Book-Keeping- Preparation of Journals Ledger Accounts and Trial Balance
Book keeping refers to the process of recording the transactions. Various transactions may include Sales, purchases, payments, receipts, adjustments etc. The general form of book-keeping is using the double entry system, in which there is a credit entry for every debit entry and vice versa. Single-entry system of book-keeping is used in limited instances.
Journals:
A journal is a record of all the transactions in chronological order. It is the first step in book-keeping before the transactions are entered in the ledgers.
Example: A Ltd. sold $5,000 worth of goods on cash basis, on 2nd Jan 2009. The journal entry would be:
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Date
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Particulars
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Ref.
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Debit
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Credit
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02-Jan-09
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Cash a/c Dr.
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$5,000
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Sales a/c
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$5,000
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(Being
cash sales recorded)
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Ledgers:
Ledgers are records of accounts with each account heads recorded individually with its respective balances. Ledgers summarize the value of one type of financial transaction per account. It also forms the basis for trial balance, income statement and balance sheet. Also, there are types of ledgers like general ledgers and subsidiary ledgers. It is also called as T-accounts
Trial Balance:
Preparation of Trial Balance is the next step in book-keeping after the preparation of ledger accounts. It gives a list of all the account heads with the period end debit or credit balances. After the entry of all the account titles, the trial balance should tally; i.e., both the debit and credit sides must be equal otherwise we can say that there is an error committed somewhere. There are Unadjusted trial balance, adjusted trial balance(after all adjusting transactions) and post-closing trial balance that are prepared at various stages.
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