2. Review….

3. Your Homework was… Page 96, Exercises 1,2,3 Page 107, ‘Exercise’ 1 A.
(Use a T Account Ledger)
Do the transactions for this ‘new’ business – what will the opening balances be for each account?
Calculate account totals when complete.

4. Page 96, Exercises 1 (A,B) A.
A debit balance in an A/R account means that person owes us. B.
A credit balance in an A/P account means we owe that person money.

5. 2. A. B. Bank account is usually a DR balance.
A/R account is usually a DR balance.
A/P account is usually a CR balance. B.
Overdraft on a bank account can cause this.
Overpayment by a creditor. ($ paid to us.)
Overpayment to a debtor. (We paid more than we owed.)

6. 3. a. the left side of an account is a DR
b. the balance of an A/R is a DR.
c. The balance of a supplier’s account (someone who we buy from) is a CR.
d. A decrease in a liability is a DR.
e. An exceptional (unusual) bank account balance is a CR.
f. The balance of an equipment (asset) account is a DR.
g. The right side of an account is a CR
h. The balance of a Bank Loan account is a CR

7. i. An exceptional balance on an A/P is a DR.
j. The larger side of a liability account is a CR.
k. A creditor’s account is a DR.
l. A customer’s account (who will also owe us money) is a DR.
m. To increase an asset, we use a DR.
n. A debtor’s account is a CR.
o. The effect on accounts receivable when we sell on account (increases it) is a DR.
p. The effects on accounts payable when we buy on account is a CR.
q. The effect on A/R when we have a receipt (we make a sale) on account is a DR.
r. The effect on A/P when we purchase on account is a CR.

8. 1A.

9. The Trial Balance
To set up our ledger, we use information from the balance sheet.
Changes caused by transactions are recorded in the ledger. (T Accounts)
Periodically, it is necessary to check the accuracy of the ledger.
This is done with a ‘Trial Balance’

10. ‘Taking off’ a trial balance
Making a trial balance is called ‘taking off’ a trial balance.
The trial balance is simply a listing of the accounts and their balances in the ledger.
If all the debit balances = all the credit balances, the ledger is said to be in balance. (Otherwise it is out of balance.)

11. What does a trial balance look like?

12. Taking off a trial balance…
Step 1
List all the accounts and their balances
Step 2
Place debit balances in debit column and credit balances in credit column
Step 3
Add up the two columns
Step 4
See if your two columns are the same.
Step 5
Write a heading at the top.
Name of the business
Title of the document (Trial Balance)
Date prepared

13. Balance It is important to have your ledger in balance.
If it is not in balance, your work is not accurate.
A ledger out of balance is a certain sign at least one error has been made in the accounts.
A good accountant does not rest until all errors are found and corrected!

14. Finding Errors Re-add the trial balance columns
Check that numbers have been transferred from the ledger to the trial balance correctly.
Recalculate the account balances.
Check that there is a balanced accounting entry for each transaction! (DR = CR ?)

15. Homework… Page 102, Exercise 2
Using the answers from your homework exercise 1A (pg 107) – take off a trial balance.
(Use the handout provided for both.)