1. Ledger
The Principal Book of accounts where all transactions relating to a particular account are collected at one place.
- Posting: Process of transferring entries from Journal/Subsidiary Books to Ledger.
- Balancing: Ascertaining the difference between debit and credit sides of an account.
2. Trial Balance
A statement showing the balances of all Ledger accounts to test the arithmetical accuracy of books of accounts.
- Objective: To check arithmetical accuracy, facilitate preparation of financial statements.
- Format: Serial No. | Name of Account | L.F. | Debit Balance | Credit Balance.
Agreement of Trial Balance: Total of Debit Balances must equal Total of Credit
Balances (Double Entry System).
3. Errors Disclosed by Trial Balance
- Wrong totaling of subsidiary books.
- Posting on the wrong side of an account.
- Posting wrong amount.
- Omission of posting of one aspect of a transaction.
4. Errors NOT Disclosed (Limitations)
- Errors of Principle: Treating capital expenditure as revenue expenditure.
- Compensating Errors: One error neutralizes another.
- Errors of Complete Omission: Transaction completely omitted from books.
- Errors of Commission: Posting to wrong account but correct side.