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Chapter 4

Chapter 4. The Simple Ledger. * Ledger Accounts *. A Ledger is a group/file of Accounts Each Account has a page in the ledger Transactions that affect the account are recorded on each account’s page T-accounts (beginner format). 4.1. * The T account *. Left Side DEBIT DR or Dr

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Chapter 4

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  1. Chapter 4 The Simple Ledger

  2. * Ledger Accounts * • A Ledger is a group/file of Accounts • Each Account has a page in the ledger • Transactions that affect the account are recorded on each account’s page • T-accounts (beginner format) 4.1

  3. * The T account * • Left Side • DEBIT • DR or Dr • Assets beginning value • Debit = Left • Right Side • CREDIT • CR or Cr • Liabilities & Equity beginning value • Credit = Right 4.1

  4. * Opening Accounts * • Record name at top of account • Record Beginning balances on correct side • Assets on Debit Side (left) • Liabilities & Equity on Credit Side (right) Assets = Liabilities + Equity + + + Dr Cr Cr 4.1

  5. A/P Capital Cash Supplies 7,400 3,100 45,800 6,600 Debit = Credit Left = Right 4.1

  6. ~ 4.1 Homework ~ • Page 82 (wb33-34) • Exercises 1-3 • Review questions 1-7 • http://www.youtube.com/watch?v=j71Kmxv7smk 4.1

  7. Assets = Liabilities + Equity - - - + + + Assets increase with a Debit - Left side of equation and balance sheet Liabilities increase with a Credit - Right side of equation and balance sheet Equity increases with a Credit -Right side of equation and balance sheet 4.2

  8. Purchased $200 supplies on credit • Increase in Supplies • Asset • Debit (left side) • Increase in A/P • Liability • Credit (right side) • Left side = Right Side • Debits = Credits Supplies  200 A/P 200  4.2

  9. Cash 700 A/P 200  Made $50 payment on Account • Decrease in Cash • Asset • Credit • Decrease in A/P • Liability • Debit • Debits = Credits 50   50 4.2

  10. ~ 4.2 Homework ~ • Page 90 (wb34-36) • Exercises 1-4 • Review questions 1-12 4.2

  11. * Calculating Account Balances * • Add the two sides separately • Record pin totals • Subtract the smaller total from the larger • Write the result beneath the larger pin total • Circle this final amount Cash 3265 500  2500   200  400 650  3865 3650 215 3865-3650 = 215 4.3

  12. * Normal Account Balances * + • Assets • Debit • Liabilities • Credit • Equity • Credit Dr + Cr + Cr 4.3

  13. * Exceptional Balances * • Occasionally accounts have opposite balances • Credit balance for Cash/Bank • Overdrawn, took out more money than we have • Credit balance for A/R • Customer overpaid us (we now owe them) • Customer returned merchandise but has no balance • Debit balance for A/P • We overpaid a creditor (they now owe us) • We returned products but have no balance owing • These do not last long 4.3

  14. ~ 4.3 Homework ~ • Text page 96-97 • Review Questions 1-9 • Exercises 1, 2,3 4.3

  15. * Trial Balance * • Checks the accuracy of the ledger • Informal Document • Listing of the account balances • Check if debits = credits • If not equal, then at least ONE error • ALL errors must be found • If in balance, still MAY have errors 4.4

  16. * Creating a Trial Balance * • Heading: Who, What, When • List all Assets first, in order of liquidity • Record their values in the Debit Column • List the Liabilities, in order of maturity • Record their values in the Credit column • List the Equity account(s) -- Capital • Record the value in the Credit column • Total up the two columns • Debits = Credits 4.4

  17. * Common Errors!!!! * • Make sure account balances are in the correct column • Find the difference between the totals • Find that value in a transaction • Missed an entry • Divide difference by two and find • Double entry • Difference divisible by 9 • Transposition error (wrote 45 instead of 54) • Difference divisible by 10 • Addition Error (forgot to carry the one) 4.4

  18. ~ 4.4 Homework ~ • Page 101-102 (wb 38-40) • Exercises 1, 2 & 3 • Review Questions 1-7 4.4

  19. ~ Homework: Ch4 Review~ • Text Pages 109-110 (wb 43-45) • Exercises 1-4 • Page 112, Questions for Further Thought • Prepare for chapter 5  Print notes and workbook pages

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