how to prepare Journal,Ledger and Trial Balance || chapter #3 || 3.4 A part (1/2) meigs& meigs скачать в хорошем качестве

how to prepare Journal,Ledger and Trial Balance || chapter #3 || 3.4 A part (1/2) meigs& meigs

Recording transaction in the journal entries Journal entries refer to analysing business transaction and recording in the journal books of the company. Journal entries are the first official entries of any business transaction recorded in the business (Weetman, 2008). Journal entries starts at the start of the financial year and continuous till the end of the same financial year. Journal entries are process of analysing assets, liabilities, or equity of the business. After duly recording all the transactions, managers or accountants classify and record the events according to debit and credit rules (Benedict and Elliot, 2011). For this purpose, accounting policies and procedures are followed namely Accounting Standards which are set by respective government agencies. Advantages of journal entries: Journal entries set the foundation for the business. With the help of journal entries and other documents, one can understand how the business operates and how it deals with its customers and suppliers (Abdel-Kader and Luther, 2008). Proper journal entries also help company in finding better solution for their business and at the same time being more transparent in their operation. Journal entries also play an important role in developing ledger accounts and ultimately uses of financial statement. In this context, it is important for managers to develop and follow journal entries in accordance with accounting rules and regulations (Alawattage et al. 2009). Therefore, it is clear that journal entries need to be prepared in an effective manner. Disadvantages of journal entries: Journal entries are done by after analysing and verifying different documents that support transactions. In this context, it becomes difficult for managers and consumes lot of time in order to prepare and record u journal entries (Drumm, 2008). Difference in accounting standards in different countries also makes difficult for managers to reconcile these changes so that true position of financial statement can be prepared. It is also to be noted that managers also needs to have better understanding and lack knowledge may leads to incorrect preparation of ledger account (Drury, 2009). As all financial information are dependent on journal entries, any wrong step taken by the account May results in huge chaos for the company. It is also difficult to trace mistakes made in journal entries as numerable journal entries are made every day.The above journal entries have been prepared in accordance to transactions incurred in the business at the month of April. Journal entries have been in accordance to accounting standards so that it would facilitate the management in preparing effective and correct ledger accounts (Ismail, 2008). 3. Preparation of ledger account Ledger account refers to the company’s main recording accounting records. A ledger records all the transaction relating to particular items till the tenure of the business. Ledger accounts hold different types of information that are needed to be carried by management in taking financial decisions. Ledgers accounts are maintained where business follow double-entry system (Lambert and Larker, 2008). And therefore, any transaction having both debit and credit impact on the business. Under this method, one account is debited and the other account is credited with the same amount. This helps the management to keep proper records of their transaction and at the same time effectively presenting proper information (Cadle and Paul, 2010). With changing business environment, maintenance of ledger accounts has transferred from physical book to accounting computer programme. The double entry system is very effective in nature and ensures that transaction is recorded as per accounting standards.  After preparing ledger accounts, they are used for preparing trial balance and thus help accountants to find out any loopholes in the business (Bebbington et al. 2010). The ledger accounts are also important in preparing balance sheet for the company. Therefore, ledger accounts serve different purposes and thus it is important for managers to have better understanding about preparation of ledger accounts and their subsequent transfer in other financial statements. The entire above mentioned ledger accounts have been prepared by considering journal entries made in the above section. Some ledger accounts had opening balances and some did not. Excess or deficit of ledger balances has been carried forward to the next month. This would ensure that ledgers at the end of the financial years reflect the true financial strengths of the company (Ingram and Albright, 2009).