The General Ledger Part 1
What are the headings of the columns in the general ledger accounts?
There are 5 columns headings. They are 1. Date 2. Day 3. Details 4. Folio 5. Amount These columns are on both the Debit (left) and credit (right) sides of the general ledger account.
What information is written in the amount column of the general ledger?
The transaction amount
What types of accounts are listed under the Nominal accounts
These accounts are all the income and expense accounts
What are the Nominal accounts used for?
These accounts are used to draw up the Income Statement
What types of accounts are listed under the Balance sheets accounts
These are accounts that are assets or liabilities
What are expenses?
These are the running costs of the business. eg payment of the telephone bill or purchases of stock to sell, travelling expenses
What information is written in the folio column of the general ledger?
This is the folio reference from the CPJ or CRJ
What is income?
This is the money that the business earns by selling its services or goods.
What is 'turnover'?
Turnover is the total amount of income from services rendered or total sales, not including any expenses - just money in from these 2 activities
What are the pieces of information that must go at the top of the page above the columns of a general ledger account?
1. Name of the business that the General Ledger belongs to 2. Heading that indicates whether the account is a Balance Sheet Account or an Nominal Account 3. Dr - Indicates the debit side of the account Cr - Indicates the credit side of the account 4. Name of the account eg Sales/ Stock/ Capital etc 5. Folio reference of the open account.
Give 5 examples of general ledger accounts
1. stock on hand 2. bank ( money in the bank) 3. Sales 4. land and buildings 5. Vehicles
What is a balance sheet ?
A balance sheet is a statement of the assets and liabilities of the business and is used to judge whether the business owns more assets than it owes.
How are the accounts in the general ledger laid out?
Every account has 2 sides to it. The debit side is on the left hand side and the credit side is on the right hand side.
Give an example of a nominal account
Sales
What are the balance sheet accounts used for?
The Balance Sheet will be drawn up using these accounts
What is an Income Statement of a business?
The Income statement is used to determine whether the business had made a profit or loss.
What is the General ledger used for by a business?
The accounts in the general ledger are used to sort all the transactions that the business does into categories (called accounts) which are then totaled at the end of an accounting period, and these totals are then balanced to make sure that all the transaction are captured and that money has not been stolen.
What information is written in the date column of the general ledger?
The month and year in which the transaction took place
What is a liability
A liability is a debt that the business owes to a creditor eg a loan from a bank. The owner of a a business can also be a creditor of the business. the owner puts his own money into the business and therefore the business has to pay him back at some point in time.
What is an asset
An asset is a possession of the business eg computer, desk furniture, manufacturing equipment, vehicles, land, buildings, money in the bank
The general ledger is divided into 2 sections. What are these sections?
Balance sheet accounts section and the Nominal accounts section.
What is a folio reference for an account?
Every account and every journal is allocated a folio number. If the folio number begins with a B then it is the folio number of a balance sheet account. If the folio number begins with an N it is a nominal account. The CRJ and the CPJ are also allocated folio numbers. ie a folio number is the number that identifies the account.
Give 6 examples of Balance sheet accounts
Examples: Capital, Loan, Land and Buildings, Bank, Vehicles, Equipment
What is the connection between the general ledger and the CPJ and CRJ?
For every column in the CPJ and CRJ that is totaled there is an account in the general ledger, and the totals of these columns are posted to the General ledger
What is a double -entry book-keeping system.
It is a system of posting transactions to the general ledger in such a way that every transaction generates 2 postings. One must be a debit posting and the other must be a credit posting. In this way the the debits and credits should all balance at the end of the financial period.
What is 'cost of Sales'
'Cost of sales ' is the costs associated with rendering a service (eg transport costs, costs of advertising) or selling goods (eg transporting the goods to the customer)
What are 'overheads'?
'Overheads' are the expenses that a business incurs in its day to day operation eg telephone expenses, stationery costs, cleaning costs., running water, electricity , etc)
What is a financial period?
A financial period is a period of time that the business chooses (it can be a day or week or month or quarter, etc) within which it collects all the transactions that occur in that period of time and posts them to the journals and then posts these totals from the journals to the general ledger and balances its books, and then its starts the process over again for the new accounts period. This process is repeated for every accounting period.
What is a general ledger?
A general ledger is a set of accounts. Each account represents a particular type of transaction of the business.
What information is written in the detail column of the general ledger?
Name of the related account. In other words as entries are made on the debit side of this account, the names of the accounts that will be credited must be entered in this account's details column (on the debit side).
Are transactions from the CPJ and the CRJ the only source of transactions for posting to the general ledger?
Not sure ?
What is 'Other income"
Other income is the income from activites that do not involve sales or services rendered . Eg income from rentals or interest from investment.
What information is written in the day column of the general ledger?
The day on which the transaction took place
What is the name of the method used to post transactions to the general ledger?
The double -entry book-keeping system
