Professional Documents
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Balancing Off Accounts and Trial Balance
Balancing Off Accounts and Trial Balance
Balancing Off Accounts and Trial Balance
Slide
1-2
Overview of Accounting Process
Books
of Adjusti Financial
original Trial ng & Statements
Source Ledgers
Documents
entry Balance Accrual
(Journa Entries
ls)
Slide
1-3
Reading Materials
Frank Wood, 2019. Business Accounting, Pearson.
1. Chapter 5
2. Chapter 6
Slide
1-4
Accounts for debtors
Debtors owe us nothing
Dr K.Tandy a/c Cr
Aug1 Sales 144 Aug22 Bank 144
19 Sales 300 28 Bank 300
444 444
Slide
1-5 SO 1 Close-off accounts when appropriate
Accounts for debtors
Debtor still owes us
D. Knight
Aug 1Sales 158 Aug 28Bank 158
15Sales 206
30Sales 118
482 158
D. Knight
Aug 1Sales 158 Aug 28Bank 158
15Sales 206
30Sales 118
Slide SO 2 Balance-off accounts at the end of a period and bring down the
1-12 opening balance to the next period
Accounts for creditors
• The process of closing off or balancing off is the same for
creditors’ accounts
• Total debit < Total credit => The balance is said to be a
‘credit balance'
E. Williams
Aug 21Bank 100 Aug 2Purchases 248
31Balance c/d 264 18Purchases 116
364 364
Sep 1 Balance c/d 264
Slide SO 2 Balance-off accounts at the end of a period and bring down the
1-13 opening balance to the next period
Practice
Enter the following in the personal accounts (i.e., the creditor and
debtor accounts) only in Sales Ledger and Purchases Ledger.
Close-off or Balance-off each personal account at the end of the
month.
Sep 1 Sales on time to J. Bee £1,040; T. Day £1,260; J. Soul £480.
6 Purchases on time D. Blue £780; F. Rise £1,020; P. Lee £560.
8 Returns inwards from J. Soul £25; T. Day £190.
14 We returned goods to F. Rise £12; P. Lee £84.
19 J. Bee paid us by cheque £900.
27 We paid F. Rise by cheque £766.
Slide SO 2 Balance-off accounts at the end of a period and bring down the
1-14 opening balance to the next period
Balancing off accounts in General Ledger
The accountants also need to balance off accounts in
General Ledger at the end of the accounting period
WATCH OUT!!!
For asset, liability or capital accounts, the balance on the account
is balanced off (carried down and brought down to give the
opening balance for the next accounting period).
For income or expense accounts, the balance is transferred to a
profit and loss ledger account, leaving a nil balance in the income
or expense account (This is covered in Topic 5: Financial
Statements). For those accounts, the accounts just calculate the
totals to prepare trial balance.
Slide SO 2 Balance-off accounts at the end of a period and bring down the
1-15 opening balance to the next period
Balancing off accounts in General Ledger
PRACTICE:
Balance off ledger accounts in Exercise 6.2
Slide SO 2 Balance-off accounts at the end of a period and bring down the
1-16 opening balance to the next period
REVIEW: Five-step process
1. Analyze the transaction
Analyze the transaction to determine which
Five-step process for analyzing
• For each debit entry, there is a credit entry and for each
credit entry, there is a debit entry.
• Total debit entries = Total credit entries
• To check that there is a matching credit entry for every
debit entry, we prepare a trial balance.
• Trial balance is the starting point to preparing the
financial statements.
Slide
1-23
PRACTICE
In April 20XX, Hawk Ltd made the following transactions:
• 05/04: Bought goods for $1,000, half for cash and half on
credit.
• 12/04: Made sales of $1,040, $800 of which were on credit.
• 25/04: Paid wages to shop assistants of $260 in cash.
Slide
1-24
PRACTICE - SOLUTION
As at 31.3.20X7, Hawk Ltd has the following nominal ledger
account balances.
Opening Movements Closing
Balance Balance
DR CR DR DR CR
Bank Loan 12,000
Cash at Bank 11,700
Capital 13,000
Rent 1,880
Accounts Payable 11,200
Purchases 12,400
Sales 24,300
Accounts Receivable 12,000
Equipment 22,020
Wage expense 500
Slide
1-25
PRACTICE - SOLUTION
Recording transactions in April 20XX:
Apr 5 Dr. Purchases 1,000
Cr. Bank 500
Cr. Accounts Payable 500
Apr 12 Dr. Bank 240
Dr. Accounts Receivable 800
Cr. Sales 1,040
Apr 25 Dr. Wage Expense 260
Cr. Bank 260
Slide
1-26
PRACTICE - SOLUTION
Hawk Ltd
Opening Balance Movements Closing Balance
DR CR DR CR DR CR
Bank Loan 12,000 12,000
Cash at Bank 11,700
240 760 11,180
Capital 13,000 13,000
Rent 1,880 1,880
Accounts
11,200
Payable 500 11,700
Purchases 12,400 1,000 13,400
Sales 24,300 1,040 25,340
Accounts
12,000
Receivable 800 12,800
Equipment 22,020 22,020
Wage expense 500
260 760
Total 60,500 60,500 2,300 2,300 62,040 62,040
Slide
1-27