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Journal And Ledger

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Published in: Accounts
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This is for BBA, MBA, B.Com, CA - CPT and CMA Foundation students

Soumendra R / Delhi

8 years of teaching experience

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Teaches: CA - CPT, CA - IPCC, ICWA & ICWAI, B.Com Tuition, BBA Tuition, Costing, Financial Management, BBA Subjects, Management Subjects

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  1. A man who cannot make mistakes cannot do anything. Journal, Ledger Posting and Trial Balance SOUMENDRA ROY NIMS
  2. TYPES OF ACCOUNTS Personal Account Real Account Nominal Account Valuation Account 25/09/2017 Soumendra Roy NIMS 2
  3. RULES FOR DEBIT AND CREDIT Types of Accounts Personal Account Real Account Nominal Account Valuation Account 25/09/2017 Debit Receiver What comes in Expenses and Losses When account to be decreased Soumendra Roy NIMS Credit Giver What goes out Income and Gains When account to be increased
  4. 25/09/2017 ACCOUNTING EQUIVALENCE Assets = Owner's Equity + Outside Liabilities A = OE + OL Soumendra Roy NIMS
  5. DOUBLE ENTRY SYSTEM A = OE+OL Debit = Credit In the double-entry accounting system, every transaction is recorded by equal amounts of debits and credits. 25/09/2017 Soumendra Roy NIMS
  6. ACCOUNTANT'S LIFE Debit for Credit for Increase Decrease Debit for Decrease Debit Credit for Increase Credit 1 Debit for Decrease Debit Credit for Increase Credit Debit 25/09/2017 Credit Soumendra Roy NIMS
  7. 2. 3. 4. 5. 6. 7. ACCOUNTING CYCLE Business Transaction Transaction is recorded in document (Voucher / Receipt) Analyze the transaction — location ? Journal Entry Ledger Accounts (or 'T' account) Trial Balance Balance Sheet, P&L A/c, Cash Flow Statement 25/09/2017 Soumendra Roy NIMS
  8. ACCOUNTANT'S ROUTINE Source Transaction Balance Sheet 2CasW Flow documents Prepare a trial balance Post to the ledger Soumendra Roy NIMS Analyze Journal Entry 8
  9. 25/09/2017 Soumendra Roy NIMS
  10. 25/09/2017 TRANSACTION-I Mr. Ram started business with cash Rs The accounts involved are: (1) Cash ( asset (2) Owner's Equity (equity Soumendra Roy NIMS 10
  11. TRANSACTION-I ASSETS EQUITIES Debit Credit Debit Date 2001 Dec. JOURNAL ENTR Particulars 1 Cash o Capital Investmen omer Credit Debit 500,000 Page 1 Credit 500,000
  12. TRANSACTION-I - LEDGER Date 2001 Dec. JOURNAL ENTRY Particulars 1 Cash To Capital Investment by omer Cash Debit Ca ital 25/09/2017 Soumendra Roy NIMS Page 1 Credit 12
  13. Transaction 2 Mr. Ram purchased goods worth Rs 80,000 on cash basis. The accounts involved are: (1) Goods/Purchase (asset) (2) Cash ( asset) 25/09/2017 Soumendra Roy NIMS 13
  14. Transaction 2 ASSETS 1 ASSETS 2 Debit 1 Page 1 Credit 2001 I Dec. 25/09/2017 Credit JOURNAL E Particulars e To Cash Debit Credit Debit 80,000 80,000 Soumendra Roy NIMS
  15. Date 2001 I Dec. Cash 1 JOURNAL ENTRY Particulars Purchase To Cash Purchase 80,000 Soumendra Roy NIMS Debit 80,000 Page 1 Credit 80,000 Cash (l) 25/09/2017 80,000 15
  16. Transaction 3 He Sold Goods on credit to Mr. Sachin worth Rs 50,000 25/09/2017 Soumendra Roy NIMS 16
  17. Transaction 3 ASSETS 1 ASSETS 2 Debit Credit JOURNAL E Particulars Debit Credit Debit Page 1 Credit 2001 I Dec. 25/09/2017 1 Sachin A/c To Sales A/c Soumendra Roy NIMS 50,000 50,000
  18. Page I Credit Date 2001 Dec. JOURNAL ENTRY Particulars 1 Sachin A/c sales NC Sachin Debit 50,000 25/09/2017 Soumendra Roy NIMS 50,000 50,000 sales 50,000 18
  19. Trial Balance A trial balance is a list of all the accounts for a period, to test that the Debits agree with the Credits 25/09/2017 Soumendra Roy NIMS 19
  20. 2. 3. Why to Prepare Trial Balance To check arithmetical accuracy To detect and prevent fraud and errors To assists preparation of Final Accounts. 25/09/2017 Soumendra Roy NIMS 20
  21. 2. HOW To Prepare All assets, expenses and losses to be recorded on the debit side. All liabilities, incomes and gains to be recorded on the credit side. 25/09/2017 Soumendra Roy NIMS 21
  22. 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 2. 3. 4. 5. 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. 25/09/2017 Soumendra Roy NIMS 22
  23. 2. Types of Errors Errors Disclosed By Trial Balance Errors Not disclosed by Trial Balance 25/09/2017 Soumendra Roy NIMS 23
  24. Errors Disclosed By Trial Balance Omission to post an amount into ledger. Debit or credit entries are not posted at all or posted twice. Debits are wrongly posted as credits and vice versa. Wrong totaling of Subsidiary Books. Difference in amount between the entries. Error in computation of an Account Balance. Omission of Account balance. Balance of an Account wrongly recorded in the Trial Balance. Errors in extraction of the Trial Balance. 25/09/2017 Soumendra Roy NIMS 24
  25. ERRORS WHICH ARE NOT DISCLOSED BY THE TRIAL BALANCE Errors of Omission Errors of Principle Compensating Errors Recording wrong amount in the books of Original Entry Recording both aspects of a transaction more than once in the books of account Errors in recording a transaction on the correct side of a wrong account 25/09/2017 Soumendra Roy NIMS 25
  26. LOCATING ERRORS STEP 1: Check the addition of the debit and credit columns by adding these columns in opposite directions, i.e., from bottom to top or from top to bottom. STEP 2: If the errors remain undetected, divide the exact difference by 9. If it is totally divisible by 9, this will mean that there is either a transposition error or a Slide error. STEP 3: Divide the difference by 2 and scan the columns for an identical amount. If a debit balance is entered in the credit column, or credit balance is entered in the debit column, it would cause a difference of double of its amount in the trial balance. 25/09/2017 26 Soumendra Roy NIMS
  27. LOCATING ERRORS STEP 4: Check from the ledger if any account shows a balance equal to the difference of the trial balance. STEP 5: Re-check the opening balances of all the accounts from the last previous Balance Sheet. STEP 6: Re-check the amount in the Trial Balance with the balances in the ledger. Make sure that all the balances have been placed in the correct column of the trial balance. STEP 7: Re-compute the balances of each ledger account. 25/09/2017 Soumendra Roy NIMS 27
  28. LOCATING ERRORS STEP 8: If the errors remain undetected, check the postings from the journal and other books of original entry to the ledger accounts. Put tick (W) marks with a colored pencil in the journal and in the ledger after checking each figure. After completing the operation, look through the journal and the ledger for any unticked amounts. STEP 9: If the errors still remain undetected, repeat the above steps with the help of other members of the staff, who are not in charge of maintaining the books of account. 25/09/2017 Soumendra Roy NIMS 28
  29. SUSPENSE ACCOUNT If it is not possible to locate the errors in spite of the above steps, the difference Of the trial balance is transferred temporarily to an account known as "Suspense Account". After transferring the difference, the trial balance can thus be totaled up and balanced. Afterwards, when the errors have been located, they can be rectified through the Suspense Account. 25/09/2017 Soumendra Roy NIMS 29
  30. 25/09/2017 Thank You Soumendra Roy NIMS 30

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