Mechanics of Accounting- Ledger and Trial Balance

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GENERAL LEDGER AND TRIAL BALANCE

General Ledger & Trial Balance

INRODUCTION TO TRIAL BALANCE:

A businessman closes and balances the ledger accounts at the end of the month or year to prepare the trial balanc

Normally! he prepares the trial balance at the end of the year for preparation of final accounts The ledger accoun

ha"ing debit balances are recorded in the debit column of trial balance and accounts ha"ing credit balances a

recorded in the credit column of the trial balance Both the columns of Trial balance should be e#ual! but if they ar

not e#ual! efforts are made to locate the errors in the boo$s of accounts Later on %hen trial balance agrees! fin

accounts are prepared

MEANING OF TRIAL BALANCE:

Trial balance is statement of balance of "arious ledger accounts prepared as on particular day&date It is a li

containing balances of ledger accounts It is prepared periodically ie at the end of a month or year Normally it

prepared at the end of the month

OBJECTIVES OF PREPARING TE TRIAL BALANCE:

A Trader prepares the trail balance for the follo%ing purposes'()* It chec$s the arithmetical accuracy of boo$s of accounts

(+* It assists in locating errors

(,* It helps in preparation final accounts

T!PES OF TRIAL BALANCE:

T"ere are #$% #'e( %) Trial Balance a( gi*en +el%$:

,-. Gr%(( Trial Balance / T%#al Me#"%d:It is a trial balance in %hich the debit and credit totals of an account a

recorded in the trail balance ie the accounts are not balanced but only totaled on debit and credit sides -o

eg .achinery A&c debit total is Rs,//// and credit total is Rs0/// both are recorded In the trial balan

under debit and credit columns respecti"ely

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N%5 ,R(5. ,R(5.

T%#al T%#al666 666

G3ideline( )%r 're'aring #"e #rial +alance'

The follo%ing guidelines are useful for preparing trial balance'

()*Accounts of e2penses and losses sho%s debit balances Eg 3alaries A&c! Loss by fire A&c Etc

(+*Accounts of incomes and gains sho%s credit balances Eg Commission recei"ed A&c! 1rofit on sale of furnitu

A&c etc

(,* Accounts of properties and assets sho% debit balances Eg Building A&c! Good%ill A&c etc

(4* Accounts of persons from %hom the amount is recei"able sho% debit balances eg Debtors A&c! Dra%ing A&

Ban$ A&c etc

(0* Accounts of persons from %hom the amount is payable sho%s credit balances eg Debtors A&c! Dra%ing A&

Ban$ A&c etc

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LIST OF ACCOUNTS AVING DEBIT AND CREDIT BALANCES:

(A* Accounts ha"ing debit balances' the follo%ing accounts sho% debit balances

Name of Account Name of Account

1urchases

Return In%ard&3ales Return

1rinting and 3tationery

Telephone charges

Electricity Charges

-actory Rent

Rent&5ffice Rent

Royalties&Royalties on production

-reight&-reight in%ard&-reight on 1urchases

-reight 5ut%ard&-reight on sales

Rent! Rates and Ta2es

1o%er And -uel

Commission

Discount&Discount Allo%ed&Discount on

3ales&Discount Gi"en to Customers

6nproducti"e 7ages

Refreshment E2pense

Loading Charges

6nloading Charges

Clearing Charges

-or%arding Charges

Gas And Electricity

Entertainment E2penses

Import duty

E2port duty

Custom duty

3toc$ of Goods & In"entories(opening*

Cash in 8and

7ages

3alaries

1ostage And Telegram

Insurance&Insurance premium

Interest&Interest on Loan

Interest on Capital

Ad"ertisement&1ublicity

Ban$ Charges

Audit fees

Accounting Charges

1ro"ident fund contribution

Legal -ees

Repairs And Rene%als

.otor up$eep

Donations&Charity

Tra"eling E2penses

Con"eyance

8eating And Lighting

Establishment E2penses

Bad Debts

Loss By fire

Loss by theft

Loss on sale of fi2ed assets

Loss on sale in"estments

E2ciseduty

5ctroi duty

Depreciation

1ac$ing charges

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Land and Building

Loose tools

.otor Car&.otor 9ehicle

Deli"ery 9an

Li"e stoc$

-reehold properties

Leasehold properties

1etty cash

Copy Right

Debtors&Customers&Boo$ Debt

In"estments

Dra%ings

Ban$&Due -orm ban$&5%ed by ban$

Bills Recei"able&Acceptances recei"ed

1ro"ident -und In"estments

Loans Gi"en& Loans To:

Ad"ances to supplier

Deposit %ith supplier

General E2penses&Trade E2penses

3toc$ of 3tationery (opening*

-urniture and -i2tures

1lant and .achinery

1remises

Computer

Type%riter

5ffice e#uipments

1atent rights

Good%ill

Trade mar$

3hares

Debentures

Go"ernment 3ecurities

1repaid e2penses

Incomes Recei"abl

Reser"e for Discount on creditors

Insurance company&claim

-i2ed Deposits

Ad"ance to office staffDeposit %ith electric board

6ne2pired insurance

,N%#e: Cl%(ing (#%c9 %) G%%d(/(#a#i%ner ne*er a''ear( in #"e #rial +alance5.

(B* Accounts ha"ing credit balance' The follo%ing accounts sho% credit Balances

Name of accounts Name of accounts

3ales

1urchase Return&Return out%ard

Commission recei"ed

Interest on dra%ings

Interest on In"estment

Interest recei"ed

Bad debts reco"ery

Capital

Bills payable&Acceptance gi"en

Creditors&3uppliers

5utstanding e2penses

Ban$ o"erdraft&Due to ban$&5%ed to ban$

Loan&Loan from&Loan ta$en

Income recei"ed in ad"ance

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Interest on 1ro"ident fund in"estment

Discount recei"ed&Discount allo%ed by

3uppliers&Discount on 1urchases

Rent recei"ed

3ub;let rent

3undry Income&.iscellaneous Income

Di"idend recei"ed

1ro"ident fund

General Reser"e&Reser"e -und

Reser"e for discount on debtors

Reser"e for bad debts

Ad"ances from customers

Goods lost by fire

1rofit on sale of fi2ed asset

1rofit on sale of in"estments

.Cournal

c* Cash Boo$

d* 1urchase Boo$

+ The debit side of trial balances sho%s %hich type of accounts=

a* 1ersons

b* 1roperties

c* Income ? gain

d* E2penses ? losses

, The credit side of trial balances sho%s %hich type of accounts=

a* 1ersons

b* 1roperties

c* Income ? gain

d* E2penses ? losses

4 .rs .ala A&c is

a*Real A&c

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b* Nominal A&c

c* 1ersonal A&c

d* None of abo"e

0 The e2pense %hich remains unpaid is $no%n as

a* 1repaid income

b* 5utstanding income

c* 5utstanding e2penses

d* 1repaid e2penses

@ Income %hich is due but not yet recei"ed

a* Accrued Income

b* 1repaid Income

c* 1repaid E2penses

d* Accrued E2penses

Rent recei"ed is

a* 1ersonal A&c

b* Real A&c

c* Nominal A&c

d* None of abo"e

E2penses %hich are paid before they are due for payment

a* 1repaid income

b* 1repaid e2penses

c* 5utstanding income

d* 1repaid income

Li(# %) C%22%n J%3rnal En#rie(

) Cash 3ales

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Cash a&c Dr

To 3ales a&c

+ Credit 3ales

Account Recei"able a&c Dr

To 3ales

, Cash 1urchase

1urchase a&c Dr

To Cash a&c

4 Credit 1urchase

1urchase a&c Dr

To Account payable a&c

0 E2pense paid in cash

E2pense a&c Dr

To Cash

@ E2pense not paid for

E2pense a&c Dr

To E2pense outstanding a&c

1repaid e2pense

1repaid E2pense a&c Dr

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To cash

Income recei"ed in cash

Cash a&c Dr

To Income

Income earned but not yet recei"ed

Income recei"able a&c Dr

To Income

)/ Income not yet earned but collected in ad"ance

Cash a&c Dr

To 1re recei"ed Income

-or e2ample! ne%spapers collect subscription for the %hole year Tata s$y collects subscription for the

%hole year

E2ercise +

1repare ournal entries and prepare an income statement of the follo%ing transactions'

5m Enterprises is a consulting firm and the follo%ing represent their transactions in .arch +/)4

/);.ar;+/)4 Rent paid +/!///&;

/,;.ar;+/)4 3er"ice Re"enue billed 4+!///&;

/0;.ar;+/)4 Collection from customers;

che#ue recei"ed

+)!///&;

/;.ar;+/)4 Electricity Bill paid

(Rs+!0//&; relating to -eb

+/)4*

4!0//&;

/;.ar;+/)4 3alary paid )+!///&;

)4;.ar;+/)4 3er"ice Re"enue billed ,!///&;

)@;.ar;+/)4 Recei"ed from customers )+!///&;

);.ar;+/)4 5ffice stationery purchased +!0//&;

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and paid for

+);.ar;+/)4 Insurance premium paid @!0//&;

+,;.ar;+/)4 A.C charges due and not paid !0//&;

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Mechanics of Accounting- Ledger and Trial Balance

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Transcript of Mechanics of Accounting- Ledger and Trial Balance