📅 Tuesday, April 16th, 2024
One loyal friend is worth ten thousand relatives.
— Euripides
MGT011A Lecture: T-account and trial balance
- The general ledger organizes transactions by account (T-Account), which facilitates determining the balance of a type of account
- Posting is the process of transfering debit/credit information from general journal to general ledger. The posting reference code allows tracing an entry from the general ledger back to the general journal.
- A T-account is a two-column table that tracks the balance of a specific account by entries. Each entry is either on the debit (left) or credit (right) column. In the final row of a T-account, the T account lists the ending balance of the account on the column of the normal balance (e.g., if the account type is revenue, an associated T account would list ending balance on the credit column).
- Trial balance lists all account from the general ledger and their balances, which is useful for checking that debits = credits and for preparaing the financial statements (trial balances are not financial statements!). Note that even when debits = credits, trial balance does not guarantee of error-free data & accounting. Possible errors include: missing journal entries, posted entry to wrong account, posted entry with the wrong amount, etc.
- A compound journal entry is a single journal entry that have either more than one credit or debit accounts (e.g., cash + accounts receivable = revenue). Beware that the sum of debits must still equal sum of credits within the same transaction entry.