Introduction to Accounting 120
Chapter 4
The Simple Ledger
The Simple Ledger
• In this chapter, you will be
learning the system used to
maintain an up-to-date financial
position.
For this purpose,
accountants developed
the account and the
An Account
• An account is a page specifically
designed to record the changes in
each individual item affecting
the financial position.
There is one account
for each item.
The Ledger
• All the accounts together are called
the ledger. A ledger is a group or
file of accounts.
Types of Ledgers: Loose-Leaf
• Loose Leaf: In the pre-computer era,
accounting personnel had to record each
change by hand. The pages were actual
pieces of paper and were
normally housed in a
large ledger book. These
books, designed
specifically for accounting,
provide rulings for money
items and other necessary
notations.
Types of Ledgers: Rolodex
• Card Ledger: Another pre-computer ledger
system was the card ledger. Account
information was recorder on individual cards
and housed on a device similar to a rolodex.
Envision accounting records of a dental office
with each customer
having their own card
displaying the date, the
amount of each bill and the
receipt of any payment.
Types of Ledgers: Computer
Ledger
• Computer Ledger: Today, most
businesses use some type of
computerized accounting
software. These programs
automatically adjust the
account when a transaction
is entered. Individual accounts
can be viewed and printed
at any time.
The General Ledger
• View the following display. It is important
to understand that each balance sheet
account has its own "page" in the ledger,
holding information specific to it.
The T-Account
• Another learning device is the T-Account.
Unlike the equation analysis sheet, which is
only used by accounting learners,
accountants frequently use the T-Account. It
is not a formal way to present data, but it is
useful to
quickly decipher the effects
of any transaction.
Examine the T-Account layout:
The T-Account
• The T-Account is in fact shaped like the letter T and
divides information onto its two sides: the left and
the right.
• As information is entered, the T-Account displays:
–
–
–
–
The account name
The opening or beginning balance
Individual entries
Possibly an ending or updated balance
• This unit will use the T-Account as the account
"page." Each account will have its own T and the
assembled T-Accounts will make up the general
ledger.
Establishing the T-Account
Ledger
• The first steps to establishing T-Accounts and developing a
ledger is to record individual account names and opening
balances. The account names and opening balances are
obtained from a company's opening balance sheet.
• Examine the balance sheet for Atlantic Fleet, a rental
company owned by Charles Stanson in Campbellton, New
Brunswick. The preliminary (opening) balance sheet
contains the assets acquired, the costs incurred and the
owner's net worth when establishing the business. The
company is about to open its door and begin operations. The
data from this statement will be used to set up the accounts
of the ledger in T-Account form.
The Opening Balance
• The opening balance for an Asset account is recorded on the
left side of the T-Account. The opening balance for a Liability
account or an Owner's Equity account is recorded on the
right side of the T-Account.
• Initially, it may be difficult to recall on which side of the TAccount the opening balance is recorded. An easy way to
remember is to envision a balance sheet with a T-Account
drawn on top.
• When the T-Account is drawn on top of the balance sheet:
– The assets fall on the left side; thus, the opening balance falls on the
left side.
– The liabilities and owner's equity fall on the right side; thus, their
opening balances fall on the right side.
Features of the T-Account
Ledger
• Examine the T-Accounts ledger of Atlantic
Fleet with their opening balances:
Features of the T-Account
Ledger
• Note the following important features of the T-Account
ledger:
• Each balance sheet item is given its own page (T-Account).
• The name of the account is centered at the top.
• The opening dollar figures for assets are recorded on the
left side of the T-account.
• The opening dollar figures for liabilities and capital are
recorded on the right side of the T-Account.
• The sum of the left sides equals
the sum of the right sides.
• Both the ledger and the balance
sheet display the financial position
of the business.
Check Your Knowledge: U4A1
• Head to the O:\ drive and open U4A1.doc and
U4A1b.doc
• Complete these two worksheet assignments
individually or in groups of 2.
• Once you have completed the assignments,
print both of them, staple and hand them in
(in tomorrow’s class)!
• We will have today and some of tomorrow’s
class to complete them.