Chapter 3
The General Ledger
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Ledger Accounts
• A ledger account is an accounting record
showing all the transactions that affect a
particular item
• Collectively, this group of ledger accounts
is known as the General Ledger
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Ledger Accounts
A T-form account is created by dividing the page
into two columns
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Ledger Accounts
• The left-hand column is labelled the debit column
• The right-hand column is labelled the credit column
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Double-entry Recording in
Ledger Accounts
Assets appear on the left side of the Balance Sheet
• Increases are recorded in the debit column
• Decreases are recorded in the credit column
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Double-entry Recording in
Ledger Accounts
Liabilities and owner’s equity items appear on the
right side of the Balance Sheet
• Decreases are recorded in the debit column
• Increases are recorded in the credit column
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Recording Ledger Entries
• Each transaction affects two ledger accounts at
the same time; these accounts are linked
• The cross-reference specifies the link between
these two accounts by identifying the other
account affected
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Recording Ledger Entries
Footing is an informal process to calculate
the balance of an account
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Recording Ledger Entries
Footing involves
• adding up each side of the account (debits/credits)
• subtracting the smaller value from the larger one
• pencilling this figure (the balance) on the side of
the larger total and circling it
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The Trial Balance
A Trial Balance is a list of all the accounts in the
General Ledger, and their balances, to determine
whether total debits equal total credits
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The Trial Balance
Errors a Trial Balance will reveal
• two entries recorded on the same side
• only one entry having been recorded
• a different amount recorded on each side
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The Trial Balance
Errors a trial balance will not reveal
• a transaction omitted altogether
• debit and credit entries reversed
• a transaction recorded in the wrong ledger
accounts
• an incorrect amount recorded on both
sides of the ledger
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Balancing
Balancing is different from footing, as
• It is done only at the end of the Reporting
Period
• Only asset, liability and owner’s equity
accounts are balanced
• It is a more formal process, involving a
proper double entry
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Balancing
Balancing involves:
•ruling off an asset, liability or owner’s equity
account to determine its balance at the end of
the current Reporting Period
•transferring that balance to the next
Reporting Period
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