C) 1. Conventional or Theoretical System of Book-Keeping:
Under the conventional or Theoretical method of book-keeping, all the transactions of a business are, first, recorded in a single book or original entry or first entry called the journal, General Journal or Ordinary Journal as and when they take place.
Then, the entries in the journal are posted or transferred to the appropriate accounts in the book of second or 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 net loss of the business for the accounting year and the financial position of the business as on the last date of the accounting year.
Formerly, this was the only system available for any concern, whether big or small, for the recording of business transactions. But it has been found inconvenient and unsuitable for big concerns with a large volume of transactions. So, today, this method is followed only by small concerns with relatively less volume of transactions.
Under the conventional or Theoretical method of book-keeping, all the transactions of a business are, first, recorded in a single book or original entry or first entry called the journal, General Journal or Ordinary Journal as and when they take place.
Then, the entries in the journal are posted or transferred to the appropriate accounts in the book of second or 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 net loss of the business for the accounting year and the financial position of the business as on the last date of the accounting year.
Formerly, this was the only system available for any concern, whether big or small, for the recording of business transactions. But it has been found inconvenient and unsuitable for big concerns with a large volume of transactions. So, today, this method is followed only by small concerns with relatively less volume of transactions.
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