Journal, ledger and trial balance with illustration

1.Journal preparing 

 At First we defines Journal in accounting "Journal means  a daily record of business financial transaction or it is a day to day record of company's assets, expense and ravenue ,liabilities. " 

After the definition of journal you got concept of journal that what it actually means. The most important terms which was mentioned in definition  for your reminder I wil explain all in this topic because without understanding assets expense and owner equity you can't prepare a journal and  all others accounting cycle statement. These terms are basis for all the statement. I will explain these terms with  debit and credit rules which used in journal to prepare separate accounts for each transaction.

1. Assets 

"Assets can be define as things or resources owned by the company " So this is the simple definition all things company has owns those are assets of company for example equipment , machinery and cash these are assets for company.

2.Expense   

In simple words we can say expense is the amount which spent by a company during cost of production, It could be interest paid tax paid and purchase of material there would be transportation or any other expense  also be occurred . 

3. Liabilities

Liabilities are those amount which are borrowed from outsiders or that part of amount which is owed by company to supplier, lender or any other financial institutions.  

For example account payable  why it is liability for company because we have to pay him amount after specific period.

4. Owner equity  

It is that part of amount which actually invested  by the owner into business  e.g capital. For example 1000 amount invested by owner into business it is capital of company and capital is owner equity for company.

   Now we explained all these term this is your duty to remember them because these will use in journal. Another thing which is important preparing journal is debit and credit rules or how you can post these transaction into journal , without these rule  I will give you answer of one transaction which is " goods sold for Rs. 100. So entry for this is;

Cash Dr : Rs 100
           Sale Cr:   Rs  100 "

people says repeat ten time in your mind something it will remembered don't apply this  suggestion of people here for remembering all transaction just simply remembered these two rule which enable you to solve 10 ,  20 or even more transaction. So without wasting your precious time I will be writing for  you these rules.


Assets and  expenses have same rule  whenever increase in assets and expense it is recorded as Debit and whenever decrease  it is recorded as credit  so it is simple rule just remained this.

Liability , owner equity  and revenue
these are actually opposite to assets and expense. A increase in  these three accounts recorded as credit while decrease is recorded as debit. So understanding these two concept you will be able to prepare journal.   I am  adding one example of journal with entries for you to get concept about how you can solve these types of entries. Lets  read out !

Entries

1. Goods purchase on cash Rs. 150.

2. Goods sold for cash Rs 100.

3. Goods purchase from mark (any person name) Rs. 50.

4. Goods purchase on credit Rs. 50.

5. Goods sold on credit Rs 170.

Prepare general journal for following entries. 

                   General journal 

This  is your general journal i tried to make it simple not added any difficult situation  

Because if you don't understand journal you're in basic stages of accounting if you learn this simple journal very well then you can slove deficult entries  and any question you want to ask me about this topic you can comment below. If  you like this post than please visit our blog for more post about accounting ( www.accounting490.blogspot.com)

Any thing which you feel that I not wrote in this post or any suggestion also comment below this post.

Ledger 

Before  preparing  of ledger  I want to  define what ledger means " ledger is simply collection of financial  accounts after journal. "In this definition  there is no rocket science  at first you prepare journal and than post all transaction into separate  account for each transaction. For example : Goods sold for cash  in this entries we have two accounts one is cash which is debit why because according to rule of asset debit comes in and credit goes out  and  another item is credit which is sale. Its looks like in journal 

           
  Cash Dr  Rs .100 

                     Sales Cr   Rs. 100 

Now what you have to do in preparing ledger account just create separate account for both transaction (cash and sale ). After that put sale into debit side of cash account  and use this method in opposite  put cash into sale account credit side. The cash  account is  debited in first ledger account so we put balance c/d (carry down )  in credit side top and equal the both side total and then post 100 at the bottom of debit side as balance b/d

( brought down ) after total and opposite for sale account. It will looks like ;   

So this is just a simple way to prepare general ledger  after this you  have to prepare trial balance with help of general ledger  and journal. So what is trial balance

Trial balance means balancing journal and ledger or it is document which prepared at the end of month in order to show that all entries are recorded correctly or not. I uploaded illustration so you understand this better. 

 so in illustration  you know how you can prepare trial balance with help of journal and ledger  and remember this one rule that if your trial balance total is not equal then check again your ledger and journal because this is trial balance rule that both side total must be equal. End 

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