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PRINCIPLE OF DOUBLE ENTRY & TRIAL BALANCE, Ledger Account, Rules to…
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Ledger Account
- Account (individual accounting records of increase and decrease in specific assets, liability, capital, revenue, and expenses)
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- Referred as T- account/ ledger account
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- Balancing off ledgers accounts
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- each transaction has two sided / dual effect on each parties involved in it double entry
- known as DEBIT and CREDIT
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- If assets and expenses increase, we debit it
- If liabilities, owner's equity and revenue increase, we credit it
Double entry means that every transaction is recorded twice. In accounting, all transaction have dual effect. Once to the debit side of ledger account and once to the credit side of another ledger account.
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- to record an increase in assets
- to record a decrease in liabilities
- to record a decrease in capital
- to record a decrease in assets
- to record an increase in liabilities
- to record an increase in capital
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- Determine the impact of the transaction on the two items involved.
- Determine whether an asset, a liability, owner's equity, revenue, or expenses account is effected by the transaction.
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- To determine how much balance left in each account / balance at the end of month
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- A list of all ledgers accounts with balance at a particular date.
- It is important document in that it checks the accuracy of the entries in the recording process
- Rules: Total Debit Balances = Total Credit Balances
- Trial balance then serves as a basic of preparing the FINANCIAL STATEMENTS
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- To prove/check whether the debits equal to the credits balance or not
- To identify/uncover error in journalizing and posting
- To assist the preparation of the financial statement
- trial balance not balance (Total Debit not same with Total Credit)
- trial balance balanced (Total Debit = Total Credit)
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- Posting to incorrect side of accounts
- Errors in trial balance itself
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- Complete reversal of entries
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