Ledgers & Unadjusted Trial Balance


Previously in this problem we recorded a journal
entries for the transactions that happened in april
What we are going to do is we are now going to transfer the journal entries to the ledger
so that we can get a final balance for each and every account so we can build the unadjusted
trial balance. So lets take a look at the cash ledger
cash and accounts receivable are assets so they have a normal debit balance
The way a ledger is set up for each and every account is you will have a date column, an
item column, post reference column a debit and credit column and then a balance debit
and credit column The date is for the transaction of the journal
entry Item is for description
Post reference refers to the page of the journal the entry can be found on
The first debit and credit column is for what happened in the actual journal entry for that
particular account only and then the second debit and credit column for the balance is
to run a balance for this particular account So for cash on april 1st on journal page 1
we debited cash for $17,000 ending the balance for cash at $17,000
On april second we credited cash for $3,400 on journal page number 1 bringing the balance
to $13,600 On april 8 we credited the cash for $2,000
bringing the balance to $11,600 and for every journal entry that references
cash we will record that one from the journal entry in this ledger
Recording the journal entry we debit and credit and then show the running balance for that
account So at the end of april cash had a balance
of $18,050 The importantance of the ledger is to know
the balance of each and every account after each and every transaction
Its very important to know how much cash you have on hand
Taking a look at accounts receivable we will do the same thing
We will record every journal entry that references accounts receivable and have a running balance,
it’s important to know how much people owe you. We started off with accounts receivable
with a debit of $9,000 and later on we credited accounts receivable for $7,800 so at the end
of april accounts receivable had a balance of $1,200 to be more specific it had a debit
balance of $1,200 all asset accounts have a debit balance except for contra-asset accounts.
Contra-asset accounts contradict an asset and it is actually just the opposite
For accumulated depreciation and other contra-assets will actually have a credit balance and we
will learn more about those accounts in chapter 3
More assets include supplies, prepaid insurance, equipment, and truck which have a normal debit
balance and for specific supplies on april 10th on journal page number one it was debited
for 1,800 and now the balance is 1,800. Prepaid insurance on april 15 was debited
for 1800 and has a debit balance of 1800. Equipment on April 6th was debited for 10,000
on journal page number 1and now has a balance of 10,000
And the truck was debited for 21,000 on april 8 and now has a balance of 21,000
You will do this for every single account that is listed in the journal
We are not duplicating the entire journal entry just the line that belongs to the particular
account that you are going to the ledger for. Notes payable is actually a liability and
it has a normal credit balance So on april 8 on journal page one we credited
notes payable for 19,000 and now we have a credit balance of 19,000
Accounts payable is also a liability and it has a normal credit balance so every time
we journalize accounts payable we would record it here and we keep a running balance to this
particular account So in april accounts payable had 8,500
capital has a normal credit balance Drawing has a normal debit balance
Every time one of these accounts is listed in the journal we must add it to the ledger
Fees earned is our revenue account and has a normal credit balance
So when we journalize fees earned we will record the journal entry here for that particular
line and we will keep a running balance So for april we earned 22,000 in fees earned
which is basically revenue expense accounts have a normal debit balance
Every time we record and expense in the journal we will apply it to the ledger and keep a
running balance so we know exactly how much we spent for each and every expense after
each and every transaction Now once you are finished with recording the
ledgers you will then take the ending balances and apply them to the normal debit or credit
that they go with So cash, accounts recievable, supplies, prepaid
insurance, equipment, and truck are our assets so they will have a normal debit balance
So we will pull this information directly from the ledgers
18050 is the cash balance 1200 is accounts recievable, supplies has an 1800 balance,
prepaid insurance has a balance of 1800, equipment has a 10000 balance and the truck has a 21000
balance We apply this to the debit column because
these are normal debit balance accounts Notes payable and accounts payable and capital
are credit balance accounts We pull these from the final balances of the
ledger Drawing has a normal debit balance
Fees earned has a normal credit balance and now the expense accounts have a normal debit
balance Once we have brought in and recorded the ending
balance from each account in the appropriate column they belong in we will then total these
columns to determine if the debit and credit balances equal
In this particular case we had debit balances of 66,500 and credit balances of 66,500
If I were completeing this accounting work I would feel very confident that I had done
my job correctly in recording transatctions because all accoutns that have a debit balance
are in the debit column and all accounts that have a credit balance
are in the credit column and my debits and credits equal
Now the tricky thing about the trial balance is that it is to prove the credit equality
however it does not show every error that could potentially happen
For instance if you recorded entries into the wrong account that is not an error that
you may see on an unadjusted trial balance so I want you to keep in mind that a trial
balance is to prove debit credit equality. It is to check for certain errors however
it doesn’t reveal every error in accounting So do not always depend on this trial balance
to be your 100% accuracy check I would say I would be about 98-99% sure I
had done my job correctly if my trial balance balances
You will go into chapter 3 and you will learn about adjusting entries and you will record
those adjusting entries so then you will do whats called an adjusted trial balance
From the adjusted trial balance you will then create your financial statement and that will
continue in the lecture for chapter 3

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