4.1 Ledger Accounts
What is a ledger?
A group of accounts used to record all financial transactions.
Debits....? Credits....?
Left, Right
Why can we normally determine the type of account by the balance?
Cash has a debit balance, assets have debit balances, therefore Cash is an asset. The opposite would also be true.
What is a trial balance?
A trial balance is a listing of the account balances in a ledger. It is used to see if the dollar value of the accounts with debit balances is equal to the dollar value of the accounts with credit balances.
What is the purpose of a T‑account?
To record transactions and to help students understand accounting theory.
Does a debit increase or decrease an owners equity account?
Decrease
Give two examples that would cause an exceptional balance in an account.
A debtor overpays
Bank account becomes over-drawn
Overpay a creditor
A customer, who does not have an A/R balance, returns some merchandise
You return good to a supplier whom you currently have no A/P balance
If a trial balance does not balance, what does that indicate?
There is at least one error in the ledger or posting.
Why are the beginning amounts for a ledger usually taken from a balance sheet?
The beginning amounts for a ledger are usually taken from a balance sheet because a balance sheet is prepared at the start of a business to give a balanced record of the company’s assets and liabilities.
What is the normal balance of Assets, Liabilities, and Owners Equity accounts?
Debit, Credit, Credit
A payment on account is...
A payment on account is money paid to a creditor to reduce the amount owed to that creditor.
Does a balanced trial balance guarantee all entries are correct?
No, it is possible to make incorrect but equal entries.
A company makes a $900 purchase on account from Casey's Catering. How should the company express this entry?
Debit Owner's, Capital and credit A/P - Casey's Catering, $900”
A/R-Mr. Manak, 500; A/P-Mr. G, 150; supplies 200; Loan payable 450; Equipment, 900; Jevan's Capital: ?
1000
A used truck costing $18 000 is purchased from Richie Bros. A cash down payment of $7000 is made at the time of the purchase and the balance is to be paid at a later date. How would an accountant express this transaction?
An accountant would express this transaction as: “debit Trucks $18,000, credit Cash $7,000 and credit A/P –Richie Bros $11,000.”
What is a "pencil footing"
Adding the debit and credit columns to determine totals.
Why must debits always equal credits?
To maintain the accounting equation and ensure double‑entry accuracy.
The affect on accounts receivable when we have a receipt on account?
Credit
What is the four step procedure to find errors in the trial balance?
Step 1 Re-add the trial balance.
Step 2 Check the figures from the ledger against those of the trial balance. Make sure that none are missing, none are on the wrong side, and none are for the wrong amount.
Step 3 Recalculate the account balances.
Step 4 Check that there is a balanced accounting entry in the accounts foreach transaction.