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Journal, Ledger, Trial Balance and Balance Sheet

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Journal, Ledger, Trial Balance and Balance Sheet

  1. 1. Journal, Ledger, Trial Balance and Balance Sheet By Sadat Faruque
  2. 2. Golden Rules of Accounting Accounts Personal Real Nominal ReceiverDR GiverCR What comes inDR What goes outCR Expenses and losses DR Income , Profit and Gains CR
  3. 3. Record the following transaction of A & Co in Journal & Prepare necessary Ledger AC. • On 1st Jan, • 2nd Jan, bought goods on Credit from P & Co for Rs 2,000. • 3rd Jan, sold goods for Cash to B & Co for Rs 500. Asset Amt (Rs p) Liabilities Amt (Rs p) Cash in hand 500 Loan from SBI 10,000 Cash in bank 8,000 Amt due to V & Co 5,000 Stock of goods 4,000 Machinery 20,000 Furniture 5,000 R & Co (Amt due to A & Co) 2,000 S & Co (Amt due to A & Co) 3,000
  4. 4. • 4th Jan, sold goods to R & Co on credit Rs 1,000. • 5th Jan, received from R & Co amount on 1st Jan Rs 1,900 as full settlement of Rs 2,000. • 6th Jan, payment paid to V & Co by cheque (V & Co allowed Rs 50 discount). • 8th Jan, old furniture sold for cash (book value Rs 300 at Rs 350). • 10th Jan, bought goods for cash Rs 1,000. • 11th Jan, received cheque from S & Co deposited in bank Rs 3,000. • 12th Jan, paid for repair of machinery Rs 200. • 13th Jan, bought goods from V & Co on credit Rs 2,000. • 14th Jan, received cheque from R & Co deposited in bank discount allowed Rs 50 (1,000 – 50 = 950).
  5. 5. Journal In the books of A & Co… Date Particulars L.F Dr (Rs p) Cr (Rs p) 1st Jan Cash A/C …. Dr Bank A/C …. Dr Stock A/C …. Dr Machinery A/C …. Dr Furniture A/C …. Dr R & Co A/C …. Dr S & Co A/C …. Dr To, Loan from SBI A/C To, V & Co A/C To, Capital A/C (Being bal of various Assets & Liabilities transferred) 500 8,000 4,000 20,000 5,000 2,000 3,000 10,000 5,000 27,500 2nd Jan Purchase A/C .... Dr To, P & Co A/C (Being purchased on credit from P & Co) 2,000 2,000
  6. 6. Date Particulars L.F Dr (Rs p) Cr (Rs p) 3rd Jan Cash A/C …. Dr To, Sales A/C (Being ……) 500 500 4th Jan R & Co A/C …. Dr To, Sales A/C (Being….) 1,000 1,000 5th Jan Cash A/C ….. Dr Discount allowed A/C …. Dr To, R & Co A/C (Being….) 1,900 100 2,000 6th Jan V & Co A/C.... Dr To, Discount received A/C To, Bank A/C (Being….) 5,000 50 4950 8th Jan Cash A/C …. Dr P/L A/C …. Dr To, Furniture A/C (Being ……) 300 50 350
  7. 7. Date Particulars L.F Dr (Rs p) Cr (Rs p) 10th Jan Purchase A/C …. Dr To, Cash A/C (Being ……) 1,000 1,000 11th Jan Bank A/C …. Dr To, S & Co A/C (Being….) 3,000 3,000 12th Jan Repair to Machinery A/C ….. Dr To, Cash A/C (Being….) 200 200 13th Jan Purchase A/C.... Dr To, V & Co A/C To, Cash A/C (Being….) 2,100 2,000 100 14th Jan Bank A/C …. Dr Discount A/C …. Dr To, R & Co A/C (Being ……) 950 50 1,000
  8. 8. Ledger In the books of A & Co Sales A/C Dr Cr Date Particulars J/F Amt (Rs p) Date Particulars J/F Amt (Rs p) 3rd Jan To, Cash A/C 500 4th Jan To, R & Co A/C 1,000 31st Jan By, Balance c/d 1,500 1ST Feb To, Balance b/f 1,500
  9. 9. Trial Balance • Trial Balance indicates mathematical accuracy. • Trial Balance should always balance. • Total debit entries = Total credit entries. • Closing Stock will never appear in Trial Balance. • Suspense A/C can be used to balance the A/C’S but mistakes later needs to be found out and rectified before preparation on Final A/C’S. SL. No Particulars/List of Ledger A/C L/P Debit (Rs p) Credit (Rs p) Capital A/C 1,00,000 Building A/C 2,00,000 Creditors A/C 2,00,000 Loan taken A/C 50,000 Interest on Loan taken A/C 50,000 Drawings A/C 1500 Sales A/C (taken from previous example ) 1,500 Balance 3,01500 3,01,500 In the books of …. Trial Balance as on….. (EXAMPLE)
  10. 10. Limitation of Trial Balance • Trial Balance will not show… • Errors of omission – transaction left out completely. • Errors of commission – correct amounts, wrong account(s). • Errors of principle – e.g. posted a capital expense as revenue expense. • Compensating errors – errors which cancel each other out. • Reversal of entries – wrong sides of each account used.
  11. 11. Balance Sheet as on…. Schedule VI of B/S as per Companies Act 1956 (Format) Liability Amt (Rs p) Amt (Rs p) Asset Amt (Rs p) Amt (Rs p) Share Capital : Authorized (……...) XXXXX Fixed Assets: [1st Intangible Assets Patent, Goodwill, etc. Then Tangible Assets like P & M, Furniture & Fixture, Land & Building, etc will come] XXXX Issued, Subscribed & Paid up XXXX Investments: (Long term) XXXX Reserve & Surplus: Profit & Loss A/C (as its Mortgaged) XXXX Current Assets XXXX Secured Loans XXXX XXXX Unsecured Loans XXXX
  12. 12. Liability Amt (Rs p) Amt (Rs p) Asset Amt (Rs p) Amt (Rs p) Current Liabilities & Provision : Loans & Advances: Sundry Creditors XXXX Stock in trade XXXX Bill Payable XXXX Bills Receivable XXXX Bank Overdraft XXXX Sundry Debtors XXXX Outstanding Expenses XXXX Cash in hand XXXX Income received in advance XXXX Cash in bank XXXX Provision XXXX XXXX Expenses paid in advance XXXX Loan & Advances given XXXXX XXXX Miscellaneous Expenditures XXXX XXXXX XXXXX