Page 89 - DMGT104_FINANCIAL_ACCOUNTING

Unit 5: Preparation of Journal, Ledger and Balancing

5.5 Keywords Notes

Credit: Giver in Personal Account, Going assets in Real Accounts and Incomes in Nominal
Accounts.

Debit: Receiver in Personal Account, Coming Assets in Real Account and Expenses in Nominal
Accounts.
Double Entry System: Accounting which is based on the two aspects of the transactions.

Journal: The primary book in which the transactions are recorded first time.
Ledger: It is the classification of accounts in which various accounts are maintained.
Nominal A/c.: Accounts of incomes, expenses and gains or losses.

Personal A/c.: Accounts which are related to person, firms, companies and representatives.
Process of Accounting: It includes the recording of transactions into Journal, classifying into
Ledger and summarizing into Trial Balance and Final Accounts.

Real A/c: All the assets accounts are included into it.
5.6 Review Questions

1. What do you mean by Posting? Give the rules of posting.
2. What are the key steps in balancing a ledger A/c?
3. State the relation between journalizing and ledger posting with suitable examples.
4. Why is ledger known as the primary book or the principal-book of accounts? Can profit of
the business and its financial position be known without maintaining ledger?
5. What is the rule for posting the debit account from the journal into the ledger account?
6. Why is ledger prepared?

7. Enumerate the various types of ledgers which may be maintained by a business.
8. Mr. Kamal Nath was doing a business as a cloth merchant. On 1st July, 2007 his assets were:
Furniture and Office Equipment = 12,500, Stock 1,25,000 Cash in Hand 3,000, Bank
Balance 42,500, Amounts due from Brijesh 6,000, Amount due from Girijesh 7,500.
On the date he owed 10,000 to Manish and 7,250 to Naresh. His transactions during the
month were as follows. You have to Journalise these transactions and from that information
prepare his Ledger.

2008 ( )
July 2 Sold cloth on credit to Xavier 2,500
July 3 Purchased cloth from Yogesh 10,000
July 4 Paid Rent by cheque 4,000
July 5 Purchase of cloth by cheque 10,000

July 7 Cash sales 2,250
July 8 Received cheque from Brijesh 5,900
Allowed him discount 100

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