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Accounting Practices 501 Chapter 3 Introduction to the General Ledger Cathy Saenger, Senior Lecturer, Eastern Institute of Technology © Pearson 2011.

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Presentation on theme: "Accounting Practices 501 Chapter 3 Introduction to the General Ledger Cathy Saenger, Senior Lecturer, Eastern Institute of Technology © Pearson 2011."— Presentation transcript:

1 Accounting Practices 501 Chapter 3 Introduction to the General Ledger Cathy Saenger, Senior Lecturer, Eastern Institute of Technology © Pearson 2011

2 Ch3A - Intro to Gen Ledger2 We start with a laundry basket full of transactions What we have done so far can be compared to “sorting the laundry” General Ledger

3 Ch3A - Intro to Gen Ledger3 What we have done so far can be compared to “sorting the laundry” General Ledger Through the source documents we sort the transactions into their different journals One heap of other stuff (General Journal) One heap of cash payments (Cash Payments Journal) One heap of credit purchases (Purchases Journal) One heap of cash receipts (Cash Receipts Journal) One heap of credit sales (Sales Journal)

4 Ch3A - Intro to Gen Ledger4 What we have done so far can be compared to “sorting the laundry” General Ledger Through the journals we sort the transactions into their different accounts off you go to POWER!off you go to ACCOUNTS RECEIVABLE! off you go to BANK! off you go to CAPITAL! off you go to SALES! off you go to RENT!

5 Ch3A - Intro to Gen Ledger5 What we have done so far can be compared to “sorting the laundry” General Ledger off you go to POWER!off you go to ACCOUNTS RECEIVABLE! off you go to BANK! off you go to CAPITAL! off you go to SALES! off you go to RENT! We now put it all neatly away in the General Ledger (storing the information)

6 Ch3A - Intro to Gen Ledger6 What we have done so far can be compared to “sorting the laundry” General Ledger off you go to POWER!off you go to ACCOUNTS RECEIVABLE! off you go to BANK! off you go to CAPITAL! off you go to SALES! off you go to RENT! Let’s look at some examples of posting from the General Journal to the General Ledger

7 Ch3A - Intro to Gen Ledger7 Date Account Titles Ref noDebitCredit 1Bank200,000 Funds Introduced200,000 Each item from the General Journal is posted to the General Ledger where the information of each individual account is stored General Journal (page 1) Jun 1 : Owner starts business with $200,000 from his personal account Being entry required to record capital contribution

8 Chart of Accounts An index of all accounts, using the same headings as in the accounting equations. Example: Account noAccount name 1000Assets Current assets 1100ASB cheque account 1120Accounts receivable control 2000Liabilities Current liabilities 2200Accounts payable control 2400Accrued expenses

9 Ch3A - Intro to Gen Ledger9 A + E + D = L + C + I Dr Cr +Dr -Cr + -Dr Remember this? Date Account Titles Ref noDebitCredit 1Bank200,000 Funds Introduced200,000 General Journal (page 1) Jun 1 : Owner starts business with $200,000 from his personal account Being entry required to record capital contribution

10 Ledger account format T form Debit sideCredit side Three-column DateParticularsRefAmountDateParticularsRefAmount DateParticularsRefDebitCreditBalance

11 Ch3A - Intro to Gen Ledger11 Date General Ledger Details Ref noDrCr Balance BANK (acct no 1100) 1 Funds Introduced (acct no 3150) 1 Funds Introduced Bank 200,000 Dr 200,000 Cr GJ1 Date Account Titles Ref noDebitCredit 1Bank200,000 Funds Introduced200,000 General Journal (page 1) Being entry required to record capital contribution

12 Ch3A - Intro to Gen Ledger12 Date Details Ref no Balance BANK (acct no 1100) 1 Funds Introduced (acct no 3150) 1 Funds Introduced Bank 200,000 Dr 200,000 Cr GJ1 1100 3150 General Ledger Date Account Titles Ref noDebitCredit 1Bank200,000 Funds Introduced200,000 General Journal (page 1) Being entry required to record capital contribution DrCr

13 Trial Balance Ch3A - Intro to Gen Ledger13 The Trial Balance is now demonstrated, but it should be prepared after all postings have been done The Trial Balance gives a summary of the balances and would indicate whether Debits = Credits

14 Ch3A - Intro to Gen Ledger14 Trial Balance as at … DrCr 200,000 Funds Introduced Bank 200,000 Date General Ledger Details Ref no Balance BANK (acct no 1100) 1 Funds Introduced (acct no 3150) 1 Funds Introduced Bank 200,000 Dr 200,000 Cr GJ1 DrCr

15 Ch3A - Intro to Gen Ledger15 Trial Balance as at … 200,000 Funds Introduced Bank 200,000 Date General Ledger Details Ref no Balance BANK (acct no 1100) 1 Funds Introduced (acct no 3150) 1 Funds Introduced Bank 200,000 Dr 200,000 Cr GJ1 DrCr DrCr

16 Ch3A - Intro to Gen Ledger16 Let’s try another transaction, where GST is accounted for

17 Ch3A - Intro to Gen Ledger17 Date Account Titles Ref noDebitCredit Vehicles Bank Being entry required to record truck purchased 18,000 20,700 GST Paid 2,700 2 General Journal (page 1) Jun 2 : Purchase a truck for $20,700 cash We have already done a transaction where the Bank account was involved. An amount ($200,000) has therefore already been posted to the Bank account

18 Ch3A - Intro to Gen Ledger18 Date Account Titles Ref noDebitCredit Vehicles Bank Being entry required to record truck purchased 18,000 20,700 GST Paid 2,700 2 General Journal (page 1) Date Details Ref no Balance BANK (acct no 1100) 1 VEHICLES (acct no 1710) 2 Funds Introduced Bank 200,000 Dr 18,000 Dr GST PAID (acct no 2330) 2Bank 2, 700 20,700179,300 Dr 2, 700 Vehicles2 GJ1 1710 2330 1100 General Ledger DrCr

19 Ch3A - Intro to Gen Ledger19 Trial Balance as at … DrCr 179,300 Funds Introduced Bank 200,000 $200,000 Our Trial Balance would now be as follows: Vehicles 18,000 GST Paid2,700

20 Ch3A - Intro to Gen Ledger20 Trial Balance as at … 179,300 Funds Introduced Bank 200,000 $200,000 Vehicles 18,000 GST Paid2,700 Yay, we balance! DrCr


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