Warm up

Chapter 4: Balancing Account

Objectives
 Identify the concept of balancing account

 Examine the balancing ledger account

 Ledger account are divided into two sections by a
central vertical line. The left hand side is known as
debit side and the right hand side is known as
credit side. The term debit is usually abbreviated
to “dr” and the term credit is usually abbreviated
to “cr”.
 A folio number is used for reference purpose

The layout of a ledger account

Debit Account name Credit

Date Details Folio $ Date Details Folio $

 A ledger is traditionally a bound book where
each account appears on a separate page.
 In order to record the two aspects of every

transaction, every transaction is entered twice

– on the debit side of one account and on the
credit side of another account.
 Activity
 For each of the following transactions, insert the name of the account to be
debited and the name of the account to be credited

Transaction Accounts to be Accounts to be

Debited Credited
a The owner of a business Bank A/c Capital
invested capital in the business
bank account.
b Bought goods on credit from Purchases Mohan
Mohan.
c Paid rent by cheque. Rent Bank
d Paid motor expenses by cheque. Motor expenses Bank

e Sold goods on credit to Beena. Beena Sales

 Activity
 The following transactions is taken from the books of Rahul
 2007-January

1 Rahul began business with a capital of $60000 in the business bank

account -
2 He paid rent of premises, $500, by cheque
3 He paid insurance, $150, by cheque
 3A short-term loan of $ 10000 was received from AB Loans
5 A motor vehicle costing $10000 was bought and paid for by cheque
5 He paid motor expenses, $ 100, by cheque
6 A long-term loan of $5000 was received from Rahul’s sister Pooja
7 Part of the premises were rented out to another business and a cheque for
$100 was received (rent)
 
 Enter these transactions in Rahul’s ledger.
Plennary

 Define ledger
 Explain why it is necessary to make a double

entry in a ledger of each transactions.

 Explain the use of the folio column in a

ledger account.
Home work
 Home work uploaded in Google classroom