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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