ACCA FA CH6 - FROM TRIAL BALANCE TO FINANCIAL STATEMENTS

• - List of ledger accounts shown in debit and credit columns.
• - TOTAL DEBITS = TOTAL CREDITS

• - Complete omission of a transaction (i.e. no debit or credit listed)
• - Posting to correct debit/credit but wrong account (i.e. Electricity vs Telephone expense)
• - Compensating errors (i.e. one error cancelled out by another error of the same amount)
• - Errors of principle (i.e. debiting what should be credited and crediting what should be debited)

• - One-sided entries
• - Two debits, no credit or two credits, no debit

• - End of period balances from income/expense T-accounts are transferred to the profit/loss ledger account
• - Double entry applies to this account
• - Once balances have been transferred, income/expense accounts are closed and start fresh the next year (i.e. we don't carry forward)

• - Balances on all non expense/income accounts (including profit/loss account) can be listed and rearranged to form the statement of financial position.
• - Assets, liabilities, capital
• - NOT part of double entry system so balances are not transferred out.
• - Balances at end of the period in the statement of profit or loss and drawings ledger accounts are cleared to the capital account.

- c/d = where you need to fill in the gap to make the two sides balance.

- b/d is the actual balance to be ‘brought’ into the next period.

• - Amounts being taken out of the business by its owner.
• - Generally in the form of cash
• - Can also be inventories - inventory drawings valued at cost not sales price

- Assets = Capital + Liabilities

• - Investment of money (funds) with the intention of earning a return.
• - Business proprietor invests capital with the intention of earning profit
• - Capital is treated as money owed to the proprietor by the business

Assets = (Opening capital + profit - drawings) + liabilities

Opening Capital + Profit - Drawings