Accounting - 1

Accounting – Bookkeeping to Trial Balance 2

Definitions
 Trial Balance is a list of account balances arranged according to whether
they are debit balances or credit balances.

Concepts
First stage
 Balance each T-account
o Add up stronger side & put the sum on the weaker side too
o Weaker side: SUM (stronger side) – SUM (weaker side) = c/d
o c/d: Last day of transaction period
o b/d: Write under SUM on stronger side with the 1st date of new
period. It will be the opening account for the next period.

Second stage
 Is to enter the account balances into the appropriate column
o If the debit side is stronger in a T-account, then you monitor the
b/d in the trial balance as a debit, too!
 The total of the two sides MUST ALWAYS MATCH!
 Accounting - 2

Types of errors
 Even if the trial balance balances, there can still be errors
 Errors of omission: Forgot to record transaction
 Errors of commission: Wrong account name  K. Green, G. Green
 Errors of principle: Wrong class of account  Debit asset inst. of expense
 Compensating errors: two completely diff. errors balance each other
 Errors of original entry: wrong figure
 Complete reversal of entries: Wrong side of account
 Transposition errors: Figure transposed, 142  124
Sage
 Double-entry bookkepping is very labour intensive.
 Nowadays: Computerised packages, e.g., Sage.
 Computer can produce trail balance, income statement and statement of
financial position
 Two examples:
o Owning a shop and do make bank transactions with customers.
After, you have to type all transactions manually into program.
o Completely online: Program reports transactions automatically.