Journal, Ledger and Trial Balance
The journal is the book of original entry, the ledger is the book of final entry, and the trial balance is a statement of balances at a date. UPMSP questions combine journalising with posting and then ask what a given error will do to the trial balance.
Journal and ledger rules
- Modern rules: debit increases assets and expenses; credit increases liabilities, capital and income.
- A compound entry records several debits or credits in one entry; narration is written below.
- Posting means transferring each side of the journal entry to the correct ledger account.
- Balance c/d is written on the shorter side; the balance b/d opens the next period.
Trial balance
It lists debit and credit balances and should agree. Agreement proves arithmetical accuracy, not complete accuracy.
Worked example
Goods sold to Ram ₹10,000; cash received from Ram ₹6,000; salary paid ₹2,000. Journal: Ram Dr ₹10,000 to Sales; Cash Dr ₹6,000 to Ram; Salary Dr ₹2,000 to Cash. Trial balance: Cash ₹4,000 Dr, Ram ₹4,000 Dr, Salary ₹2,000 Dr; Sales ₹10,000 Cr. Both totals are ₹10,000.
Traps
- Errors that do not affect the trial balance: complete omission, error of principle, wrong account of the same class, compensating errors and wrong amounts entered in both accounts.
- Errors that do affect it: one-sided posting, wrong casting, posting to the wrong side.
- Writing To before a debit account or omitting narration.
- Treating discount allowed and discount received as the same type of account.