Project
Subject: Accounts
Topic: Ledger account and trial
balance of business concern with the
help of journals
Broad Steps
1.
2.
To understand and analyse the transaction
To pass Journal entry. The only way of changing account balances is to enter journal
entries. Account balances cannot be changed without journal entries.
3.
4.
5.
To post journal entry into ledger
At the end of the year, to prepare trial balance from the Ledger.
From the Trial balance, prepare profit and loss account and balance sheet.
Steps for posting into ledger
Step 1- Locate the account title used by the journal entry in the general ledger.
Step 2- Determine if the journal entry is a debit entry or a credit. If it is a debit entry, it
should be posted on the debit side of the located ledger account. If it is credit entry, it
should be posted on the credit side of the located ledger account.
Step 3- Record the date of the journal entry in the date column. If the posting is to be
done on a fresh page, write the year on the first line. Then write the month and day of
the journal entry on the second line. For succeeding entries, only the day of the journal
entry should be written. The month should be written only if it is different from the
month of the last entry made.
Step 4- Write a brief explanation of the journal entry in the explanation column. It
should be on the same line as that of the date.
Step 5- Write the amount of the journal entry in the amount column. It should be on the
same line as that of the date and explanation.
Step 6- In the folio column, write the page number of the general journal page that
contains the posted journal entry. It should be on the same line as that of the date, the
explanation, and the amount.
Step 7- In the folio column of the general journal, write the account number of the page
number of the ledger account in which the journal entry was posted. The account
number of the page number should be on the same line as of the journal entry.
Step 8- Do not leave a blank line between entries in the general ledger.
Steps to Prepare the Trial Balance
For each ledger account Cash, Accounts Payable, etc. total your credits and
debits.
If the credit total is larger, subtract the debit total from the credit total to get
your ledger account total which goes in the credit column of the trial balance
If the debit total is larger, subtract the credit total from the debit total to get your
ledger account total which goes in the debit column of the trial balance
Put the ledger account total in the credit or debit column of your trial balance
(as identified above).
When you have debit or credit totals for each ledger account, add all of your credit
totals to get a credit grand total.
Add all of your debit totals to get a debit grand total. This is your trial balance.
Unbalanced Trial Balance
If you have an unbalanced trial balance, then you have an error
somewhere in the accounting process. Examples of problems that can
unbalance a trial balance include:
Adding the debits and credits for the trial balance incorrectly;
Forgetting to include a ledger account balance on the trial balance;
Putting the ledger account balances in the wrong debit/credit column in the trial
balance;
Writing the wrong ledger account balances in the trial balance columns;
Miscalculating the ledger account totals;
Posting a journal entry incorrectly to the general ledger, whether using the wrong
number or getting your debits/credits mixed up;
Making an error in your journal entry, whether using the wrong number or forgetting
part of a compound journal entry.
Balanced Trial Balance
If all of your journal entries were posted properly (and error-free) in the general ledger,
your debit grand total and credit grand total should balance, and you can move on in the
accounting cycle. If the debit and credit grand totals do not balance, then you have an
error to find somewhere in your transaction posting process (journal to general ledger to
trial balance).
It's possible to have a posting error even if the debits and credits do balance, but that
will get found and solved later in the accounting cycle. Examples of problems that
would not show up in the trial balance include:
*
Putting the credit amount in the debit column and the debit amount in the credit
column for a particular transaction;
*
Recording a transaction in an incorrect account;
*
Forgetting to record a journal entry as a general ledger transaction;
*
Neglecting to make a journal entry at all.
LIMITATIONS OF A TRIAL BALANCE
A trial balance does not prove that all transactions have been recorded or that the
ledger is correct.
Numerous errors may exist even though the trial balance columns agree.
The trial balance may balance even when:
* a transaction is not journalized,
* a correct journal entry is not posted,
* a journal entry is posted twice,
* incorrect accounts are used in journalizing or posting,
* offsetting errors are made in recording the amount of the
transaction.
Example of passing journal entries, posting the same into ledger and prepare
trial balance is given hereunder for a business concern.
Following are a few transactions of M/s. Rajesh Traders consisting of 16 transactions along with Journal
entries, Ledgers, Trial Balance, Financial Statements along with some of the ledgers and similarly, one can
prepare the remaining ledgers.
The following are the transactions of M/s Rajesh Traders.
Date
Particulars
2012
April 1
Rajesh started his business with cash Rs 1,00,000
April 10
Rajesh opened an account in a bank with cash Rs 30,000
May 10
Purchased goods from Mohan Singh on credit Rs 40,000 and also paid carriage of Rs 2,000
May 20
Sold goods to Rajeev Rs 20,000
May 25
Due to some quality defect Mohan Singh returned goods of Rs 10,000
June 15
Sold goods to Ayesha for Rs 70,000
June 30
Paid rent of Rs 10,000
Aug.31
Purchased Furniture for cash of Rs 8,000
Sept.10
Paid through a cheque of Rs 5,000 for advertisement
Oct.05
Withdrawn Rs 6,000 from Bank for personal use
Nov.30
Recovered Rs 65,000 from Ayesha in full settlement of his account
Dec.12
Goods costing Rs 1,000 donated to NGO
Dec.31
Salaries paid to employees Rs 15,000
2013
Jan.15
Interest received from Bank Rs 2,000
Feb.10
Rajeev has become insolvent Rs 80 paisa in the rupees on a debt of Rs 20,000 was recovered as a
compensation
March 31
Stock of good at end of the year is Rs 32,000
Journalize above transaction, post them in ledgers, prepare Trial Balance and Financial Statements for year ending
March 31, 2013
Books of M/s Rajesh Traders
Journal
Date
Particulars
L.F.
Debit
Amount
(Rs)
Credit
Amount
(Rs)
2012
April 01
Cash A/c
Dr.
1,00,000
To Capital A/c
1,00,000
(Business started with cash of Rs 1,00,000)
April 10
Bank A/c
Dr.
30,000
To Cash A/c
30,000
(Opened a Bank Account)
May 10
Purchase A/c
Dr.
40,000
To Mohan Singh
40,000
(Goods Purchased on credit)
May 10
Carriage A/c
Dr.
2,000
To Cash A/c
2,000
(Carriage paid on purchase of goods)
May 20
Rajeev
Dr.
20,000
To Sales A/c
20,000
(Goods sold to Rajeev)
May 25
Mohan Singh
Dr.
10,000
To Purchase Return A/c
10,000
(Goods returned by Mohan Singh)
June 15
Ayesha
Dr.
70,000
To Sales A/c
70,000
(Goods Sold to Ayesha)
June 30
Rent A/c
To Cash A/c
Dr.
10,000
10,000
(Rent Paid)
Aug.31
Furniture A/c
Dr.
8,000
To Cash A/c
8,000
(Furniture purchased)
Sept.10
Advertisement A/c
Dr.
5,000
To Bank A/c
5,000
(Advertisement expenses paid through cheque)
Oct.05
Drawing A/c
Dr.
6,000
To Bank
6,000
(Withdrawn from bank for personal use)
Nov.30
Cash A/c
Dr.
65,000
Discount Allowed A/c
Dr.
5,000
To Ayesha
70,000
(Recovered from Ayesha in full settlement of his
account)
Dec.12
Donation A/c
Dr.
1,000
To Purchases A/c
1,000
(Goods of Rs 1,000 donated to NGO)
Dec.31
Salaries A/c
Dr.
15,000
To Cash A/c
15,000
(Salaries Paid to employees)
2013
Jan.15
Bank A/c
Dr.
2,000
To Interest A/c
2,000
(Interest received)
Feb.10
Cash A/c
Dr.
16,000
Bad debt A/c
Dr.
4,000
To Rajeev A/c
20,000
(Cash compensation of 80 paise in the rupees
received from Rajeev)
Mar.31
Closing Stock A/c
Dr.
32,000
To Trading A/c
32,000
(Closing stock transferred in account)
Cash Account
Dr.
Date
Cr.
Particulars
J.F.
Amount
(Rs)
Date
2012
J.F.
Amount
(Rs)
2012
April.01
Capital A/c
Nov.30
Ayesha
1,00,000
April 10
Bank A/c
65,000
May 10
Carriage A/c
June 30
Rent A/c
Aug.31
Furniture A/c
8,000
Dec.31
Salaries A/c
15,000
Balance c/d
1,16,000
2013
Feb.10
Particulars
Rajeev
16,000
30,000
2,000
10,000
2013
Mar.31
1,81,000
1,81,000
Bank A/c
Dr.
Date
Cr.
Particulars
J.F.
Amount
(Rs)
Date
2012
April 10
Amount
(Rs)
J.F.
2012
Cash A/c
30,000
Sept.10
Advertisement A/c
5,000
Oct.05
Drawings A/c
6,000
Balance c/d
21,000
2013
Jan.15
Particulars
2013
Interest A/c
2,000
Mar.31
32,000
32,000
Mohan Singh
Dr.
Date
Cr.
Particulars
J.F.
Amount
(Rs)
Date
Particulars
Amount
(Rs)
J.F.
2012
May 25
2012
Purchase Return
10,000May 10
Balance c/d
30,000
Purchases A/c
40,000
2013
Mar 31
40,000
40,000
Purchases A/c
Dr.
Cr.
Date
Particulars
J.F.
Amount
(Rs)
Date
2012
May 10
Particulars
Amount
(Rs)
J.F.
2012
Mohan Singh
40,000
Dec.12
Donation A/c
1,000
Balance c/d
39,000
2013
Mar.31
40,000
40,000
Bad Debts A/c
Dr.
Cr.
Date
Particulars
J.F.
2013
Feb.10
Amount
(Rs)
Date
Particulars
Amount
(Rs)
J.F.
2013
Rajeev
4,000Mar.31
Balance c/d
4,000
4,000
4,000
Trial Balance as at March 31, 2013
S.No.
Name of Accounts
L.F.
Debit
Amount
(Rs)
Cash A/c
Capital A/c
Bank A/c
21,000
Purchases A/c
39,000
Credit
Amount
(Rs)
1,16,000
1,00,000
Sales A/c
90,000
Purchases Return A/c
10,000
Mohan Singh
30,000
Carriage A/c
Rent A/c
10
Furniture A/c
8,000
11
Advertisement A/c
5,000
12
Drawings A/c
6,000
13
Discount Allowed A/c
5,000
14
Donation A/c
1,000
15
Salaries A/c
15,000
16
Interest A/c
17
Bad Debts A/c
2,000
10,000
2,000
4,000
Total Rs.
2,32,000
2,32,000
Financial Statements for the year ended March 31, 2013
Trading Account
Dr.
Cr.
Amount
(Rs)
Particulars
Purchases
Less: Purchases Return
Carriage
Gross Profit (Balancing Figure)
39,000
(10,000)
Particulars
Amount
(Rs)
Sales
90,000
29,000Closing Stock
32,000
2,000
91,000
1,22,000
1,22,000
Profit and Loss Account
Dr.
Cr.
Amount
(Rs)
Particulars
Rent
Particulars
10,000Gross Profit
Advertisement
5,000Interest
Discount Allowed
5,000
Donations
1,000
Salaries
Amount
(Rs)
91,000
2,000
15,000
Bad Debts
4,000
Net Profit (Balancing Figure)
53,000
93,000
93,000
Balance Sheet
as on March 31, 2013
Amount
(Rs)
Liabilities
Capital
1,00,000
Assets
Amount
(Rs)
Fixed Assets :
Less: Drawings
(6,000)
Furniture
Add: Net Profit
53,000 1,47,000
8,000
Current Assets :
Current Liabilities :
Cash
1,16,000
Creditors:
Bank
21,000
Mohan Singh
30,000Closing Stock
1,77,000
32,000
1,77,000
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