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Tutorial 4 Posting to Ledger & Trial
Balance
3
Tutorial 4: Suggested solutions
Section A:
1. (a) A Ledger is basically a group of “T Accounts. There are 3 ledgers in
an accounting system i.e. sales, purchases and general ledger
respectively. The Sales Ledger basically is a book/record that consists of
all the trade receivables accounts (all the credit customers that still owe
to the business). The cash customers are NOT recorded here as they
would have paid immediately upon sales. The total of all the trade
receivables are represented by a Trade Receivable Control amount in
the general ledger.
Similarly, the Purchases Ledger is a book/record that consists of all the
trade payables accounts (all credit suppliers that the business still
owes). Again, it does not include any cash suppliers which have been
paid off upon purchase. The total of all the trade payables are represented
by a Trade Payables Control amount in the general ledger.
All the other accounts are included in the general ledger (nominal
ledger). The subsidiary ledgers (Sales and Purchases Ledgers) does
NOT form part of the double entry system i.e. not used in the closing of
accounts to prepare the financial statements. There are kept separately
for the main purpose of monitoring the balances of the individual trade
receivables and payables for debt collection and payment purposes.
(b) Control accounts are accounts in the general ledger that represents the
total in the secondary ledgers. The 2 control accounts are Trade
Receivables Control Account and Trade Payables Control Account. The
Trade Receivables Control Account balance represents the total of all the
trade receivables balances in the Sales Ledger. The Trade Payables
Control Account balance represents the total of all the trade payables
balances in the Purchases Ledger.Only the Control Acccounts balances
are used in closing of accounts to,prepare the financial statements.
2. (a) A trial balance is a list of all ledger accounts with balances at a
particular date. All the accounts with debit balances will be listed in
the debit column while those with credit balances are listed in the credit
column. The total of the debits and credits should balance if the double
entry system of recording have been properly followed.
(b) The purposes of preparing a trial balance are to help check the
arithmetic accuracy of the double entry rules (equality of the debit
and credit balances in the ledger), help to detect errors (is any) and
help to facilitate the preparation of financial statements.
(c) When the trial balance does not balance, this indicates that one or more
errors have been made in the process of recording the transactions.
The 5 possible errors are:
Omission of part of an entry (only one entry recorded),
Errors of transposition (debit not same as credit)
Errors in addition in ledger accounts
Posting to incorrect sides of accounts (2 debits or 2 credits)
Casting error in the trial balance
3. The basic financial statements and their purposes are as follows:
Statement of Profit or Loss measures performance of a business
i.e. profit or loss
Statement of Financial Position shows the position of assets,
liabilities and equity of a business
Statement of Cash flow – shows the movements of cash during the
year
Statement of Changes in Equity shows the movements in the
equity during the year
Notes to the accounts – detailed explanation of items in the above 4
statements
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Tutorial 4 Posting to Ledger & Trial
Balance
4
Question 4
MU Trading
Statement of Profit or Loss for the year ended 31 May 2018
RM
RM
Sales
475,000
Less:
Cost of goods sold
Opening Inventories
21,950
Purchases
400,000
421,950
Less: Closing Inventories
(
10,950)
(411
,000)
Gross Profit
64
,000
Add:
Income
Discount
received
3,800
MU Trading
Statement of Financial Position as at 31 May 2018
RM
RM
RM
Non
-
current assets
Office equipment
2
0,000
Motor vehicles
60
,000
80,000
Current assets
Inventories
10,95
0
Trade receivables
26,00
0
Bank
1
8
,0
00
54,95
0
134,950
Equity
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