Professional Documents
Culture Documents
Completing ledger
Contents
The journal
The trial balance
Methods of coding data
Manual and computerized systems
Batch processing and control totals
Accounting systems
Accounting modules
The journal
One of the books of prime entry
Record of (not arise from the other books
of prime entry) unusual movement
between accounts
Date $ $
DEBIT Account name X
CREDIT Account name X
Narrative to explain the transaction
Example: Journal entries
1 January
Put in cash of $2,000 as capital
DEBIT Cash 2,000
CREDIT Paul Brown – capital account 2,000
Initial capital introduced
Journal entries
DEBIT Business rates account $200
CREDIT Gas account $200
To correct a misposting of $200 from the rates
account to electricity account.
Example – Suspense
account
A business extracts a trial balance and finds that credits
exceed debits by $4,420.
Tasks
(a) What was the balance on the suspense account
before these errors were corrected?
Solution
(a) The balance on the suspense account is DR
$9,800. Opening inventory is a missing debit entry
and a sales return is a missing credit entry to the
receivables control account.
(b) The following journal will clear the suspense
account:
DR CR
Opening inventory 10,000
Receivables control account 200
Suspense account 9,800
10,000 10,000
Example - TB
Mr Ringo Binder commenced trading as a wholesale
stationer on 1 May 20X7 with a capital of $5,000 with
which he opened a bank account for his business.
During May the following transactions took place.
1 Bought shop fittings and fixtures for cash from Folder
Fitments for $2,000
2 Purchased goods on credit from Staple $650
4 Sold goods on credit to Clip $700
9 Purchased goods on credit from Green $300
11 Sold goods on credit to Hill $580
13 Cash sales paid intact into bank $200
16 Received cheque from Clip in settlement of his
account
17 Purchased goods on credit from Kaye $800
Example – TB (con’t)
18 Sold goods on credit to Nailor $360
19 Sent cheque to Staple in settlement of his account
20 Paid rent by cheque $200
21 Paid delivery expenses by cheque $50
24 Received from Hill $200 on account
30 Drew cheques for personal expenses $200 and assistant's
wages $320
31 Settled the account of Green
Tasks
(a) Journalize: prepare journal entries
(b) Post the entries to the ledger accounts
(c) Balance the ledger accounts where necessary
(d) Extract a trial balance at 31 May 20X7
Solution
Solution
Solution
Solution
Methods of coding data
Each account has a unique code for
posting
Why need?
Used to identify the correct account for a
posting
Saves time
Saves storage space
Example
A nominal ledger has the following
codes.
Control totals
Used to make sure that there have been no errors
when the batch is input
Make sure that the total value of transactions input is
the same as that previously calculated
E.g.
A batch of 30 sales invoices with total value of
$42,378.47.
When the batch is input, the computer adds up the
total value of the invoices input and produces a total
of $42,378.47.
The control totals agree
Accounting packages
Advantages Disadvantages
(a) The packages can be (a) Initial time and costs
used by non- involved
specialists. (b) Need for security
(b) A large amount of checks
data can be processed (c) The necessity to
very quickly. develop a system of
(c) More accurate than coding (see below)
manual and checking.
(d) Handling and (d) Lack of 'audit trail'. It
processing large is not always easy to
volumes of data. see where a mistake
has been made.
(e) Possible resistance
on the part of staff to
the introduction of the
Modules
Program which Invoicing
deals with one Inventory
particular part of a
business accounting
Receivables ledger
system Payables ledger
Modules may be Nominal ledger
integrated with the Payroll
others Cash book
Job costing
Non-current asset
register
Report generator
QB 9
A credit balance of $917 brought down on Y
Co's account in the books of X Co means
that
A X owes Y $917
B Y owes X $917
C X has paid Y $917
D X is owed $917 by Y
Answer: A
QB 10
Rent paid on 1 October 20X2 for the year to
September 20X3 was $1,200, and rent paid
on 1 October 20X3 for the year to 30
September 20X4 was $1,600.
Rent payable, as shown in the income
statement for the year ended 31 December
20X3, would be
A $1,200
B $1,600
C $1,300
D $1,500
Answer: C
QB 11
11 An error of commission is one where
A A transaction has not been recorded
B On side of a transaction has been recorded
in the wrong class of account, such as
noncurrent assets posted to inventory
C An error has been made in posting a
transaction
D The digits in a number are recorded the
wrong way round
Answer: C
QB 12
Where a transaction is entered into the
correct ledger accounts, but the wrong
amount is used, the error is known as an
error of
A Omission
B Original entry
C Commission
D Principle
Answer: B
QB 23
When a trial balance was prepared, two ledger accounts
were omitted:
Discounts received $6,150
Discounts allowed $7,500
To make the trial balance balance, a suspense account
was opened. What was the balance on the suspense
account?
A Debit $1,350
B Credit $1,350
C Debit $13,650
D Credit $13,650
Answer: A