Question

What are the three categories in which entries can be classified while making voucher entry?

Hint:

The three categories are opening entries, closing entries and adjusting entries. Give the meaning of each in a line or two.

Answer 1

Step 1: What the question asks:
While making a voucher entry, every entry belongs to one of three categories.
We name each category and state what it does.

Step 2: Category 1, Opening entries:
At the start of a new financial year, the balances of the accounts of the previous year are brought forward.
For this, an opening entry is recorded in the Journal.
These are the balances transferred from the books of the previous year to the books of the present year.

Step 3: Category 2, Closing entries:
These entries are needed to complete the Trading Account and the Profit and Loss Account.
They are called closing entries because their effect is to close the books of account for the year concerned.

Step 4: Category 3, Adjusting entries:
These entries relate the figures to the trading period.
They include prepaid expenses, expenses paid in advance, income received in advance and accrued incomes.

Final Answer:
The three categories are opening entries, closing entries and adjusting entries.