ACC 111 Lecture : LEDGER AND TRIAL BALANCE
LEDGER AND TRIAL BALANCE
Unit Structure:
5.0 Objectives
5.1 Meaning
5.2 How to open an Account in the ledger
5.3 Posting
5.4 Balance and Balancing of Accounts
5.5 Meaning of Balances
5.6 Illustrations-1
5.7 Trial Balance
5.8 Some important items and their balance
5.9 Illustrations-2
5.10 Exercises
5.0 OBJECTIVES
After studying the unit the students will be able to:
•
Know the meaning of Ledger.
•
Understand the process of opening a Ledger Account.
•
Prepare a Ledger Account from the given information.
•
Explain the types of Trial Balance.
•
Prepare the Trial Balance from the balances given.
5.1 MEANING
The ledger is the principal book of accounts relating to a
particular person or property or revenue or expenses are recorded
in summarized form. It is a set of accounts. It contains all accounts of
the business enterprise whether real, nominal or personal. The main
function of a ledger is to classify or sort out all items appearing in
the journal or other subsidiary books under their appropriate accounts
& that at the end of the accounting period
each account will contain the entire information of all the transactions
relating to in a summarized or condensed form.
All the transactions are recorded first in the journal and then
from the journal they are posted in the respective accounts in the
ledger. Ledger is a book where in all the transactions would ultimately
find their place under the respective heads of accounts. Ledger is a
book of final entry.
5.2 HOW TO OPEN AN ACCOUNT IN THE LEDGER :
The pages of all books of accounts must be numbered to
facilitate reference. The page is divided into two parts by vertical line
in between. The left hand side is used as a debit side of an account
and the right hand side is used as a credit side.
Name (Account)
Dr. Cr.
Date
Particulars
J.F.
Amt.
Date
Particulars
J.F.
Amt.
5.3 POSTING :
Every transaction is first recorded in the book of original entry
and then it is posted into the ledger. Posting is made to the debit side
account which is debited in the journal entry and to the credit side of
an account which is credited in the journal entry. Name of the credit
account is written on the debit account and the name of debit account
is written on the credit side of account. Entry on the debit side of an
account starts with “To” whereas on the credit side starts with “By”.
5.4 BALANCE AND BALANCING OF ACCOUNTS :
The object of recording the business transactions in various
ledger accounts to enable a trader to ascertain balance in account
easily at any time. For the preparation of Trial balance all accounts
are to be closed.
Each account in the ledger may have same entries on the debit
side and some entries on the credit side of an account. Find out
difference between totals of each side. The difference in the total of
both the side is termed as Balance of an account. The process of
extracting the balance and inserting it on lesser side of an account is
called balancing or closing of an account.
Types of Balances
A) Debit Balance : If the debit side of an account is heavier than
its credit side, the balance is called debit balance.
B) Credit Balance : If the credit side of an account is heavier than
its debit side, the balance is called credit balance.
5.5 MEANING OF BALANCES :
5.5.1 Personal Accounts : Personal Accounts may have debit or
credit balance.
Debit balance shows that person owes to the firm. He is
debtors.
Credit balance shows that persons owed to him. He is creditor.
5.5.2 Real Accounts : Real accounts always have debit balance.
These are value of Assets, properties owned by businessmen.
5.5.3 Nominal Accounts : Nominal Account may have debit or
credit balance debit balances shows total expenses / losses for
the period. Credit balances shows total income / gain for the
period.
At the end of accounting period balances of nominal accounts
transferred to Trading, Profit & Loss Account, whereas balances
shown of Personal Accounts & Real accounts in the Balance Sheet,
and next year these balances considered as opening balances.
CHECK YOUR PROGRESS
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Fill in the blanks:
1. If the debit side of an account is heavier than its credit
side, the balance is called ------------------------- --.
2. The left hand side of a Ledger Account is used as a ---------
----- and the right hand side is used as a ------------------ --.
3. -----------------and ---------------- Accounts may have debit or
credit balance.
