Journal, Ledger and Trial Balance
Journal, Ledger and Trial Balance
This domain tests journalising, ledger posting, balancing accounts and preparing a trial balance in Tamil Nadu HSE Second Year Accountancy.
Core rules
- The journal records transactions chronologically with date, particulars, debit, credit and narration.
- Debit the receiver and credit the giver for personal accounts; debit what comes in and credit what goes out for real accounts; debit expenses and losses, credit incomes and gains for nominal accounts.
- Post each journal entry to the ledger, balance the accounts, and list debit and credit balances in the trial balance.
- A compound entry combines several debits or credits arising from one transaction.
Worked example
Goods of list price Rs.20,000 are sold to Ravi at 10% trade discount, and he pays Rs.5,000 immediately. Invoice value is Rs.18,000. The entry is: Cash A/c Dr Rs.5,000; Ravi A/c Dr Rs.13,000; Sales A/c Cr Rs.18,000. Trade discount is not recorded separately; only the net invoice price enters the books. In the ledger, Ravi has a debit balance of Rs.13,000 and Sales has a credit balance of Rs.18,000.
Traps
Recording trade discount as an expense; posting sales to the debit side; assuming an agreed trial balance proves there are no errors; and overlooking errors of omission, principle or compensating errors, which a trial balance cannot detect.