List The Steps In Processing Transactions In The Correct Order.
The second step is to Analyze these business transactions with the help of Accounting
Equation. Analyze of transaction means finding out the accounts involved in
the transaction and increase and decrease in accounts involved, i.e., as in Example
I, cash is increased by $1000 on the left side or assets side of the accounting
equation and equity is increased due to increase in capital account by $1000 on
the right side or liabilities & equity side of the accounting equation. So,
the accounting equation is in balance.
Now, we are ready to record the transactions in Journal, called Journalizing,
which includes all the transactions of each account at one place. We find out
which account is debited and which account is credited alongwith the dollar
amounts and details of the transactions. Like in our Example I, cash is increasing
as the business received it from sole owner, Mr. A, so we debit it while capital
is also increasing as the rights of the sole owner against asset (cash) of the
business is increasing, so we credit it.
Now after recording entry in Journal, accounts are transferred to concerned
ledger accounts separately, called Posting.
Here, we find the balance of each account separately as in our Example I, we
have cash balance of $1000 due to capital account and capital balance of $1000
due to cash account balance.
So, the correct sequence of processing transactions is D, B, C and A in this multiple choice question’s options.
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