Presentation is loading. Please wait.

Presentation is loading. Please wait.

BAF3M Accounting Chapter 4 – The Simple Ledger. 4.1 Ledger Accounts First off, some key distinctions:  An “Account” is a page designed to record the.

Similar presentations


Presentation on theme: "BAF3M Accounting Chapter 4 – The Simple Ledger. 4.1 Ledger Accounts First off, some key distinctions:  An “Account” is a page designed to record the."— Presentation transcript:

1 BAF3M Accounting Chapter 4 – The Simple Ledger

2 4.1 Ledger Accounts First off, some key distinctions:  An “Account” is a page designed to record the changes for an individual item  A “Ledger” is a group or file of accounts  “Heath Ledger” is a late actor best known for playing The Joker in The Dark Knight

3 4.1 Ledger Accounts There are many ways to create a ledger In “real world” would be computerized In “class” we will use paper to learn the accounting theory Each item (account) on the B/S has its own page in the ledger (p. 89) Use T-Accounts for this…

4 4.1 Ledger Accounts T – accounts Called so because they look like a T left T right Account name

5 4.1 Ledger Accounts It’s key to understand what side of the ledger the beginning balance is on ASSETS  LEFT LIABILITIES + OE  RIGHT

6 4.1 Ledger Accounts To Do 1) Copy the T account relationship on page 90. Do Exercises 1, 2 We’ll do 3 together Do Exercise 4

7 4.2 Debit and Credit Theory Debit (DR)  LEFT SIDE Credit (CR)  RIGHT SIDE Asset accounts have DEBIT values Liab & OE accounts have CREDIT values

8 4.2 Debit and Credit Theory Rules of Debit and Credit –For each type of account, record increases on its beginning value side and decrease on the other side –EX. ASSETS  increases – left -- debit  decreases – right -- credit

9 4.2 Debit and Credit Theory Types of Accounts Beginning Value Side IncreasesDecreases ASSET accounts LEFTDEBITCREDIT LIABILITY & OWNER’S EQUITY accounts RIGHTCREDITDEBIT

10 4.2 Debit and Credit Theory Memorize this: ASSETS = LIABILITIES + OWNER’S EQUITY + - - + - + DR CR DR CR DR CR Follow along with scenario on pgs 94 - 100

11 4.2 Debit and Credit Theory TO DO: –4.2 Questions #1 – 6, 9 – 11; pg 102 –4.2 Exercises 1 – 4 Pg 102-4

12 4.3 Account Balances and Terminology Calculating the Balance of an account –2 steps Step 1: Add the two sides separately (your totals are called ‘pin totals’ or ‘pencil footings’) Step 2: Subtract the smaller total from the larger total, write the result beneath the larger number and circle it See Example Figure 4.6 p. 94

13 4.3 Account Balances and Terminology Interpreting the Balance of an Account Exceptional Account Balances The Bank Account Buying & Selling on Credit –Read each section (p.94) and make your own notes

14 WHY DO WE DO A TRIAL BALANCE? Periodically it is necessary to check the accuracy of the ledger (your T-accounts) TRIAL BALANCETo do this we use a form called a TRIAL BALANCE 4.4 Trial Balance

15 WHAT IS A TRIAL BALANCE? TRIAL BALANCETRIAL BALANCE - is simply the listing of the account balances in a ledger – it is used to see if the dollar value of the accounts with debit balances is equal to the dollar value of the accounts with credit balances 4.4 Trial Balance

16 KEY TERMS IN BALANCEIN BALANCE – if the debits equal the credits OUT OF BALANCEOUT OF BALANCE – if the debits don’t equal the credits 4.4 Trial Balance

17 STEPS TO CREATE A TRIAL BALANCE 1)Include the heading (who, what, when) 2)List all the accounts and their balances. 3)Place the debit balances in a debit column and the credit balances in a credit column. 4)Add up the 2 columns. 5)See if the 2 column totals are the same.

18 Trial Balance Example

19

20 If the 2 columns balance does that mean I did it right? NO 4.4 Trial Balance Sometimes the errors made were incorrect entries that just happened to be balanced.. This takes some skill to detect and solve


Download ppt "BAF3M Accounting Chapter 4 – The Simple Ledger. 4.1 Ledger Accounts First off, some key distinctions:  An “Account” is a page designed to record the."

Similar presentations


Ads by Google