Ledger posting and trial balance

The rule of personal account is. Debit the receiver. Credit the giver. Salary accounts, commission account etc are examples. The rule of nominal account is. Debit all expenses and losses. Credit all incomes and gains. There are separate rules for each particular which are as follows:. Increase Dr. Decrease Cr. Increase Cr. Decrease Dr. Ledger: A Ledger account may be defined as a summary statement of all the transactions relating to a person, asset, expense or income, which have taken place during a given period of time and show their net effect.

So every entry recorded in the journal must be posted into the Ledger. A ledger account is a statement shaped liked an English alphabet 'T' that systematically contains all financial transactions relating to either a particular person or thing for a certain period of time.

It is the principal book of accounts. Features of ledger. The following are the features of ledger. The left hand side is called debit side and right hand side is called credit side. The excess of debit side over credit side indicates debit balance, while excess of credit side over debit side indicates credit balance. If the total of the two sides are equal there will be no balance. Importance of ledger. Ledger is an important book of Account.

It contains all the accounts in which all the business transactions of a business enterprise are classified. At the end of the accounting period, each account will contain the entire information of all the transactions relating to it.

Following are the advantages of ledger. While finding out business results the revenue and expenses are matched with each other. Hence, we can get the information about the Book value of any asset whenever we need. From this we can judge the financial position and health of the business.

Sub-division of ledgers. In a big business, the number of accounts is numerous and it is found necessary to maintain a separate ledger for customers, suppliers and for others. Usually, the following three types of ledgers are maintained in such big business concerns.

This ledger is also known as sales ledger. This ledger is also known as Purchase Ledger. It is also known as Nominal Ledger. Difference between journal and ledger:. In order to overcome this problem, the journal is sub-divided into many subsidiary books which are called special journals.

The journal in which transaction of a similar nature is recorded is known as special journal or subsidiary book. The special journals are ruled differently on the basis of the nature of transactions to be recorded.

Transactions that cannot be recorded in any of the special journals are recorded in a journal called journal proper or miscellaneous journal. Objects of preparing subsidiary books:.

Advantages of subsidiary books. Division of work: since there are so many subsidiary books, the accounting work may be divided amongst a number of clerks. Specialization: when the same work is allotted to a period of time he acquires full knowledge of it and becomes efficient thus the accounting works will be done more efficiently.

Save in time: the trader can save time and labor by avoiding repetitions. Availability of information: since separate subsidiary book is kept for each class of transactions, information relating to that will be readily available.

Facility in checking: checking is facilitated in subsidiary books which will prevent errors and frauds. Various types of subsidiary books. Important Subsidiary Books: There are many types of journals and the following are the important ones:. Cash Book- to record all cash transactions of receipts as well as payments. Sales Day Book- to record all credit sales. Purchases Day Book- to record all credit purchases. Sales Returns Day Book- to record the return of goods sold to customers on credit.

Purchases Returns Day Book- to record the return of goods purchased from suppliers on credit. Bills Receivable Book- to record the details of all the bills received. Bills Payable Book- to record the details of all the bills accepted.

Journal Proper-to record all residual transactions which do not find place in any of the aforementioned books of original entry.

Cash Book: Cash Book is a sub-division of Journal recording transactions pertaining to cash receipts and payments. Firstly, all cash transactions are recorded in the Cash Book wherefrom they are posted subsequently to the respective ledger accounts. The Cash Book is maintained in the form of a ledger with the required explanation called as narration and hence, it plays a dual role of a journal as well as ledger. All cash receipts are recorded on the debit side and all cash payments are recorded on the credit side.

All cash transactions are recorded chronologically in the Cash Book. The Cash Book will always show a debit balance since payments cannot exceed the receipts at any time. A Cash Book has the following features:. It is both a book of original entry as well as a book of final entry. Ledger is also called the Principal Book of Accounts. After recording the business transactions in the Journal or special purpose Subsidiary Books, the next step is to transfer the entries to the respective accounts in the Ledger.

Ledger is a book where all the transactions related to a particular account are collected at one place. A Ledger is a book which contains all the accounts whether personal, real or nominal, which are first entered in journal or special purpose subsidiary books.

According to L. In the particular column the name of the other account which has been credited in the Journal entry should be written for reference. In the particular column the name of the other account which has been debited in the Journal entry should be written for reference. While balancing an account, the following steps are involved:.

Step 1 — Total the amount column of the debit side and the credit side separately and then ascertain the difference of both the columns. Step 3 — Total again both the amount columns, put the total on both the sides and draw a line above and a line below the totals. Trial balance is a statement prepared to check the arithmetical accuracy of the books of ledger accounts. Trial Balance is the list of debit and credit balances taken out from ledger to test the arithmetical accuracy of the books.

First step recording of transactions in journal. The next step post them into ledger and the next step in the accounting process is to prepare a statement to check the arithmetical accuracy of the transactions recorded so for.

Trial balance is a statement which shows debit balances and credit balances of all accounts in the ledger. Since, every debit should have a corresponding credit as per the rules of double entry system, the total of the debit balances and credit balances should tally agree. In case, there is a difference, one has to check the correctness of the balances brought forward from the respective accounts.

Trial balance can be prepared in any date provided accounts are balanced. Diagrams for Circular flow of Income. Meaning and advantages of Double Entry System. Balancing is done periodically, i. All such balances in personal and real accounts are shown in the Balance Sheet and the balances in nominal accounts are taken to the Trading and Profit and Loss Account. The accounts which are prepared at the final stage at the end of the financial year of the accounting cycle to know the profit or loss and financial position of a business concern are called Final Accounts.

Final accounts gives an idea about the Profitabilitty and Financial position of a business to its management, owners, and other interested parties. TradingAccount, b. Trading activities means buying and selling of goods.

Opening Stock. Returns Inward. Returns Outward. Sales Ledger Control. Cash in Hand. Cash at Bank. Carriage Inwards. Carriage Outwards. Discount Allowed. Type of Account. Usual balance.