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Workshop Week 3: Understanding Ledgers Posting To Ledgers Preparing A Trial Balance

This document provides an overview of general ledger concepts and processes. It discusses posting transactions from the general journal to individual ledger accounts, and preparing a trial balance. Specifically, it covers: 1) Posting journal entries for cash receipts and payments to the relevant ledger accounts, such as cash, capital, and drawings accounts. 2) The format of ledger accounts, including T-accounts and running balances. 3) Preparing a trial balance by listing all ledger account balances to check the equality of total debits and credits. 4) Correcting errors by adjusting journal entries or amending ledger account postings. 5) An introduction to accounting for GST, including GST registration thresholds

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Gokul Kumar
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© © All Rights Reserved
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Download as PPTX, PDF, TXT or read online on Scribd
41 views

Workshop Week 3: Understanding Ledgers Posting To Ledgers Preparing A Trial Balance

This document provides an overview of general ledger concepts and processes. It discusses posting transactions from the general journal to individual ledger accounts, and preparing a trial balance. Specifically, it covers: 1) Posting journal entries for cash receipts and payments to the relevant ledger accounts, such as cash, capital, and drawings accounts. 2) The format of ledger accounts, including T-accounts and running balances. 3) Preparing a trial balance by listing all ledger account balances to check the equality of total debits and credits. 4) Correcting errors by adjusting journal entries or amending ledger account postings. 5) An introduction to accounting for GST, including GST registration thresholds

Uploaded by

Gokul Kumar
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 33

Workshop week

3
Understanding ledgers
Posting to ledgers
Preparing a trial balance

Recap on the Debit


and Credit rules
All assets accounts = All liability accounts +
All equity accounts
DrCredit
Cr to Debit Dr
Cr to Debit toDr
CreditCr
to
Debit to
to Credit
increase decrease decreaseincrease decreaseincrease
Normal
Normal
Normal
balance
balance
balance
Expense
Income
accounts
accounts
Drto Credit to DebitDr
to Credit to
Debit
Cr
Cr
decrease decrease
increase
increase
Normal
Normal
balance
balance
2

General Journal
entries
Dat
e

Account

Pos
t

Debit

1
Jan

Cash at Bank

110

200,000

S.Lang Capital

310

Credit

200,000

Commenced business
2
Jan

Van
Cash at Bank

150

50,000

110

50,000

Purchased a van for cash


4
Jan

S. Lang Drawings
Cash at Bank
Owner withdrew cash

315
110

3,000
3,000
3

General Journal
How do the
transactions
get on to
the financial
statements?

By using
the general
ledger

The General Ledger


The general ledger is made up of all the
asset, liability, equity, income and expense
accounts of the business.
Each of the accounts from these categories
have their own identity and account number
These are called the ledger accounts
There will be a separate ledger account for
ALL accounts (ie cash at bank, accounts
receivable, GST Outlays, accounts payable
etc).
5

DEBIT AND CREDIT


RULES
Accounts: Balance Sheet
Assets
= Liabilities +
Equity
Debit to
Credit to Debit toCredit to Debit toCredit to
increase
decrease decrease
increase decrease
increase

Normal
balance

Normal
balance

Normal
balance

DEBIT AND CREDIT


RULES
Accounts: Income Statement
Income (incl. revenues)
Debit to Credit to
decreaseincrease

Normal
balance

Expenses

Debit to Credit to
increase decrease

Normal
balance

CHART OF ACCOUNTS
Complete listing of ledger account
titles and identification numbers
Used as a reference point when
analysing transactions
A good chart of accounts will
reveal
The type of organisation
The nature of its activities
The sources of incomes and expenses

THE LEDGER
ACCOUNT
Where effect of transactions is recorded
Three Basic Parts
Title
Place for recording increases
Place for recording decreases
Account Title

e Explanation

Amt

Debit (Dr) side

Date

Explanation

Credit (Cr) side

LEDGER ACCOUNT
FORMAT
T-Accounts
Convenient way to show individual
accounts
Illustrate effects of transactions on an
account
Still used in practice for quick calculations

Running Balance Accounts


Used in formal accounting systems
Standard presentation for computerised
systems

Examples of a ledger account in


- T account format
Cash at Bank
110
Date Explanation

Amt

201
3

Date

Explanation

Amt

2013

2/1 Darren Jones, Capital

35 000

20/1 Lawn and Garden


Income
31/1 Accounts Receivable

3/1 Vehicle

21 000

3/1 Lawn and Garden


2 200
550

Equipment

9 000

22/1 Employee Wages


Expense
31/1 Accounts Payable
31/1 Darren Jones,
Closing
Drawings
balanc
Balance c/d e

450
2 500
200
11

4 600

Example of same ledger account in


- Running Balance format
ACCOUNT
Date

Cash at Bank

Explanation

Account No.
110
Debit

Credit

Balance

2013
Jan.

Darren Jones, Capital

35 000

35 000

2
3 Vehicle
3 Lawn and Garden Equipment
20 Lawn and Garden Income
22 Wages Expense
31 Accounts Receivable
31 Accounts Payable
31 Darren Jones, Drawings

21 000

14 000

9 000

5 000

2 200

7 200
450

6 750

550
Closing Balance
2 500
amount
200

7 300
4 800
12
4 600

POSTING FROM JOURNAL


TO LEDGER
General journal records each transaction
General ledger records effect transactions
on each individual account
Think of journal as an instruction which
accounts are changing, which direction and
by how much?
In a computerised system
Posting is automated
Therefore it is important that the initial entries are
correct
Debits and credit automatically checked for equality

POSTING FROM JOURNAL


TO LEDGER
Each line of accounts in the general
journal must be posted
(transferred) to their respective
account in the General Ledger
Post
each
line

14

The difference between General


Journal and General Ledger

The general journal is the daily


record of all transactions
Date

Account Details

Pos
t

Debit

6/5

Equipment

14
0

5,000

GST Outlays

12
0

500

Cash at Bank

11
0

Credit

5,500

Cash purchase of
Equipment
8/5

Accounts Receivable
GST Collections

11
5
22

6,600
600

15

The difference between General


Journal and General Ledger
The general ledger is a book containing the
financial year history of each account. It is listed
byCash
account
number.
at Bank
Acct.No 110
Date

Account

Pos
t

Debit

Credit

Balance

1 Jan

S.Lang Capital

GJ1

200,0
00

2 Jan

Van

GJ1

50,00
0

150,000

4 Jan

S.Lang Drawings

GJ1

3,000

147,000

200,000D
r

16

Posting Example
We will not use GST for this
example.
1. 1/1/12 Stuart Lang starts a
cleaning business by placing
$200,000 in a business bank
account
2. 2/1/12 Stuart Lang Buys a Van for
$50,000 paying cash
3. 4/1/12 Stuart Lang withdraws
$3,000 from the business.

17

Post to ledgers
From the previous journal entries
we need to determine how many
accounts are affected
The answer is (4) four accounts:
1. 110 Cash at bank and 310 capital
2. 110 Cash at bank and 150 Van
3. 110 Cash at bank and 315 Drawings
Notice that cash at bank has more than
one entry
18

First GJ entry:
Stuart invests $200,000 into
business
Account
Pos Debit
Credit
Dat
eThe next step is to
t post each
1account
Cash at Bank
110 200,000 into their
from the journal
Jan
respective
S.Lang Capitalledger.310
200,000

Commenced
business
om the first
journal
entry post the first line (Cash at B
its ledger account
Cash at Bank

Acct No. 110

Date

Account

Post Debit

1 Jan

S.Lang Capital

GJ1

Credit

Balance

200,00
200,000dr
0 the page number in the GJ
This is

Use the other side of the


entry

19

Now post to other


ledgers
S.Lang Capital

Acct. No. 310


301

Date

Account

Pos
t

1 Jan

Cash at Bank

GJ1

Debit

Van

Credit

Balance

200,000

200,000C
r

Acct. No 150

Date

Account

Pos
t

Debit

2 Jan

Cash at Bank

GJ1

50,000

S.Lang Drawings

Credit

Balance

50,000Dr
Acct. No 315

Date

Account

Pos
t

Debit

4 Jan

Cash at Bank

GJ1

3,000

Credit

Balance

3,000Dr

20

Now complete the


cash at Bank postings
Cash at Bank

Acct.No 110

Date

Account

Post

Debit

Credit

Balance

1 Jan

S.Lang Capital

GJ1

200,000

2 Jan

Van

GJ1

50,000

150,000

4 Jan

S.Lang Drawings

GJ1

3,000

147,000

200,000
Dr

21

Cash at Bank in T-Account Format


Cash at Bank
Date
2012
1 Jan

Explanation

Debit

Date

Explanation

2012
S. Lang Capital 200,000
2 Jan
Van 50, 000
4 Jan
S.Lang Drawings
3,000

200, 000
1 Feb

110

31 Jan balance c/d 147,000


200, 000

balance b/d 147,000

Credit

Remember when posting


from the Journal to the
The general journal excerpt
Ledger
Date

Details

A/c

Debit

1 Jul

Cash at Bank

110

200,000

Capital S. Lang

310

Credit
200,000

(S. Lang contributed cash


into the business)

Each line represents an account- So cash at bank and


capital need to be entered (posted) into their own
ledger account

A note about Posting Reference


What is it with all these posting
references?
The posting reference in the
general journal is the Ledger
Account reference (ie 110, 130, 210
etc)

The posting reference in the


general ledger is the General
Journal reference ( GJ1, GJ2 which is
the page number on which the
transaction was recorded)

TRIAL BALANCE
Once all the ledgers have
been posted a trial balance
can be prepared
The TB Lists all ledger
accounts and their closing
balances
Debits in one column, credits in
another
The totals of both columns
must be equal and in balance
Limitations of the trial balance
May balance but still contain errors
eg. Revenue may be recorded as a

25

Trial Balance for Stuart Lang


NB not all transactions were shown

Now prepare a trial


balance
Hint: Draw a 4 column table
Account name, Account number,
Debit & Credit
Place ending balance of each
account

27

Trial Balance Solution

28

CORRECTING ERRORS
Error detected before posting
Cross out with single line and insert correct
amount

Error detected after posting


Must be corrected with another entry

Errors should not be erased or


whited out
This may give the impression of
concealment or fraud

APPENDIX: INTRODUCTION
TO GST IN AUSTRALIA
GST rate is 10%
All supplies of goods and services
are subject to GST unless they are
non-taxable
Two types of non-taxable supplies
GST-free supplies
fresh food; education courses; wages etc.

Input taxed supplies


financial services etc.

GST IN BUSINESS
GST Registration
Turnover < $75 000 optional
Turnover > $75 000 required

Cash or accrual basis of recording GST


Cash basis
GST recorded on receipt/payment of cash

Accrual basis
GST recorded on recept/issue of invoice, unless cash flow
occurs first

Gross Revenue < $2 000 000 cash or accrual


Gross Revenue > $2 000 000 accrual only

GST IN PRACTICE

ACCOUNTING FOR GST


Business Activity Statement (BAS) must
be completed for each tax period
GST registered business uses two
accounts
GST Collections for GST amounts received
GST Outlays for GST amounts paid

GST collections must be remitted to the


government hence are a liability
GST outlays can be claimed back and are
therefore an asset

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