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Journal Ledger Trial Balance
Journal Ledger Trial Balance
An acconting equation is a statement of equality between the assets and the sources through which the assets have been financed and this can be expressed as
Assets=Sources
Assets=Liabilities+ Capital Assets=Liabilities+Owners equity
CLASSIFICATION OF ACCOUNTS:
Personal Account: Natural Personal Account i.e. account of natural or physical persons e.g Rams A/c, Sitas A/c etc. Artificial Personal Accounts i.e accounts of artificial or legal person e.g.accounts of firms,companies,banks,government,schools and colleges etc.
Representative personal accounts these accounts are called representative personal account as they represent certain person behind them e.g outstanding expenses account,income received account
Impersonal Account: Real Account: Real accounts are accounts of properties,assets or things owned by a
concern and with which the business is carried on.Real or assets accounts may be1)Tangible Assets-assets such as goods account,cash account,furniture account etc. 2)Intangible Assets- such as goodwill account,patent account,copyrights etc.
Nominal Account: Nominal or fictitious accounts are accounts of the expenses and loses and income and gains which a concern earn in the course of its business1)income account-accounts of revenue,income,gains etc 2)Expenses account-accounts of loses such as bad debts ,discount allowed.
JOURNAL
Acc to Cropper A journal is a book employ to classify or sort out transactions in a form convenient for their subsequent entry in the ledger
Acc to Rowland the basic book of Journal is called Journal The process of recording the transaction into journal is called journalising.
NECESSITY OF JOURNAL
Convenient recording of transaction Maintaining and preserving the identity of transaction Ascertaining the true nature of transaction Maintaining permanent record of information
FUNCTIONS OF JOURNAL
To analyse each transaction into debit and credit so as to enable their posting in the ledger To arrange transaction ,chronological i.e in order of date.
ADVANTAGES OF JOURNAL
Show all necessary information relating to a transaction Provide the explanation of the transaction Date wise record of all the transaction can be obtained Help in locating and preventing the errors
LIMITATIONS OF JOURNAL
Recording all the transaction in a journal requires: 1)writing down name of account involved 2)individual posting of each account debited and credited Does not provide information on prompt basis Does not facilitate the internal check system since the journal can be handled only by one person Journal become bulky and voluminous
LEDGER
It is the principal book of accounts where similar transactions relating to particular person or thing are recorded Acc to cooper ledger epitomizes the general operations of principles of book keeping
FEATURES OF LEDGER
Book of principal entry Classified and summarized record Posting
ADVANTAGES
Transactions relating to a particular person, item or heading of expenditure or income are grouped in the concerned account at one place. When each account is periodically balanced it reflects the net position of that account. Ledger is the stepping stone for preparing Trial Balance - which tests the arithmetical accuracy of the accounting books. Since the entries recorded in the journal are referenced into ledger the possibility of errors of defalcations are reduced to the minimum. Ledger is the destination of all entries made in journal or subjournals. Ledger is the "store-house" of all information which subsequently is used for preparing final accounts and financial statements.
TRIAL BALANCE
It is a statement of all the balances from the ledger and cash book on a particular date. Total debits should be equal to total credits. Acc to carter trial balance is the list of debit and credit balances ,taken out from ledger it also includes the balances of cash and bank taken from cash book
objectives
To check arithmetic accuracy of books of accounts Completion of double entry system To detect errors Connecting link To facilitate preparation of financial statements
Advantages
correct ledger balance Helps in preparation of final accounts Arithmetical accuracy errors are revealed
If the total debit is not equal to the credit, it reveals the presence of some errors during the process of journalising or posting.
Errors of Omission
Errors of Principle Compensating errors Errors of Original entry Complete Reversal of entries