Unit 7 The ledger account. To navigate around the unit Press the enter button to move onto the next screen. If you need to move back press the backspace.

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Presentation transcript:

Unit 7 The ledger account

To navigate around the unit Press the enter button to move onto the next screen. If you need to move back press the backspace button. You can also navigate using the forward and back arrows on your key board

What you will learn What a ledger account is How to enter transactions into a ledger account

A ledger account Ledger account DateDetails£DateDetails£ Remember our books of prime entry? That was the first place that we listed all of our transactions. The transactions are then moved to the ledger accounts. The ledger account is part of double entry book keeping system. You may hear this referred to as the general ledger or the nominal ledger. You may also hear reference to a T account. That is because a ledger account is T shaped.

The debits and credits are different side of the ledger account Ledger account DateDetails£DateDetails£ DEBITCREDIT Debits are always on the left and Credits are always on the right. Think – we DRive on the left and CRash on the right

In the last few units we have been following Mark and his fish stall at the market. We are going to take the debits and credits that we worked out in the last unit and put them into ledger accounts.

Here is a reminder of the first few transactions DateDetailDebitCredit 101/03/X6£10,000 invested in the businessCashCapital 201/03/X6Purchased a van for £8,000VanCash 301/03/X6Purchased fuel for the van for £65Fuel expenseCash 402/03/X6Purchased fish from the wholesaler £340PurchasesCash 502/03/X6Sold fish for £595CashSales 602/03/X6Hired stall for £50Stall hireCash Turn to task 10 in your workbook and write the entries for the above transactions in the T accounts provided as we go through the next few slides.

The first transaction Cash DateDetails£DateDetails£ 01/03/X6Capital10,000 In the first transaction Mark put £10,000 into the business. We have already decided that this is a Debit to the cash. We therefore enter the transaction on the left hand side as this is the Debit side. The credit side will be to a capital ledger account, so in the details we put the name of the account of the opposite entry

The first transaction Capital DateDetails£DateDetails£ 01/03/X6Cash10,000 The other side is put on the right hand side (the credit side of the transaction is put on the right hand side of the ledger account and described as cash. Remember debits must equal your credits.

The second transaction Cash DateDetails£DateDetails£ 01/03/X6Capital10,00001/03/X6Van8,000 For the second transaction Mark purchased a van for £8,000. We said that this was reducing our cash asset and therefore is a credit to the cash ledger account. This goes on the right hand side of the account. This is in the cash account and will already have the capital that was introduced in the first transaction in this account.

The second transaction Van DateDetails£DateDetails£ 01/03/X6Cash8,000 If the first part was a credit, then the second half must be a debit. We will debit the van account. This is because we are increasing an asset. The van is an asset as it is something we own that will be used in the business for some time to help us generate future profits. Remember debits must equal your credits.

Now its your turn DateDetailDebitCredit 301/03/X6Purchased fuel for the van for £65Fuel expenseCash 402/03/X6Purchased fish from the wholesaler £340PurchasesCash 502/03/X6Sold fish for £595CashSales 602/03/X6Hired stall for £50Stall hireCash In your workbook, turn write the above transactions in the T accounts provided. When you have done that, move onto the next slide and check your work.

The cash account Cash DateDetails£DateDetails£ 01/03/X6Capital10,00001/03/X6Van8,000 02/03/X6 Sales 59501/03/X6 Fuel 65 02/03/X6Purchases340 02/03/X6Stall Hire50

The fuel expense account Fuel DateDetails£DateDetails£ 01/03/X6Cash65

The purchases account Purchases DateDetails£DateDetails£ 02/03/X6Cash340

The sales account Sales DateDetails£DateDetails£ 02/03/X6Cash595

The stall hire account Stall hire DateDetails£DateDetails£ 02/03/X6Cash50

If you are struggling to remember the Debits and Credits, here are a couple more ways that might help you to remember. DEBIT CREDIT P urchases E xpenses A ssets R evenue L iabilities S ales

If you are struggling to remember the Debits and Credits, here are a couple more ways that might help you to remember. D ebit C redit E xpenses A ssets D rawings L iabilities I ncome C apital

Or if you really can’t remember…..

What you have learnt What a ledger account is How to enter transactions into a ledger account

Did you get it right? If you did well done. If you didn’t don’t worry, it can take a little while for the process to click. Just go through this unit again before going any further. And remember, if you are unsure then don’t forget to contact the academy. When you are ready move onto task 11 in the workbook. Once you have completed that you will be ready to move onto unit 8.