ACCA FA CH5 - LEDGER ACCOUNTS & DOUBLE ENTRY

Summarise all individual transactions listed in the books of prime entry

Account record which summarises the financials of the business (general ledger)

• - Method by which business records financial transactions. An account is maintained for every asset, liability, income, and expense item.
• - Every transaction gives rise to two accounting entries (a debit and a credit). 

• - Increase in an asset
• - Decrease in a liability
• - Expense item

• - Increase in a liability
• - Decrease in an asset
• - Income item

DEBIT - EXPENSE/ASSET/ DRAWINGS


CREDIT - LIABILITIES/INCOME CAPITAL/

Keeps a record of unusual movement between accounts. It is used to record any double entries made which do not arise form the other books fo prime entry i.e. non-routine transactions. Used for errors as well.

• Format:
• Date
• Account to be debited    $X
• Account to be credited          $X
• (Narrative to explain transaction)

• - Must accompany each journal entry. 
• - Required for audit/control
• - Indicates the purpose and authority for each transaction which is not recorded in book of prime entry.

• - Each item in the statement of financial position or statement of profit or loss will have an 'account'
• - Ledger accounts are often shown as 'T' accounts
• - At the end of the year/period, each ledger account is balanced off and the totals taken to the trial balance

• - TOTAL DEBITS = TOTAL CREDITS
• - DEAD CLIC!

• - At the end fo the accounting period, each ledger account needs to be balanced off.
• - The P&L accounts go straight to the P&L to enable the calculation of profit/loss for the year.
• - Balance sheet accounts get carried into the new year.