Chapter 7: From Journal to Ledger

GRADE 9 — The General Ledger Chapter 7: From Journal to Ledger After recording transactions in journals, we post (transfer) them to the General Ledger. The ledger has one page (called an account) for every item: cash, stock, debtors, rent, salary, and so on. Think of it this way: the journal is your diary — events in order. The ledger is your filing cabinet — everything sorted by category. The T-Account — The Ledger Account Every ledger account looks like the letter T. The left side is called DEBIT (Dr) and the right side is called CREDIT (Cr). This is where the term 'double-entry' comes from — every transaction touches at least two Taccounts. BANK ACCOUNT (ASSET) DEBIT (Dr) CREDIT (Cr) 1 Mar Capital R5 000 15 Mar Rent paid R800 5 Mar Sales R1 140 20 Mar Stock bought R1 200 10 Mar Debtors R500 30 Mar Salaries R2 000 The Golden Rules of Double Entry Account Type DEBIT means... CREDIT means... Asset Increase ? (e.g. receive cash) Decrease ? (e.g. pay cash) Liability Decrease ? (e.g. repay a loan) Increase ? (e.g. take a loan) Equity/Capital Decrease ? (e.g. drawings) Increase ? (e.g. owner invests) Income/Revenue Decrease ? (rare) Increase ? (e.g. make a sale) Expense Increase ? (e.g. pay rent) Decrease ? (rare) Chapter 8: The Trial Balance Once all journal entries are posted to the ledger, we balance each account and then list all balances in a Trial Balance. Its purpose is to check that the total of all Debit balances equals the total of all Credit balances. Account Name Debit (Dr) Capital Credit (Cr) R15 000 Bank R8 500 Stock R3 200 Debtors control R1 800 Creditors control R2 000 Sales R9 500 Cost of sales R5 000 Salaries R4 000 Rent expense R4 000 TOTAL R26 500 R26 500