounts over the amount deposited in the bank account up to a prescribe limit. Overdraft facility is provided to a business for meeting its various business needs and not the proprietor's personal account. A business opens a current account with a bank and overdraft facility is provide on the current account of the  business.

Keeping the kind of books for recording the business transaction depends on the business need but there are two important books which are essentially to kept by each business i.e. journal and ledger. Any transaction which occurs in the business need to be first recorded in journal first. Hence all the original entries can be found from journal itself. 

Accounts recording transactions with a person or group of persons are known as personal accounts. These accounts are necessary, to record credit transactions. Personal accounts are of the following types:

Journal is called as subsidiary books because it does not give any summarized details about an account. Journal merely helps the posting of entries in to ledger.

All business transaction must be recorded as soon it occur. 

Every business transaction must first be recorded in journal. Hence all original entries are found in journal itself which is a subsidiary books. Subsidiary books of accounts are also called book of original entry as all the transactions are recorded originally or at the first instance in these books.