C) 2. Modern or Practical System of Book-Keeping:
Under the modern or practical system of book-keeping, the transactions of a business are, first, recorded in a number of books of original entry called special journals or subsidiary books, as and when they take place.
Then, the entries in the various subsidiary books are posted or transferred to the appropriate accounts in the books of final entry called the Ledger periodically, say, weekly, fortnightly, monthly or quarterly, to know the exact position of each account on any particular date.
Finally, at the end of the accounting year, from the ledger account balances, whose arithmetical accuracy is checked by a Trial Balance, Final Accounts (i.e., the Trading and Profit and Loss Account and the Balance Sheet) are prepared to ascertain the net profit or loss of the business for the accounting year and the financial position of the business as on the last date of the accounting year.
This system of book-keeping is quite popular. It is followed by big concerns which have a large volume of business transactions.
Under the modern or practical system of book-keeping, the transactions of a business are, first, recorded in a number of books of original entry called special journals or subsidiary books, as and when they take place.
Then, the entries in the various subsidiary books are posted or transferred to the appropriate accounts in the books of final entry called the Ledger periodically, say, weekly, fortnightly, monthly or quarterly, to know the exact position of each account on any particular date.
Finally, at the end of the accounting year, from the ledger account balances, whose arithmetical accuracy is checked by a Trial Balance, Final Accounts (i.e., the Trading and Profit and Loss Account and the Balance Sheet) are prepared to ascertain the net profit or loss of the business for the accounting year and the financial position of the business as on the last date of the accounting year.
This system of book-keeping is quite popular. It is followed by big concerns which have a large volume of business transactions.
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