22408925 journal ledger trial balance ppt copy
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7/27/2019 22408925 Journal Ledger Trial Balance Ppt Copy
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Recording of transactions
Journal, ledger and trial balance
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JOURNAL
• Journal is derived from the French word ‘Jour’ which
means a day.• It is a daily record of business transactions
• It is the book of original entry because transaction is
first written in the journal from which it is posted to the
ledger at any convenient time.• Journalising means recording a transaction in the
journal and the form in which it is recorded is known as
journal entry
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NECESSITY OF JOURNAL
Convenient recording of transaction
Maintaining and preserving the identity of
transaction
Ascertaining the true nature of transaction
Maintaining permanent record of
information
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Analysis of transactions
1. Which are the two accounts involved in thetransaction to be recorded?
2. Whether the two accounts involved in the
transaction are personal, real or nominal?3. What rules of debit and credit are applicable to
the accounts concerned?
4. Which account should be debited or credited?
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Format of journal
Date Particulars L.F. Debit
Rs.
Credit
Rs.
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FUNCTIONS OF JOURNAL
To analyse each transaction into debit and
credit so as to enable their posting in the
ledger
To arrange transaction ,chronological i.e.
in order of date.
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LIMITATIONS OF JOURNAL
• Recording all the transaction in a journal requires:
1)writing down name of account involved
2)individual posting of each account debited and
credited
• Does not provide information on prompt basis
• Does not facilitate the internal check system since the journal can be handled only by one person
• Journal become bulky and voluminous
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LEDGER
• A ledger account may be defined as a
summary statement of all the transactions
relating to a person, asset, expense or
income which have taken place during agiven period of time and shows their net
effect.
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Format of Ledger
Date Particulars J.F Amount
Rs.
Date Particulars J.F
.
Amount
Rs.
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FEATURES OF LEDGER
• Book of principal entry
• Classified and summarized record
• Posting-Process of transferring the transactions from the
journal to ledger
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ADVANTAGES
•Transactions relating to a particular person, item or heading of expenditure or income are grouped in the concerned account at
one place.
• When each account is periodically balanced it reflects the net
position of that account.
• Ledger is the stepping stone for preparing Trial Balance - whichtests the arithmetical accuracy of the accounting books.
• Since the entries recorded in the journal are referenced into
ledger the possibility of errors of defalcations are reduced to the
minimum.
• Ledger is the destination of all entries made in journal or sub- journals.
• Ledger is the "store-house" of all information which
subsequently is used for preparing final accounts and financial
statements.
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Trial balance
• Trial Balance may be defined as a statementwhich contains balances of all ledger accountson a particular date.
•To check the accuracy of posting in the ledger astatement is prepared with two columns i.e. debitcolumn and credit column which contain debitbalances of accounts and credit balances of accounts respectively. Total of the two columnsare if equal, it means the ledger posting isarithmetically correct. This statement is calledTrial Balance.
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Features of trial balance
• Particular date
• Agreement
• Arithmetical accuracy
• Errors
• Not conclusive
• Journalising and Ledger balances required
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Objectives
• To check arithmetic accuracy of books of
accounts
• Completion of double entry system
• To detect errors
• Helps in making comparisons
• To facilitate preparation of financialstatements
• Helps in dealing with adjustments
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Preparation of trial balance
• Trial Balance is not an account. It is only a list or
schedule of balances of ledger accounts
including cash and bank balances. It is prepared
on a particular date. The accounts having adebit balance are entered in the debit amount
column and credit balance accounts are entered
in the credit amount column. The totals of the
two sides of the accounts may also be used toprepare trial balance. The sum of each column
should be equal
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Standard
format of a trial balance
• Trial Balance of .................
as at .................(closing date)
Name of the
account
L.F. Debit
balance
Rs.
Credit
Balance
Rs.
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Methods for preparation of trial
balance• Total method
Trail balance is
prepared by taking
into account the totalsof debit and credit
balances of each
account recorded in
the ledger.
• Balances method
• Trail balance is made
on the basis of the
balances of theaccounts. it is also
known as net trial
balance.
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Advantages
• Correct ledger balance
• Helps in preparation of final accounts
• Arithmetical accuracy
• Errors are revealed
• If the total debit is not equal to the credit,
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Limitations
• Trial balance can be prepared only if
double entry system is followed
• Certain errors are not disclosed by trial
balance
• Incorrect trial balance will lead to incorrect
final accounts
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Errors that can affect the Trial Balance:
• Errors of calculation
• Errors of omission of one entry
• Posting to the wrong side of an account
• Errors in amount
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Errors not revealed by the Trial Balance:
• Errors of Commission
• Errors of Omission
• Errors of Principle
• Compensating errors
• Errors of Original entry
•Complete Reversal of entries