balancing off account and trial balance l3
TRANSCRIPT
Introduction to Introduction to AccountingAccounting
Unit 3 :
Balancing off account and Trial Balance
ObjectivesObjectivesAfter you have studied this chapter, you
should: Be able to balance off personal accounts
for debtors and creditors Be able to distinguish between a debit
balance and a credit balance Understand why trial balance totals
should equal one another Be able to draw up a trial balance from a
given set of accounts Appreciate that some kinds of errors can
be made but the trial balance totals will still equal one another
Introduction to the Introduction to the LedgerLedger
Transactions are classified in a book called a "ledger".
A ledger has different accounts.
Recording into the accounts requires the observation of the double entry rule.
Types of accountsTypes of accounts
Types of accountsTypes of accounts Debtors and creditors are called
personal accounts Others are called impersonal
accounts, which can be real or nominal
Assets like car, buildings, cash, etc are called real accounts
Expenses, income and capital accounts are called nominal accounts
Balancing off AccountsBalancing off AccountsA ledger account must always be
closed, or balanced. While balancing an account, both
sides of the accounts are added. The larger amount will be written on
both sides. The balancing figure is then decided
so that both totals will be equal. This balance is what is called as balance carried down. ( Bal c/d)
This balance must be carried across to the beginning of the next period and will then be called as "Bal b/d ".
K Tandy
2008 2008Aug 1 Sales $144 Aug 22 Bank
$144 19 Sales $ 300 28 Bank $
300$444
$444
Where debtors still owe for Where debtors still owe for goodsgoods
D Knight2008 August 2008 August 1 Sales $158 28Bank $158 15 Sales $206 31 B c/d$ 324
30 Sales $118
482 482Sept 1 b b/d 324(to start off entries for following month)
Introduction to a Trial BalanceIntroduction to a Trial Balance
A Trial balance is prepared to ensure that double entry rules are observed.
It contains all the balances of all the ledger accounts on a certain date.
If the balance brought down is a debit balance, then the item is placed in the debit column of the trial Balance.
If the balance brought down is a credit balance, then the item is placed in the credit column of the trial Balance.
A Trial balance is not an Account
Trial Balance as at 31 May Trial Balance as at 31 May 20092009
Dr Cr
$ $Purchases 994Sales 490Returns outwards
15
Return inwards
16
A Lyon & Son 624M Spenser 29Cash 90
1,1291,129 1,1291,129
Errors not revealed by the Trail Errors not revealed by the Trail BalanceBalance
Errors of Omission Errors of Commission Errors of Principle Compensating errors Reversal of entry Error of Original Entry
2.2.
Errors of Omission
A transaction is completely not recorded ( no debit, no credit entry)
3.3.Errors of Principle
An asset is recorded into an expense account
E.g. Cost of a new motor car put into a motor car expense account
4.4.Compensating errors
When one error balances the other.
E.g. Debtors are over added by $10, creditors also over added by $10
5.5.
Reversal of entry Where the debits and credits
are mixed up E.g. An account to be debited
is credited, while an account to be credited is debited
6.6.
Errors of Commission The amount is entered on the
right side, but in the wrong account
e.g. In Mr. B's account, instead of Mr. D's account