AccountingQA Latest Questions

Aadil
AadilCurious
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  2. Vijay Curious M.Com
    This answer was edited.

    As you know all transactions occurring in a business are recorded in the journal (book of original entry) in chronological order. After recording them in the journal, they are posted to their respective ledger accounts. Here I've explained the steps involved in posting a journal entry to the ledger.Read more

    As you know all transactions occurring in a business are recorded in the journal (book of original entry) in chronological order. After recording them in the journal, they are posted to their respective ledger accounts.

    Here I’ve explained the steps involved in posting a journal entry to the ledger.

    Posting of an account debited in the journal entry:

    Step 1: Identify the account which has to be debited in the ledger.

    Step 2: Write the date of the transaction under the ‘Date Column’ of the debit side of the ledger account.

    Step 3: Write the name of the account which has been credited in the journal entry in the ‘Particulars Column’ on the debit side of the account as “To (name of the account)”.

    Step 4: Write the page number of the journal where the entry exists in the ‘Journal Folio (JF) Column’.

    Step 5: Enter the amount in the ‘Amount Column’ on the debit side of the ledger account.

    Posting of an account credited in the journal entry:

    Step 1: Identify the account which has to be credited in the ledger.

    Step 2: Write the date of the transaction under the ‘Date Column’ of the credit side of the ledger account.

    Step 3: Write the name of the account which has been debited in the journal entry in the ‘Particulars Column’ on the credit side of the account as “By (name of the account)”.

    Step 4: Write the page number of the journal where the entry exists in the ‘Journal Folio (JF) Column’.

    Step 5: Enter the amount in the ‘Amount Column’ on the credit side of the ledger account.

    I’ll explain the process of preparing a ledger A/c with a simple transaction.

    On 1st May ABC Ltd. purchased machinery for 5,00,000. In the Journal the following entry will be made.

    Machinery A/c   5,00,000
       To Bank A/c   5,00,000
    (Being machinery purchased for 5,00,000)

    Let’s assume that this entry appears on page no. 32 of the journal. Now we will open Machinery A/c and Bank A/c in the Ledger.

    On the debit side of the Machinery A/c “To Bank A/c” will be written. In the Bank A/c “By Machinery A/c” will be written on the credit side.

    An extract of both the accounts are as follows:

    Machinery A/c

    Date Particulars J.F. Amt. Date Particulars J.F. Amt.
    May-01 To Bank A/c 32   5,00,000

     

    Bank A/c

    Date Particulars J.F. Amt. Date Particulars J.F. Amt.
    May-01 By Machinery A/c 32   5,00,000
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Radha
Radha
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  2. Vijay Curious M.Com
    This answer was edited.

    The difference between a ledger & a trial balance is as follows: Basis Ledger Trial Balance Meaning Ledger is a book/register in which all the accounts are put together. A Trial Balance is a statement showing the debit and credit balance of all the accounts to ascertain the arithmetical accuracyRead more

    The difference between a ledger & a trial balance is as follows:

    Basis Ledger Trial Balance
    Meaning Ledger is a book/register in which all the accounts are put together. A Trial Balance is a statement showing the debit and credit balance of all the accounts to ascertain the arithmetical accuracy of the books of accounts.
    Basis of preparation Journal is the basis for recording transactions in the ledger. The closing balances of different accounts in the ledger are the basis for preparing the trial balance.
    Objective It is prepared to see the net effect of various transactions affecting a particular account. It is prepared to check the arithmetical accuracy of the books of accounts.
    Format A ledger has four identical columns on the debit and credit sides: 1. Date, 2. Particulars, 3. Journal Folio, 4. Amount. A Trial Balance has five columns: 1. S.No, 2. Name of Accounts, 3. Ledger Folio, 4. Debit Balance, 5. Credit Balance.
    Stage of Recording A ledger is prepared after recording the transactions in the journal. A trial balance is prepared after posting the transactions in the ledger.
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Simerpreet
SimerpreetHelpful
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  2. Saurav
    This answer was edited.

    Debit balance means excess of credit side over debit side. For Example- At the beginning of the year the debit balance of trade receivables is 3,000 and there is a decrease(credit) of trade receivables of 1,000 during the year and an increase(debit) of trade receivables of 4,000 then at the end therRead more

    Debit balance means excess of credit side over debit side.

    For Example- At the beginning of the year the debit balance of trade receivables is 3,000 and there is a decrease(credit) of trade receivables of 1,000 during the year and an increase(debit) of trade receivables of 4,000 then at the end there will be a debit balance of 6,000 of trade receivables at the end

    A Debit balance basically signifies all expenses and losses and all positive balances of assets. The debit balance increases when any asset increases and decreases when any asset decreases.

    Assets

    All the assets that appear in the balance sheet always have a debit balance. The debit balance under it will increase as it debits. Some of these assets can be illustrated below -:

    •  Cash and Bank Balance: Cash and Bank Balance means the amount that is held by a person in physical form or in a current/savings account.
    • Property, Plant, and Equipment-  Property Plant, and Equipment means assets that are used for the production of goods and services.
    • Account Receivables– Account Receivables means the amount that is due from debtors to whom goods were sold at credit for a specified time period.
    • Inventory – Inventory means goods that are used in the normal course of business.
    • Investments– Investments are the amount invested in other companies from which they were expecting returns in future periods.

     

    Expenses and Losses

    All expenses that appear on the debit side of the P&L account have a debit balance in their accounts.

    For eg-: A rent of 10,000 is given to the landlord under which the work has been done by the entity.

    For eg-: A depreciation of 10% is there on an asset of 12,000 will result in a debit balance under depreciation in the P&L Account.

    Some of the following expenses can be illustrated below

    • Rent- Rent means a property that an entity takes on lease for business purpose and pay a certain amount to the landlord for such lease.
    • Depreciation– Depreciation means a fall in the value of an asset due to its usage every year
    • Loss on Sale of an asset- Loss on the Sale of an Asset means the sale amount of the asset is less than its WDV
    • Printing and stationery– Printing and Stationery means the paperwork or anything related to stationery used for business purposes
    • Audit fees– Audit fees are the amount which is given to an auditor for auditing the financials of an entity
    • Salaries and Wages– Salaries and Wages are the amount given to employees for the work they have done for the entity
    • Insurance– Insurance means a premium given by an entity for insurance done by them
    • Advertising– Advertising means any promotion that a company does of its product to increase its revenue

    So after seeing all the above points we can conclude that the debit balance includes all the expenses that are in the P&L account and all the assets that are there in the Balance sheet. So its balance increases when there is an increase in its account.

     

    CREDIT BALANCE

    Credit balance means excess of credit side over debit side.

    For example, At the beginning of the year, the credit balance of trade payable is 3,000 and there is a debit of trade payable of 1,000 during the year and an increase(credit) of trade payable of 4,000 then at end there will be a credit balance of 6,000 for trade payable at the end

    .A Credit balance signifies all income and gains and all liabilities and capital that is there in business.

    Liabilities

    • Account Payables
    • Bank Overdraft
    • Bonds
    • Income Tax Payables
    • Notes Payable
    • Deferred Tax Liability

     

    Income and Gains

    • Interest Received
    • Dividend Received
    • Rent Received
    • Gains on Sale of Capital Gains

     

     

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Ishika Pandey
Ishika PandeyCurious
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  2. SidharthBadlani CA Inter Student
    This answer was edited.

    Yes, the account receivable is a sub ledger account. It is an account that is used to record the payment history of each and every customer to whom the business has sold goods or provided services on credit. Accounts receivable represent the amount that the customers owe to the business with respectRead more

    Yes, the account receivable is a sub ledger account. It is an account that is used to record the payment history of each and every customer to whom the business has sold goods or provided services on credit.

    Accounts receivable represent the amount that the customers owe to the business with respect to the goods sold or services provided to them on credit. They are also known as trade receivable or debtors.

    The accounts receivable subledger shows various details of every transaction like the invoice number, amount due, date of payment, discount allowed etc. The subledger accounts are also known as the subsidiary accounts.

     

    Difference between general ledger and subledger accounts

    Here is a list of the major differences between sub-ledgers and the general ledger:

    • The subsidiary accounts or the sub ledger are a subset of the general ledger. In other words we can say that subsidiary accounts are a part of the general ledger.
    • The trial balance is prepared with the help of the general ledger and not with the help of subsidiary accounts.
    • The trial balance is prepared with the help of the general ledger and not with the help of subsidiary accounts.
    • The subledger accounts help us to store large volumes of data. They provide us with detailed and comprehensive analysis of each item of financial statements. On the other hand, a general ledger provides us with superficial information about every item in one place.

    Importance/ use of Subsidiary Account

    The usefulness of an accounts receivable sub ledger account lies in the fact that it provides detailed information about the money different customers owe to the business.

    For example, the general ledger account may show that the total balance of trade receivable is 1 lakh without indicating the individual amount that each customer owes to the business. The subsidiary account can help us by showing that customer A owes 50000 rupees, customer B owes 30000 rupees while customer C owes 20000 rupees.

    In short, the subsidiary accounts provide detailed information about each and every transaction. They help us to find useful information quickly and easily. They help us analyze the business policies and take corrective actions.

    Thus, we can conclude that accounts receivable is a subledger account that provides us detailed information about the various credit transactions and the amount that each customer owes to the business. It helps us analyze our credit policies and take corrective actions. It helps us identify and classify bad debts as such on

     

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