chapter 1
assets: things owned by a business which carried a value,they can be considered as
economic resources, providing benefits to the business.
liabilities: amount owed by a business to various parties, they can be considered as
debts or obligations owned by the business to outside bodies.
posting: recording trasactions and entering accounts are often called “posting”.
a trail balance: is therefore defined as a list of balances of ledger accounts worked
out periodically to test the calculation accuracy of account.
---------every account in the ledger is labelled (with debit or credit )
---------the items can come in any order
---------when the debit balance agree with the credit balances, it confirm
that there has been a debit entry for every credit entry in the
posting of the account
---------it is an interim summary of the information shown by the
account,it should carry date.
---------the main difference between trial balance statements and balance
sheets is that in the trial balance, all accounts in the ledger are
shown as simple balances (debit or credit )whereas in the balance
sheet, they are shown not as debit or credit balances but as assets
and liabilities respectively.
---------trial balance is unable to detect the following type of errors:
1) omission in the recording of the accounting data
2) an entry is made into the wrong account of the same group
3) an entry is entered into the wrong group of the account
4) there are mistakes in the book of original entry in amount
5) mistake is made on the wrong side in the book of original entry
6)mistake is coverde up by a same mistake
nominal account: do not represent an asset or a liability. they simply store up
information needed to work out a profit or loss for the business at the year end.
nominal account includes: purchases ,sale, rent, wages, lights and other such
expenses. the nominal accounts will give us the information needed to calculate
the profit or loss periodically. at the end of a financial year,the nominal accounts
are written off by transferring the amounts to the trading and profit and loss account,
leaving he nominal accounts empty.
journal: the journal,or the book of original entry , is a chronological record,showing
for each transaction the debit and credit changes in specific ledger accounts.
the debit and credit entries recorded in the journal are transferred to the accounts
in the ledger at appropriate intervals. structure of journal: date , accounting titles
and explanation, ledger page , debit , credit.
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