Chapter 3The LedgerPrepared byBrooke C. W. BarkerCopyright © 2010 by Nelson Education Limited
Chapter 3: The LedgerChapter ObjectivesAfter completing this chapter, you will be able to: assign account numbers accordi...
Chapter 3: The LedgerWhat is the General Ledger?The General Ledger is a book or file that holds all theindividual ledger ...
Why have a journal and aledger?Journal Record businesstransactions on a dailybasis Activity for one account, forexample,...
Chapter 3: The LedgerBelow is the ledger account for a customer, DevonLauryl Company. All ledger accounts look basicallyth...
Chapter 3: The LedgerEach ledger account has: A name An account number The chart of accounts will be discussed later. ...
Chapter 3: The Ledger...and each ledger account has a column for: Date Memo (sometimes called Explanation) Folio (the p...
Chapter 3: The Ledger...as well as columns for: Debit entries Credit entries Balance (the ongoing value of the account)...
Chapter 3: The LedgerOther columns not mentioned previously will bediscussed at another time. These include: Discount Dat...
Chapter 3: Chart of AccountsA chart of accounts is a list of account categories and the accountnumbers assigned to them.Fo...
Chapter 3: Chart of AccountsOn this chart, asset accounts are assigned a numberbetween 100 and 199.Liability accounts are ...
Chapter 3: Chart of AccountsThe range of numbers assigned to a category willdepend on the needs of the business. Numbers a...
Chapter 3: Chart of AccountsHeres an example of a very basic chart of accounts:Assets:Cash 1010Furniture 1100Equipment 120...
Pg 40 – Exercise 1
Pg 40 – Exercise 1 answers1xx Cash (or Bank)1xx Accounts Receivable1xx Drafting Supplies Prepaid1xx Insurance Prepaid1xx S...
Pg 40 – Exercise 1 Answers2xx Accounts Payable2xx Sales Tax Payable2xx Bank Loan Payable2xx Mortgage Payable
Pg 40 – Exercise 1 Answers 3xxxCapital A. Fraser
Pg 40 – Exercise 1 Answers4xx Sales4xx Interest Revenue4xx Rental Revenue
Pg 40 – Exercise 1 Answers5xx Purchases5xx Advertising Expense5xx Delivery Expense5xx Donations5xx Interest Expense5xx Ren...
Chapter 3: PostingPosting is the process of transferring information from the journal tothe ledger accounts.Copyright © 20...
Chapter 3: Posting General Journal entries should be posted in theorder they appear on the journal page.Copyright © 2010 ...
Chapter 3: Posting Copyright © 2010 by NelsonEducation Limited3-221234
Chapter 3: PostingThere are 8 basic steps in the posting process:Step 1: Locate the ledger account for the first entry tob...
Chapter 3: Posting Copyright © 2010 by NelsonEducation Limited3-24
Chapter 3: PostingStep 2: Enter the date of the transaction in the Datecolumn of the ledger account.Use the same date as ...
Chapter 3: Posting Copyright © 2010 by NelsonEducation Limited3-26
Chapter 3: PostingStep 3: Enter a suitable explanation of thetransaction in the Memo column.This might include an invoice...
Chapter 3: Posting Copyright © 2010 by NelsonEducation Limited3-28investment
Chapter 3: PostingStep 4: Enter the debit amount in the Debit column.Write the amount clearly.No dollar signs, commas, o...
Chapter 3: Posting Copyright © 2010 by NelsonEducation Limited3-30
Chapter 3: PostingStep 5: Calculate the balance of the account andenter it in the Balance column.The balance is the runni...
Chapter 3: Posting Copyright © 2010 by NelsonEducation Limited3-32
Chapter 3: PostingStep 6: Mark the status of the account balance asdebit (Dr) or credit (Cr).To simplify this, we simply m...
Chapter 3: Posting Copyright © 2010 by NelsonEducation Limited3-34
Chapter 3: PostingStep 7: Enter the folios in the journal and the ledgeraccount.The folio in the journal shows the ledger...
Chapter 3: Posting Copyright © 2010 by NelsonEducation Limited3-36
Chapter 3: PostingStep 8: Repeat the process for each entry in thejournal.Copyright © 2010 by NelsonEducation Limited3-37
Pg 44 Practice Exercise 2 Enter information into the General Journal Post the journal entries to the Ledger accounts as ...
P 44 - Exercise 2 – Chart ofAccounts 101 Bank 102 Office Furniture and Equipment 110 A/R Michael Bensen 201 Kran’s Com...
General Journal – PG 44
General Journal – PG 44
General Journal– PG 44
General Journal – PG 44
General Ledger – Pg 44
General Ledger – Pg 44
General Ledger – Pg 44
General Ledger – Pg 44
General Ledger – Pg 44
Chapter 3: Trial BalanceA Trial Balance is a list of all the accounts in the ledger and theirbalances.It proves that the ...
Chapter 3: Trial BalanceA Trial Balance has a 3-line heading.The heading identifies who, what and when.Copyright © 2010 b...
Chapter 3: Trial BalanceAccounts are listed in order by account number.Copyright © 2010 by NelsonEducation Limited3-52
Chapter 3: Trial BalanceThe balance of each ledger account is entered in theDebit column or the Credit column.Copyright ©...
Chapter 3: Trial BalanceThe totals must be equal.Debits = CreditsCopyright © 2010 by NelsonEducation Limited3-54
P 44 – EX 2 – Create a TrialBalance
P 44 Trial Balance
Chapter 3: Finding Errors in a Trial BalanceIf the Trial Balance does not balance, it might be because of one ormore of th...
Chapter 3: Finding Errors in a Trial BalanceThere are some errors that a Trial Balance will not reveal:Posting to the wro...
Chapter 3: Finding ErrorsHere are 7 steps for locating almost any error you could encounter inyour books:1. Double-check t...
Chapter 3: Finding Errors2. Compare the amounts on the trial balance withthose in the ledger accounts.The error could be ...
Chapter 3: Finding Errors3. Calculate the difference between the debit andcredit totals on the Trial Balance to see how mu...
Chapter 3: Finding Errors4. Using the difference calculated in step 3, divide itby 2 and look for that amount.An amount o...
Chapter 3: Finding Errors5. Divide the difference by 9. If the difference isdivisible by 9, the error is usually a transpo...
Chapter 3: Finding Errors6. Double-check the calculation of the balance ineach ledger account.Copyright © 2010 by NelsonEd...
Chapter 3: Finding Errors7. Thoroughly check every posting from the journal tothe ledger accounts to ensure that each one ...
P 49 - Exercise 6 Please hand in corrected trial balance at the end of class. Work in groups if you prefer
Chapter 3: The LedgerEnd of Chapter 3Copyright © 2010 by NelsonEducation Limited3-67
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Ppt ch 03

  1. 1. Chapter 3The LedgerPrepared byBrooke C. W. BarkerCopyright © 2010 by Nelson Education Limited
  2. 2. Chapter 3: The LedgerChapter ObjectivesAfter completing this chapter, you will be able to: assign account numbers according to a chart of accounts post transactions from the General Journal to the GeneralLedger accounts prepare a trial balance of the General LedgerCopyright © 2010 by NelsonEducation Limited3-2
  3. 3. Chapter 3: The LedgerWhat is the General Ledger?The General Ledger is a book or file that holds all theindividual ledger accounts in one place.What is a ledger account?A ledger account shows the increases and decreases(the debit and credit entries) of each asset, liability,owner’s equity, revenue, and expense account.Copyright © 2010 by NelsonEducation Limited3-3
  4. 4. Why have a journal and aledger?Journal Record businesstransactions on a dailybasis Activity for one account, forexample, cash is scattered Hard to say at end of monthhow much cash is left inaccountLedger Holds all the individualledger accounts in oneplace Easy to see increases anddecreases in each account Can tell how many salesper month, how much cashleft easily
  5. 5. Chapter 3: The LedgerBelow is the ledger account for a customer, DevonLauryl Company. All ledger accounts look basicallythe same.Copyright © 2010 by NelsonEducation Limited3-5
  6. 6. Chapter 3: The LedgerEach ledger account has: A name An account number The chart of accounts will be discussed later. A sheet number This is the page number of the account. Page 1, 2, 3, etc.Copyright © 2010 by NelsonEducation Limited3-6
  7. 7. Chapter 3: The Ledger...and each ledger account has a column for: Date Memo (sometimes called Explanation) Folio (the page number of the journal the entry camefrom)Copyright © 2010 by NelsonEducation Limited3-7
  8. 8. Chapter 3: The Ledger...as well as columns for: Debit entries Credit entries Balance (the ongoing value of the account)Copyright © 2010 by NelsonEducation Limited3-8
  9. 9. Chapter 3: The LedgerOther columns not mentioned previously will bediscussed at another time. These include: Discount Date Dr/CrCopyright © 2010 by NelsonEducation Limited3-9
  10. 10. Chapter 3: Chart of AccountsA chart of accounts is a list of account categories and the accountnumbers assigned to them.For example:Assets 100–199Liabilities 200–299Owner’s Equity 300–399Revenues 400–499Expenses 500–599Copyright © 2010 by NelsonEducation Limited3-10
  11. 11. Chapter 3: Chart of AccountsOn this chart, asset accounts are assigned a numberbetween 100 and 199.Liability accounts are assigned numbers between200 and 299, etc.Assets 100–199Liabilities 200–299Owner’s Equity 300–399Revenues 400–499Expenses 500–599Copyright © 2010 by NelsonEducation Limited3-11
  12. 12. Chapter 3: Chart of AccountsThe range of numbers assigned to a category willdepend on the needs of the business. Numbers areCHEAP, use more digits to allow flexibilityCopyright © 2010 by NelsonEducation Limited3-12
  13. 13. Chapter 3: Chart of AccountsHeres an example of a very basic chart of accounts:Assets:Cash 1010Furniture 1100Equipment 1200Liabilities:Accounts Payable 2010Owners Equity:Capital 3010Revenues:Sales 4010Expenses:Rent Expense 5110Copyright © 2010 by NelsonEducation Limited3-13
  14. 14. Pg 40 – Exercise 1
  15. 15. Pg 40 – Exercise 1 answers1xx Cash (or Bank)1xx Accounts Receivable1xx Drafting Supplies Prepaid1xx Insurance Prepaid1xx Service Equipment1xx Office Furniture & Equipment1xx Land1xx Building
  16. 16. Pg 40 – Exercise 1 Answers2xx Accounts Payable2xx Sales Tax Payable2xx Bank Loan Payable2xx Mortgage Payable
  17. 17. Pg 40 – Exercise 1 Answers 3xxxCapital A. Fraser
  18. 18. Pg 40 – Exercise 1 Answers4xx Sales4xx Interest Revenue4xx Rental Revenue
  19. 19. Pg 40 – Exercise 1 Answers5xx Purchases5xx Advertising Expense5xx Delivery Expense5xx Donations5xx Interest Expense5xx Rent Expense5xx Salaries Expense5xx Telephone Expense
  20. 20. Chapter 3: PostingPosting is the process of transferring information from the journal tothe ledger accounts.Copyright © 2010 by NelsonEducation Limited3-20
  21. 21. Chapter 3: Posting General Journal entries should be posted in theorder they appear on the journal page.Copyright © 2010 by NelsonEducation Limited3-21
  22. 22. Chapter 3: Posting Copyright © 2010 by NelsonEducation Limited3-221234
  23. 23. Chapter 3: PostingThere are 8 basic steps in the posting process:Step 1: Locate the ledger account for the first entry tobe posted.Copyright © 2010 by NelsonEducation Limited3-23
  24. 24. Chapter 3: Posting Copyright © 2010 by NelsonEducation Limited3-24
  25. 25. Chapter 3: PostingStep 2: Enter the date of the transaction in the Datecolumn of the ledger account.Use the same date as the entry in the journal.The month and year are usually recorded only forthe first entry in each account, or when starting anew ledger page, or when starting a new monthor year.Copyright © 2010 by NelsonEducation Limited3-25
  26. 26. Chapter 3: Posting Copyright © 2010 by NelsonEducation Limited3-26
  27. 27. Chapter 3: PostingStep 3: Enter a suitable explanation of thetransaction in the Memo column.This might include an invoice number, a chequenumber, or a special notation.Some transactions do not require explanations.Copyright © 2010 by NelsonEducation Limited3-27
  28. 28. Chapter 3: Posting Copyright © 2010 by NelsonEducation Limited3-28investment
  29. 29. Chapter 3: PostingStep 4: Enter the debit amount in the Debit column.Write the amount clearly.No dollar signs, commas, or decimal points.Use 00 or -- for no cents.Copyright © 2010 by NelsonEducation Limited3-29
  30. 30. Chapter 3: Posting Copyright © 2010 by NelsonEducation Limited3-30
  31. 31. Chapter 3: PostingStep 5: Calculate the balance of the account andenter it in the Balance column.The balance is the running value of theaccount.Copyright © 2010 by NelsonEducation Limited3-31
  32. 32. Chapter 3: Posting Copyright © 2010 by NelsonEducation Limited3-32
  33. 33. Chapter 3: PostingStep 6: Mark the status of the account balance asdebit (Dr) or credit (Cr).To simplify this, we simply mark all Asset andExpense accounts DR in our template, and allLiability, Equity and Revenue accounts CR – as thisis their normal balance.Copyright © 2010 by NelsonEducation Limited3-33
  34. 34. Chapter 3: Posting Copyright © 2010 by NelsonEducation Limited3-34
  35. 35. Chapter 3: PostingStep 7: Enter the folios in the journal and the ledgeraccount.The folio in the journal shows the ledgeraccount number to which the entry wasposted.The folio in the ledger account shows thejournal page number that the entry camefrom.Copyright © 2010 by NelsonEducation Limited3-35
  36. 36. Chapter 3: Posting Copyright © 2010 by NelsonEducation Limited3-36
  37. 37. Chapter 3: PostingStep 8: Repeat the process for each entry in thejournal.Copyright © 2010 by NelsonEducation Limited3-37
  38. 38. Pg 44 Practice Exercise 2 Enter information into the General Journal Post the journal entries to the Ledger accounts as explained.
  39. 39. P 44 - Exercise 2 – Chart ofAccounts 101 Bank 102 Office Furniture and Equipment 110 A/R Michael Bensen 201 Kran’s Computer Co. 301 Capital, Henri Bruin 401 Commission Revenue 501 Rent Expense 503 Office Supplies Expense 505 Telephone Expense
  40. 40. General Journal – PG 44
  41. 41. General Journal – PG 44
  42. 42. General Journal– PG 44
  43. 43. General Journal – PG 44
  44. 44. General Ledger – Pg 44
  45. 45. General Ledger – Pg 44
  46. 46. General Ledger – Pg 44
  47. 47. General Ledger – Pg 44
  48. 48. General Ledger – Pg 44
  49. 49. Chapter 3: Trial BalanceA Trial Balance is a list of all the accounts in the ledger and theirbalances.It proves that the ledger is in balance.It proves that Debits = Credits.Copyright © 2010 by NelsonEducation Limited3-50
  50. 50. Chapter 3: Trial BalanceA Trial Balance has a 3-line heading.The heading identifies who, what and when.Copyright © 2010 by NelsonEducation Limited3-51
  51. 51. Chapter 3: Trial BalanceAccounts are listed in order by account number.Copyright © 2010 by NelsonEducation Limited3-52
  52. 52. Chapter 3: Trial BalanceThe balance of each ledger account is entered in theDebit column or the Credit column.Copyright © 2010 by NelsonEducation Limited3-53
  53. 53. Chapter 3: Trial BalanceThe totals must be equal.Debits = CreditsCopyright © 2010 by NelsonEducation Limited3-54
  54. 54. P 44 – EX 2 – Create a TrialBalance
  55. 55. P 44 Trial Balance
  56. 56. Chapter 3: Finding Errors in a Trial BalanceIf the Trial Balance does not balance, it might be because of one ormore of the following:A debit amount was entered into the credit column in aledger account, or vice versa.An error was made in calculating one or more accountbalances.Amounts were copied incorrectly from a ledger accountto the trial balance or from the journal to a ledgeraccount.Copyright © 2010 by NelsonEducation Limited3-57
  57. 57. Chapter 3: Finding Errors in a Trial BalanceThere are some errors that a Trial Balance will not reveal:Posting to the wrong ledger account.Leaving out an entire transaction during posting.Compensating errors (an error on the debit side thatoffsets an error of equal value on the credit side).Copyright © 2010 by NelsonEducation Limited3-58
  58. 58. Chapter 3: Finding ErrorsHere are 7 steps for locating almost any error you could encounter inyour books:1. Double-check the addition of the Trial Balance.The error could be just an adding mistake.Copyright © 2010 by NelsonEducation Limited3-59
  59. 59. Chapter 3: Finding Errors2. Compare the amounts on the trial balance withthose in the ledger accounts.The error could be an amount copied incorrectly.Copyright © 2010 by NelsonEducation Limited3-60
  60. 60. Chapter 3: Finding Errors3. Calculate the difference between the debit andcredit totals on the Trial Balance to see how muchyou are out of balance.Perhaps an account balance was forgotten ora journal entry was missed during posting.Copyright © 2010 by NelsonEducation Limited3-61
  61. 61. Chapter 3: Finding Errors4. Using the difference calculated in step 3, divide itby 2 and look for that amount.An amount on the wrong side creates an imbalanceof double the amount.So, if the difference between the totals is $70, divide by 2to get a value of $35. Look for a possible incorrectbalance or journal entry of $35.Copyright © 2010 by NelsonEducation Limited3-62
  62. 62. Chapter 3: Finding Errors5. Divide the difference by 9. If the difference isdivisible by 9, the error is usually a transposition offigures, such as $96 entered as $69, or $57.20entered as $52.70.This kind of error is very common. Take extra carewhen entering and copying amounts.Copyright © 2010 by NelsonEducation Limited3-63
  63. 63. Chapter 3: Finding Errors6. Double-check the calculation of the balance ineach ledger account.Copyright © 2010 by NelsonEducation Limited3-64
  64. 64. Chapter 3: Finding Errors7. Thoroughly check every posting from the journal tothe ledger accounts to ensure that each one hasbeen posted accurately.Unfortunately, if you have not found the error by thispoint,it is necessary to double-check everything.Copyright © 2010 by NelsonEducation Limited3-65
  65. 65. P 49 - Exercise 6 Please hand in corrected trial balance at the end of class. Work in groups if you prefer
  66. 66. Chapter 3: The LedgerEnd of Chapter 3Copyright © 2010 by NelsonEducation Limited3-67
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