GENERAL LEDGER AND

TRIAL BALANCE
1 Ledger Accounts
2 T-Account Trial Balance
3 Errors in Trial Balance
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 Accounting Process
– proper procedure for recording each
financial transaction

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 Accounting Process
 Starts from journal followed by ledger, trial balance, and
final accounts
 Journal and Ledger are the two pillars which create the
base for preparing final accounts.
 The Journal is a book where all the transactions are
recorded immediately when they take place which is then
classified and transferred into concerned account known
as Ledger.
 Journal is also known as book of primary entry, which
records transactions in chronological order.
 Ledger, or otherwise known as principal book implies a set
of accounts in which similar transactions, relating to
person, asset, revenue, liability or expense are tracked.
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 Journal
 It is a subsidiary day book, where monetary transactions are
recorded for the first time, whenever they arise.

 In this, the transactions are regularly recorded in an orderly

manner, so that they can be referred in future.

 It highlights the two accounts which are affected by the

occurrence of the transaction, one of which is debited and the
other is credited with an equal amount.

 A short note is given in support of each entry, which gives a

brief description of the transaction, known as Narration.

 The complete process of recording the entries in the journal is

7 known as Journalizing.
 Journal
• It has five columns which are Date, Particulars,
Ledger Folio, Debit, and Credit. A journal can be:

• Single Entry: Entry having one debit and a

corresponding credit.

• Compound Entry: Entry having one debit and

more than one credit or entry having more than
one debit for a single debit or two or more debit
and two or more credits. In the case of compound
entry, it should be kept in mind that the total of
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debit and credit will tally.
 Ledger
 It is a principal book which comprises a set of
accounts, where the transactions are
transferred from the Journal.
 Once the transactions are entered in the
journal, then they are classified and posted
into separate accounts.
 The set of real, personal and nominal
accounts where account wise description is
recorded

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 Personal Accounts
 Show the transactions with the customers, suppliers,
money lenders, the bank and the owner.
 A business may have many credit transactions with the
above persons or organizations. A separate account is to
be prepared for each of them.
 Persons or organizations with whom the business has
credit transactions are either debtors or creditors.
 If they have to give some money to the firm, they are called
debtors.
 If the firm is to pay them some money they are known as
creditors.
 The main purpose of preparing personal accounts is to
ascertain the balances due to or due from persons or
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 Real Accounts
 These accounts are accounts of assets and
properties such as land, building, plant,
machinery, patent, cash, investment, inventory,
etc.
 When a machinery is purchased for cash, the
two accounts involved are machinery and cash -
both are real accounts.
 If the same machine is purchased from Z & Co.
on credit, the two accounts involved will be
those of machinery and Z & Co., the former
being a real account and the later being a
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personal account.
 Nominal Accounts
 These are the accounts of incomes,
expenses, gains and losses.
 Examples of nominal accounts are wages
paid, discount allowed or received,
purchases, sales, etc.
 These accounts generally accumulate the
data required for the preparation of
income statement or trading and profit
and loss account.
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 Valuation Accounts
 These are the accounts of provision for depreciation and
provision for doubtful debts.

 Where fixed assets are maintained in the books of

accounts at original cost, to reflect the actual book value of
the assets, a provision for depreciation account on the
credit is maintained.

 If the debtors' personal accounts are retained at total

amount due, a valuation account on the credit - provision
for doubtful debts is required.

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 Classify the following into real, nominal, personal
and valuation accounts:
1 Plant and machinery Real Account

2 Purchases Nominal

3 Investment Real

4 Bank Personal

5 Provision for bad and doubtful debt Valuation

6 Tata Iron & steel Co. Personal

7 Rent Nominal
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Classify the following into real, nominal, personal
and valuation accounts:
8 Land and Building Real Account

9 Capital Personal

10 Trademark Real

11 Provision for depreciation Valuation

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 STANDARD FORM OF LEDGER ACCOUNTS

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