Lesson 5 General Ledger and Trial Balance

verify debit and credit

are in the correct column

trial balance

A list of all the accounts and their balances. Most information needed for preparing the various financial statements is noted on this single page.

assets

1

liablilties

2

owner's equity

3

revenue

4

expenses

5

transposition error

An accounting error in which the digits of a number are switched—for example, when someone records 53instead of 35. Transposition errors can frequently be diagnosed by looking for errors that are divisible by nine.

slide error

An accounting error that misplaces the decimal in a number—for example, when someone records $180instead of $1,800. Slide errors are also referred to as decimal slips.

general ledger

The log that contains a record of each account. It's prepared after the general journal and before the trial balance.

posting

The process of transferring amounts from the general journal to the general ledger.

audit trail

The sequence of detailed transactions, including the source documents, that supports accounting entries. An audit trail provides a clear path of transactions that a reviewer can follow in order to understand specific accounting activity.

negate by adding

a new journal entry

used to verify...

debits=credits

you can cross out number in

ledger but not journal

debits

left

readd numbers

from bottom to top

subtract the total

from the other and divide by 2, look for that number in the wrong column

trial balance is...

not a financial source

accounts with no balance

not on trial balance

credits

right

do in order of .....

the chart of accounts

How to Balance Accounts

· How to find errors o 1. Read the trial balance totals from bottom up o 2. Make sure credit and debit general ledger accounts are recorded in the right column o 3. Subtract one total from the other and divide the amount by 2 and look to see if you can find this number in the trial balance o 4. Take the difference of the two columns and divide it by 9 and if it divides evenly it is a transposition error or a slide error o 5. Make sure no general ledger accounts have been left off the trial balance o 6. Verify the amounts in the general ledger were correctly transferred from the general journal

How to Prepare a Trial Balance

· The heading contains three lines o The first contains the name of the business o The second contains the words "Trial Balance" o The third line has the date of when the period of transactions has ended · 2. The chart underneath the heading has the following accounts: assets, liabilities and owner's equity and in each of those accounts the accounts that are affected are categorized into the correct account · 3. The totals are then recorded into the chart and put under the debit or credit column and they are totaled up and are equal 4. The word "total" should be indented and the total of the numbers should have a line above them and two below them to verify they are checked and equal

Balancing Accounts

· You must understand if the transaction is a debit or a credit · One mistake can cause your totals to be unequal · You must make sure you take your time to not make any mistakes Once the accounts are balanced the accountant will put one line above the total and two lines underneath which verify the total are correct and checked