The LEDGER

A grouping of the entity's accounts is referred to as a ledger.

Although some firms may use various ledgers to accumulate certain
detailed information, all firms have a general ledger. A general
ledger is the "Reference Book" of the accounting system and is used
to classify and summarize transactions, and to prepare data for basic
financial statements.

The accounts is the general ledger are classified into two general
groups:
1. Balance Sheet or PERMANENT accounts (assets, Liabilities,
owner's equity)
2. Income Statement or TEMPORARY accounts (income and expenses)
Temporary or nominal accounts are used to gather information
for a particular accounting period. At the end of the period,
the balances of these accounts are transferred to a permanent
owner's equity account.

Each account has its own record in the ledger. Every account in the
ledger maintains the basic format of T-account but offers more
information (e.g. The account number at the upper right corner and
the journal reference column). Compared to a journal, a ledger
organizes information by account.

CHART OF ACCOUNTS
A listing of all the accounts and their account numbers in the
ledger is known as the CHART OF ACCOUNTS. The chart is arranged in
the financial statement order, that is, assets first, followed by
liabilities, owner's equity, income and expenses. The accounts should
be numbered in a flexible manner to permit indexing and
cross-referencing.

Weddings "R" Us
CHART of Accounts

Balance Sheet Accounts Income Statement Accounts

Assets Income

110 Cash 410 Consulting Revenues

120 Accounts Receivable 420 Referral Revenues

130 Supplies

140 Prepaid Rent Expenses

150 Prepaid Insurance 510 Salaries Expense

160 Service Vehicle 520 Supplies Expense

165 Accumulated 530 Rent Expense

Depreciation-Service Vehicle

170 Office Equipment 540 Insurance Expense

175 Accumulated Depreciation - 550 Utilities Expense

Office Equipment

Liabilities 560 Depreciation Expense -

Service Vehicle

210 Notes Payable 570 Depreciation Expense -

Office Equipment

220 Accounts Payable 580 Miscellaneous Expense

230 Salaries Payable 590 Interest Expense

240 Utilities Payable

250 Interest Payable

260 Unearned Referral Revenues

Owner's Equity

310 Diaz, Capital

320 Diaz, Withdrawal

330 Income Summary

POSTING (STEP 3)
POSTING means transferring the amounts from the journal to the
appropriate accounts in the ledger. Debits in the journal are
posted as debits in the ledger, and credits in the ledger. The steps
are illustrated as follows:
1. Transfer the date of the transaction from the journal to the
ledger.
2. Transfer the page number from the journal to thee journal
reference (JR) column of the ledger.
 3. Post the debit figure from the journal as a debit figure in the
ledger and the credit figure from the journal as a credit
figure from the journal as credit figure in the ledger.
4. Enter the account number in the posting reference column on the
journal once the figure has been posted.

LEDGER ACCOUNTS AFTER POSTING

At the end of an accounting period, the debit or credit balance
of each account must be determined to enable us to come up with a
Trial Balance.
● Each account balance is determined by footing (adding) all the
debits and credits.
● If the sum of an account's debits is greater than the sum of
its credits, that account has a debit balance.
● If the sum of its credits is greater, that account has a credit
balance.

TRIAL BALANCE (STEP 4)

The Trial Balance is a list of all accounts with their
respective debit or credit balances. 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.

The Procedures in the preparation of a trial balance follow:

A. List the account titles in numerical order.
B. Obtain the account balance of each account from the ledger and
enter the debit balances in the debit column and the credit
balances in the credit column.
C. Add the debit and credit columns
D. Compare the totals.

The trial balance is a control device that helps minimize accounting

errors. When the totals are equal, the trial balance is in Balance.

Locating Errors

An inequality in the totals of the debits and credits would

automatically signal the presence of an error. These error includes:

1. Error inpostn a transaction

● an erroneous amount was posed to the account
● A debit Entry was posted as a credit or vice versa
● A debit or credit posting was omitted.
 2. Error in determining the account balances:
● A balance was incorrectly computed
● A balance was entered in the wrong balance column
3. Error in preparing the trial balance
● One of the columns of the trial balance was incorrectly
added
● The amount of the account balance was incorrectly recorded
on the trial balance
● A debit balance was recorded on the trial balance as a
credit or vice versa, or a balance was omitted entirely.

Transposition - Reversing the order of numbers

Slide - moving of the decimal point.