CHAPTER 2

Generalizating, Posting
& Pre of T.B.

LEARNING OBJECTIVES
After studying this chapter, you should be able to:
Describe a Ledger Account and a ledger
State a role of debit and credit for Balance sheet Account
Explain the Double Entry Accounting System
Explain the Purpose of a Journal and its relationship to the ledger
Prepare Journal Entries to record Common Business Transaction
Prepare Trial Balance and explain its limitations
Describe a Basic step of Accounting cycle

INTRODUCTION
Ledger - a accounting system includes a separate record for each
item that appears in the Balance sheet.
The Form of a record used to increase or decrease in a account , or
sometimes a ledger account . Or simply we can the Account
Activity
Debit & Credit Entry : An amount recorded on left hand side of an
account is called debit entry anmd vivce versa
.

RULE FOR DEBIT & CREDIT

Assets Account s
Increase recorded by Debit
Decrease recorded by Credits

Liability & Owners Equity Accounts :

Increase are recorded by Credits
Decrease recorded by Debits

THE NATURE OF ACCOUNTING

The accounting system is a series of steps performed to analyze, record,
quantify, accumulate, summarize, classify, report, and interpret
economic events and their effects on an organization and to prepare
the financial statements.

RECORDING TRANSACTIONS IN LEDGER

ACCOUNTS:
See Book page 61

WHY USE JOURNAL?

First record OR BOOK OF ORIGNAL ENTRY
Shows all the information about a transactions in one place and also
provide an explanations of the transactions.
Provide and Chronological record of all the events in a life of
Business.
Help to Prevent errors.

WHY USE JOURNAL?

Illustrations of the Entries : Page Number 68
Posting on Page # 70

TRIAL BALANCE
Sine Equal amount debits and Credits are entered in accounts for
every transactions recorded , in sum all the debits must equal to
credits balance .
The Proof of the equality of Debit and Credit and Called Trial
Balance.
A trial balance is two column schedule listing in names and ledger of
all the accounts in the order in which they appear in the ledger.
The Debit Balance are on the left Hand side and Credit Balance are on
the right hand side.

USE & LIMITATION OF THE T.B

The primary questions about an organizations success that decision
makers want to know are:
What is the financial picture of the organization on a given day?
How well did the organization do during a given period?

FINANCIAL STATEMENTS;
The principal means of reporting general purpose financial information's to
person out side the business organization is a set of accounting reports
called FINANCIAL STATMENTS.
FS consists of four relating following accounting reports:
Balance Sheet - financial picture on a given day by identifying the resources
that its own , the debt that it owes and the amount of owners equity
( Investment) in the Business.
Income Statement - performance over a given period OR indicate the
profitability of the business over the preceding year or for a given period of
time.
Statement of Owners equity: Explaining certain changes in the amount of the
owners equity (investment ) in the business . In business which are
organized as corporations , its called as statement of retained earning.
Statement of Cash Flows Summarizing the cash receipt and cash payments of
the business over the same time period covered by the income statement.

THE BALANCE SHEET

The balance sheet equation or Accounting Equations

Assets = Liabilities +
Owners Equity
or
Owners Equity = Assets Liabilities

THANK YOU