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Chapter 4. The Simple Ledger. * Ledger Accounts *. A Ledger is a group/file of Accounts Each Account has a page in the ledger Transactions that affect the account are recorded on each account’s page T-accounts (beginner format). 4.1. * The T account *. Left Side DEBIT DR or Dr

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Chapter 4

Chapter 4

The Simple Ledger


Ledger accounts
* Ledger Accounts *

  • A Ledger is a group/file of Accounts

  • Each Account has a page in the ledger

  • Transactions that affect the account are recorded on each account’s page

  • T-accounts (beginner format)

4.1


The t account
* The T account *

  • Left Side

  • DEBIT

  • DR or Dr

  • Assets beginning value

  • Debit = Left

  • Right Side

  • CREDIT

  • CR or Cr

  • Liabilities & Equity beginning value

  • Credit = Right

4.1


Opening accounts
* Opening Accounts *

  • Record name at top of account

  • Record Beginning balances on correct side

  • Assets on Debit Side (left)

  • Liabilities & Equity on Credit Side (right)

Assets = Liabilities + Equity

+

+

+

Dr

Cr

Cr

4.1


A/P

Capital

Cash

Supplies

7,400

3,100

45,800

6,600

Debit = Credit

Left = Right

4.1


4 1 homework
~ 4.1 Homework ~

  • Page 82 (wb33-34)

    • Exercises 1-3

    • Review questions 1-7

  • http://www.youtube.com/watch?v=j71Kmxv7smk

4.1


Assets liabilities equity
Assets = Liabilities + Equity

-

-

-

+

+

+

Assets increase with a Debit

- Left side of equation and balance sheet

Liabilities increase with a Credit

- Right side of equation and balance sheet

Equity increases with a Credit

-Right side of equation and balance sheet

4.2


Purchased 200 supplies on credit
Purchased $200 supplies on credit

  • Increase in Supplies

    • Asset

    • Debit (left side)

  • Increase in A/P

    • Liability

    • Credit (right side)

  • Left side = Right Side

    • Debits = Credits

  • Supplies

     200

    A/P

    200 

    4.2


    Made 50 payment on account

    Cash

    700

    A/P

    200 

    Made $50 payment on Account

    • Decrease in Cash

      • Asset

      • Credit

  • Decrease in A/P

    • Liability

    • Debit

  • Debits = Credits

  • 50 

     50

    4.2


    4 2 homework
    ~ 4.2 Homework ~

    • Page 90 (wb34-36)

      • Exercises 1-4

      • Review questions 1-12

    4.2


    Calculating account balances
    * Calculating Account Balances *

    • Add the two sides separately

    • Record pin totals

    • Subtract the smaller total from the larger

    • Write the result beneath the larger pin total

    • Circle this final amount

    Cash

    3265

    500 

    2500 

     200

     400

    650 

    3865

    3650

    215

    3865-3650 = 215

    4.3


    Normal account balances
    * Normal Account Balances *

    +

    • Assets

      • Debit

  • Liabilities

    • Credit

  • Equity

    • Credit

  • Dr

    +

    Cr

    +

    Cr

    4.3


    Exceptional balances
    * Exceptional Balances *

    • Occasionally accounts have opposite balances

    • Credit balance for Cash/Bank

      • Overdrawn, took out more money than we have

    • Credit balance for A/R

      • Customer overpaid us (we now owe them)

      • Customer returned merchandise but has no balance

    • Debit balance for A/P

      • We overpaid a creditor (they now owe us)

      • We returned products but have no balance owing

    • These do not last long

    4.3


    4 3 homework
    ~ 4.3 Homework ~

    • Text page 96-97

      • Review Questions 1-9

      • Exercises 1, 2,3

    4.3


    Trial balance
    * Trial Balance *

    • Checks the accuracy of the ledger

    • Informal Document

    • Listing of the account balances

    • Check if debits = credits

    • If not equal, then at least ONE error

    • ALL errors must be found

    • If in balance, still MAY have errors

    4.4


    Creating a trial balance
    * Creating a Trial Balance *

    • Heading: Who, What, When

    • List all Assets first, in order of liquidity

      • Record their values in the Debit Column

    • List the Liabilities, in order of maturity

      • Record their values in the Credit column

    • List the Equity account(s) -- Capital

      • Record the value in the Credit column

    • Total up the two columns

      • Debits = Credits

    4.4


    Common errors
    * Common Errors!!!! *

    • Make sure account balances are in the correct column

    • Find the difference between the totals

    • Find that value in a transaction

      • Missed an entry

    • Divide difference by two and find

      • Double entry

    • Difference divisible by 9

      • Transposition error (wrote 45 instead of 54)

    • Difference divisible by 10

      • Addition Error (forgot to carry the one)

    4.4


    4 4 homework
    ~ 4.4 Homework ~

    • Page 101-102 (wb 38-40)

      • Exercises 1, 2 & 3

      • Review Questions 1-7

    4.4


    ~ Homework: Ch4 Review~

    • Text Pages 109-110 (wb 43-45)

    • Exercises 1-4

    • Page 112, Questions for Further Thought

    • Prepare for chapter 5  Print notes and workbook pages


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