W5: General ledger, posting general journal entries, trial balance

Question 1

What’s a general ledger?

Answer 1

It records the effects of transactions on each indivdual account as a summary of the collection of all individual accounts

The general journal is the instructions on how to record it
* Which accounts are changing?
* By how much

The ledger is the summary of each account

Question 2

Features of a general ledger

Answer 2

• Organised in order they appear in the Balance Sheet (ALO) and the Income Statement (IE)
• Each account has a specfic identification number - varies from simple two-digit numbers to complex alphanumeric system

Question 3

how is a general ledger set up?

Answer 3

1. T-Accounts
   * Convenient way to show individual accounts
   * Illustrate effects of transcations on an account
2. Running Balance
   * Used in formal accounting systems
   * Standard presentation for computerised systems

Question 4

What is included in the T-accounts

Answer 4

• Account title
• Debit (Dr) LHS ( Date, account name, amount)
• Credit (Cr) RHS (Date, account name, amount)
• Balance

Each account have its normal balance (e.g. Asset normal balance is debit)

Question 5

What is a trial balance?

Answer 5

It lists all ledger accounts and their balance
* Debit on LHS, Credit on RHS
* Dr = Cr –> balances

Question 6

What is the limitation of a trial balance?

Answer 6

• May balance but contains errors
• Doesn’t tell you where errors are