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Business Transactions – is an activity or event that can be measured in terms of money and which
affects the financial position or operations of the business entity. Transactions may be classified as
exchange and non-exchange.
Exchange Transactions involve physical exchange such as purchasing, selling, collection of
receivables, and payment of accounts.
Non-exchange Transactions events that do not involve physical exchanges.
Debit
The terms originated from the Latin terms “debere” or “debitum” which means “what is due”.
Debit is for Dr
Credit
The terms originated from the Latin terms “credere” or “creditum” which means “something entrusted
or loan”.
Credit is for Cr
Normal Balance
It is the side where the balance of the account is normally found.
Posting refers to transferring of entries from journal to the ledger. In accounting, ledger refers to a book
that consists of all accounts used by the company, the debits and credits to each, and the resulting balance.
It is also known as Books of Final Entry. Using of T-account, double entry system provides a formal
system of classification and recording business transactions.
A trial balance is a report shows the balances of the ledger accounts. It shows a summary of how much
Cash, Account Receivables, Supplies, etc., the company has after the posting process. The account names
are listed as arranged in the ledger and the balances are placed either on the debit or credit column. It is
prepared to verify the equality of debits and credits in the ledger at the end of each accounting period or at
any time the postings are updated.
1. List the account titles in numerical order
2. Obtain the account balance of each account from the ledger and enter the debit balances in the debit
column and credit balances in the credit column
3. Add the debit and credit columns
4. Compare the totals.