Balancing Ledger Accounts Mr. Barry A-level Accounting Year 12

The Use of Ledger a/c in completing a Trial Balance Learning objectives: To understand how the ledger is divided up To understand & be able to recall what is in the sales & general ledger To understand the purpose of balancing accounts for use in the trial balance Mr. Barry A-level Accounting Year 12

A-level Accounting Year 12 Division of the Ledger Sales Ledger Accounts of debtors Purchases Ledger Accounts of creditors Cash Books Main cash book & Petty cash book – NOT ON SYLLABUS General (nominal) Ledger Nominal accounts – sales a/c, purchases a/c, expenses & income, VAT, profit & loss Real accounts (fixed assets a/cs & stock Mr. Barry A-level Accounting Year 12

A-level Accounting Year 12 Business Transaction Stages in the Accounting Process Source Documents Books of Prime Entry Day books Cash Books Journal Ledgers Trial Balance Final Accounts Income Statement Balance Sheet Cash Flow Statement Mr. Barry A-level Accounting Year 12

Purposes of Final Accounts Profit & Loss Account (Income Statement) Owners want to judge performance (profit) Tax purposes Measure growth Judge managements ability to control costs and expenses. Mr. Barry A-level Accounting Year 12

Purposes of Final Accounts Balance Sheet Provides a summery and valuation of business’s assets, liabilities and capital Gives an overall valuation of the business Helps identify liquidity (WC = CA – CL) Identifies sources of funds / level of borrowing v level of owner investment v reserves – CAPITAL STRUCTURE Mr. Barry A-level Accounting Year 12

A-level Accounting Year 12 Understanding the difference between Income Statement items and Balance Sheet items Income Statement items include: Any items categorised as Revenue and Expenses Sales Purchases Carriage in/ carriage outwards Expenses Mr. Barry A-level Accounting Year 12

A-Level Accounting Year 12 Balancing an expense account An expense account is a running total of a particular expense during the financial year An expense account is balanced to show how much has been spent to date and must be included in Income Statement Rent Paid Dr Cr date details £ date details £ 1 March Balance b/d 9,000 31 March Transfer to Income Statement 10,000 20 March Bank 1,000 10,000 10,000 Mr. Barry A-Level Accounting Year 12

A-level Accounting Year 12 Balance Sheet items include: Any items categorised as Assets, Liabilities, Capital, Drawings Non-current Assets and Current Assets e.g. machinery or bank Non-current Liabilities and Current Liabilities e.g. Debenture or Creditors Capital Drawings Mr. Barry A-level Accounting Year 12

A-Level Accounting Year 12 Balancing a creditor account which has a credit balance The balancing process here is exactly the same, but the balancing figure goes on the debit side and the balance is brought down on the credit side R Gupta Dr Cr date details £ date details £ 15 June Bank 4,000 1 June Balance b/d 4,000 18 June Purchases returns 1,000 28 June Purchases 2,000 30 June Balance c/d 1,000 6,000 6,000 1 July Balance b/d 1,000 Mr. Barry A-Level Accounting Year 12

A-Level Accounting Year 12 Further example – balancing a Machinery account Machinery Dr Cr date details £ date details £ 1 June Balance b/d 7,000 15 June Bank 2,000 30 June Balance c/d 10,000 18 June Bank 1,000 10,000 10,000 1 July Balance b/d 10,000 Mr. Barry A-Level Accounting Year 12