Question

What are the three categories in which accounting entries can be classified while entering them in vouchers?

Hint:

Entries in a voucher are of three types: the opening entry that brings balances forward, the closing entry that closes the books after preparing the final accounts, and the adjusting entry that fixes figures to the trading period.

Answer 1

Step 1: Know why entries are grouped:
In a voucher, every accounting entry fits one of three types.
The type depends on the time of the entry and on its purpose in the accounting year.
The three types are the opening entry, the closing entry and the adjusting entry.

Step 2: Opening entry:
At the start of a new financial year, the balances of the last year are brought forward.
A journal entry is passed for this. It is called the opening entry.
All accounts that show assets of the business are debited.
All accounts that show amounts owed by the business are credited.

Step 3: Closing entry:
The entries needed to prepare the Trading Account and the Profit and Loss Account are closing entries.
They are called closing entries because they close the books of account for that year.
Income and expense accounts are closed by transferring them to these accounts.

Step 4: Adjusting entry:
An adjusting entry is passed to relate the figures to the trading period.
It deals with outstanding and prepaid expenses.
It also deals with accrued incomes and incomes received in advance.

Step 5: Summarise in a table:

Type of entry	When it is passed	Main purpose
Opening entry	Start of the year	Bring forward last year balances
Closing entry	End of the year	Close the books and prepare final accounts
Adjusting entry	End of the year, before final accounts	Match figures with the trading period

Final Answer:
The three categories are (1) Opening Entry, (2) Closing Entry and (3) Adjusting Entry.