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Post-closing
trial balance
Prepare Journalize
Prepare
Journalize and financial and post
adjusted
post closing statements. adjusting
trial
entries entries
balance.
Analysis and Recording Business Transactions
ASSETS = EQUITIES
Ledger Account
Complete listing of business transactions for an individual
account
Where you look if you want to find the balance of any given
account
General Ledger
A loose-leaf book or computer file containing all the
Ledger Accounts
Each account from the chart of accounts has its own
ledger account in the general ledger
Complete listing of all account tittles and account
names/codes used by an entity is called the chart of
accounts - It is like a table of content in a book
Forms of Ledgers
Two-Column Account
Account Account No:
Posting
Date Item Post. Ref. * Debit Date Item Reference Credit
Left-hand or Right-hand or
Assets
+ -
debit credit
Behavior of Accounts cont…
Liabilities and Owners’ Equity accounts increase
on the credit side, decrease on the debit side
Liabilities or Owners’ Equity Accounts
- +
debit credit
Transaction Analysis and The Duality Concept
Accounting Is Fun!
What’s in a Journal Entry?
1. Date
2. At least one debit entry
Debit account, use exact account title, do not indent titles
Revenue A c c ount s
Left or Debit S ide Right or Credit S ide
Dec reas e Incre a se
Steps:
1. Determine the effects of transactions on three
components of the accounting equation,
2. Determine which specific accounts are
affected, and
3. Assure that total of the increases should be
equal to either increases on the other side of
the equation or to decreases on the same side,
or a combination there of.
Behavior of Accounts- Summary
Assets = Liabilities + Owners’ Equity
+ - - + - +
Dr Cr Dr Cr Dr Cr
Expense Revenue
+ - - +
Dr Cr Dr Cr
Withdrawals/Dividends
+ -
Dr Cr
Accounting Cycle-Revisited
Adjust the
Analyze and accounts
Post the
record the and prepare
transactions and
transactions trial balance
prepare trial
balance
Prepare the
Close the financial
accounts and statements
prepare trial
balance
Posting -Defined
Shareholders’ Equity
Introduction:
In the previous exercise , you have learned the principles
of double entry and how to post to the ledger accounts. The
next step in our progress towards the financial statements is
the trial balance.
Before transferring the relevant balances at the year end to
the financial statements, it is usual to test the accuracy of the
double entry bookkeeping records by preparing a trial
balance. This is done by taking all the balances on every
account. Due to the nature of double entry, the total of the
debit balances will be exactly equal to the total of the credit
balances.
The Balancing of Accounts & The Trial Balance
• Question: Once you have closed all the accounts, what would
do?
• Answer: Prepare a Trial Balance
• Question: What is a Trial Balance then? What is it for?
How does it look like?
• Answer: A Trial Balance is a list of nominal ledger account
and their balances at a given date. It is usually
prepared on the last day of the accounting
period. It consists of a Debit and a Credit balance.
• Its purposes:
• (1) It is prepared to check that the total of debit balances is the
same as the total of credit balances and offer reassurance that the
double entry recording from day books has been done correctly.
• (2) For preparation of statement of income and the statement of
financial position
The Balancing of Accounts & The Trial Balance
Debit Credit
Assets Income/ Revenue
Expenses Liabilities
Drawings Capital
The Balancing of Accounts & The Trial Balance
2) List all the Debit balances on the debit side and add them up.
3) List all the Credit balances on the credit side and add them
up.
1) Errors of omission
Complete omission of a transaction, because neither a
debit nor a credit is made.
2) Errors of commission
This happens when original figure incorrectly
entered. (Correct double entries but incorrect amounts
were recorded)
The Balancing of Accounts & The Trial Balance
3) Compensating errors
This happens where errors cancel out each other. (eg an
error of £100 is exactly cancelled by another £100 error
elsewhere).
4) Errors of principles
This happens when the wrong type of account had been
used (eg the purchase of a motor van is debited to a
expense account, such as motor expenses, rather than a fixed
asset account)
5) Complete reversal of entries
This happens when an account should be debited but was
credited (and vice versa)
The Trial Balance
Expre ss Trave l Age ncy
Trial Balance
31-Jan-10
in $
Accounts De bit Cre dit
Cash 102,280
Accounts Receivable 7,500
Office Supplies 2,500
Prepaid Rent 600
Prepaid Insurance 120
Office Furniture and Equipment 15,000
Bank Loan 15,000
Accounts Payable 5,000
Unearned Revenues 7,500
Capital 100,000
Withdrawal 3,000
Commission Revenues 12,500
Salary Expenses 9,000
Total 140,000 140,000
THE END
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