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Week 4 Lecture

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9 views

Week 4 Lecture

Uploaded by

james.isaac219219
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Week 4 Lecture

Accounting Cycle
Step 3: Post to Ledger Accounts

T- ledgers

• For each account in general journal needs to be establish in the T-Ledger


• Show the effect of transactions from the general journal
• Looks like a letter T
• Left hand side records the debits
• Right hand sides records the credits
• Includes title – e.g. cash at bank
• Each account will have a date, amount and explanation
• Explanation is the name we enter of the other ledger account (cross-referencing)

• Cash invested by owner increase cash because money is coming into the business
• Cash decrease when we purchase equipment
• Always debit an expense
• When cash comes into the business such as through revenue it is an increasing meaning debit
• Increase in drawings are always recorded on the debit side
• All of the debits must equal the credits
• Must balance the ledger (debits = credits)
• Difference in the left-hand side to the right-hand side is referred to balance carried down
• Balance carried down = money brought in (debits) – money spent (credits)
• Balance brought down is the opening balance for the next month

Balance c/d stands for 'balance carried down'. Balance carried down is the closing balance of a
ledger account. In this case closing balance in Cash Ledger for the month of June. We 'carry'
forward this amount to the next month (July) as the openning balance.

Balance b/d stands for 'balance brought down'. An Openning balance of a ledger account
that is brought from the previous month. In this case 42 100 would be the openning balance
when the business starts next reporting month (July).

Running Balance Ledgers / running balance account

• Date -> explanation (corresponding account) -> debits / credits -> balance

Prepare trial balance

• Statement that tests (trial) the quality of debits and credits


• Verifies that everything recorded is correct and equalling
• Account name -> account number -> debit -> credit
• Most liquid assets are determined from accounting number = higher no. more liquid
• All the debits should equal all of the credits
• Trial balance uses the closing balances from the T – Ledger / Running balance
• If the debits and credits are not balancing then you go through the general journal and make sure it is
recorded correctly. Then go to T-Ledgers and ensure that it is recorded correctly.

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