FINANCIAL ACC 101

BALANCING OF LEDGER ACCOUNT

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Before the preparation of Trial Balance, the account must be balanced off at regular intervals during the financial year, it is necessary to balance each account, in order to ascertain the overall position recorded in the book keeping system. In balancing the account, the following procedures must be followed:

1. Post all Debit Items.

2. Add all the Items on the Debit side.

3. Post all Credit Item.

4. Add all the Items on the Credit side.

5. Compare both the two totals.

6. If the Debit side is greater, insert the differences on the Credit side.

7. If the Credit side is greater, insert the differences on the Debit side.

ILLUSTRATION 1:

1-Jan	Sales		N10, 000	6-Jan	Purchases		N3, 000
				7-Jan	Wages		N200
				10-Jan	Insurance		N800
				21-Jan	Olu		N300
					Bal b/d		N5, 700
			N10, 000				N10, 000
	Bal c/d		N5, 700

The Balance on the debit side exceeds the amount on the credit side by N5, 700. Insert the difference on the credit side as balance carried down so that the total should be equal. In the next accounting period, N5, 700 will be balance brought down.

ILLUSTRATION 2:

Ojo Enterprises started business on January 1st 1991 with a capital of N16, 000. The following Transactions were carried out during the month of January.

Jan 1- Purchased Furniture by Cash N2, 400

Jan 2- Purchased Stationery N200 Cash

Jan 3- Purchased Goods by Cash N3, 500

Jan 4- Purchased Goods on Credit from Agogo N5, 000

Jan 5- Sold Goods for Cash N6, 000

Jan 6- Sold Goods to Charlotte Umedo on Credit N2, 400

Jan 7- Paid Advertisement Expenses N200 Cash

Jan 8- Paid Agogo N3, 500 Cash being part of settlement of Goods Purchased

Jan 9- Paid Rent in Cash N300

Jan 10- Paid Salaries and Wages N600 Cash.

You are Required:

a.) To Write Up the Ledger Accounts recording the Above Transactions

b.) To Extract a Trial Balance.

SOLUTION:

DR                                                                   Cash Book                                          CR
Date	Particular	F	Amount	Date	Particular	F	Amount
1-Jan	Furniture by cash		N2, 400	15-Jan	Sold Goods		N6, 000
2-Jan	Stationery		N200	20-Jan	Advertisement Exp.		N200
3-Jan	Goods by cash		N3, 500	25-Jan	Agogo		N3, 500
	Bal b/d		N4, 500	28-Jan	Rent		N300
				31-Jan	Salaries & Wages		N600
			N10, 600				N10, 600
					Bal c/d		N4, 500

LEDGER ACCOUNT: 

DR                      Purchases A/c                                     CR
Date	Particular	Amount	Date	Particular	Amount
	Balance c/d	N6, 100	1-Jan	Cash	N2, 400
			2-Jan	Cash	N200
			3-Jan	Cash	N3, 500
		N6, 100			N6, 100

DR                           Agogo's A/c                                   CR
Date	Particular	Amount	Date	Particular	Amount
25-Jan	Cash	N3, 500	4-Jan	Goods	N5, 000
	Bal b/d	N1, 500
		N5, 000			N5, 000
				Bal c/d	N1, 500

DR                               Sales A/c                                   CR
Date	Particular	Amount	Date	Particular	Amount
15-Jan	Sales	N6, 000		Bal c/d	N8, 400
18-Jan	Sales	N2, 400
		N8, 400			N8, 400

DR                           Payment A/c                                 CR
Date	Particular	Amount	Date	Particular	Amount
28-Jan	Paid	N300		Bal c/d	N900
31-Jan	Paid	N600
		N900			N900

This brings us to the end of Today's Session. Hope this was very helpful to you, leave a comment of what you think of this Tutorial and of your Questions below. Have a Blessed Day and Remember You are Amazing. God Bless You.