Journal, Ledger and Trial Balance

Journal:
Definition:
Book of original entry/first entry where transactions are recorded in a chronological and detailed manner, is
called Journal.
Different names of Journal:

1. Journal 2. Primary Book

3. Book of Original Entry 4. Chronological Book
5. Book of First Entry 6. Preliminary Book
7. Book of Prime Entry 8. Subsidiary Book
9. Day Book
Notes:

 Record kept in Journal is called ‘Date Wise Record’ or ‘Chronological Record’. Something ‘date wise’ is
called Chronological.
 Process of making entry in Journal is called Recording or Journalizing.

Format of Journal:

1 Journal Entries Financial Accounting Notes

L.F
Date Details Debit Credit
.
      Rs. Rs.
         
 
         

         
         
         
         
         
         

Ledger and Trial Balance

Ledger:
Definition:
Mati Ur Rehman
 Book of second entry where transactions are posted from Journal in a classified manner is called Ledger.

Notes:

o Ledger is also named as ‘Secondary Book’ or ‘Book of Final Entry’.

o The records kept in ledger are called ‘Classified Records’ or ‘Condensed Records’.
o Process of keeping records in Ledger is called ‘Classifying or Posting’.
o Ledger is the King of all Books.

Types of Ledger:

Ledger Accounts can be prepared in following two ways:

1. “T” Accounts Form/Traditional/Standard/Conventional Form (British).

2. Running Balance Form/Modern Form (American).

Format of Ledger:

Ledger A/c

Dr. Cr.
J.F J.F
Date Details Amount Date Details Amount
. .
2       Rs.     Financial Accounting
  Rs.Notes
               
               
               
               
               
               
               
               
               

Trial Balance:

Definition:

An Accounting Book where balances of all ledger accounts are posted from Ledger in a summarized manner is
called Trial Balance.

Notes:

Function of Accounting performed in Trial Balance is Summarizing.

Record kept in Trial Balance is called Summarized Record.

Format of Trial Balance:

Mati Ur Rehman
 ABC’s
Trial Balance
As on…………
A/c Debit Credit
S.No. Accounts Titles
no. Balances Balances
      Rs. Rs.
         
         
         
         
         
         
         
         
         
         
         

Proof of Accuracy:

If total of debit balances is equal to the total of credit balances, it means that books of accounts have been
3 prepared accurately; this is called Proof of Accuracy. Financial Accounting Notes

Problems relating to Journal:

P#01:
Record the following transaction in Journal:

2008 Jan. 01:Mr. Fuaad started business with cash Rs. 150,000.
// Jan. 05: Purchased furniture for cash Rs. 2,000.
// Jan. 07: Purchased goods for cash Rs. 9,000.

// Jan. 10: Paid carriage on purchases Rs. 250.

// Jan. 12: Purchased goods from Salim & Co. Rs. 7,000.

// Jan. 15: Sold goods to Usman & Sons Rs. 15,000.

// Jan. 21: Received Cash from Usman & Sons Rs. 15,000.

// Jan. 25: Paid cash to Salim & Co. Rs. 3,000.

// Jan. 30: Paid salaries for the month Rs. 2,500.

P#02:

Prepare Journal from the following transactions:

2006 June 01: Mr. Ahmed started business with cash Rs. 30,000 and Goods Rs. 20,000.
// June 05: Bought goods for cash Rs. 10,000.

// June 06: Bought goods on account Rs. 6,000 from Ali.

// June 10: Purchased furniture for cash Rs. 4,000.

// June 12: Sold goods for cash Rs. 12,000.

Mati Ur Rehman
 // June 14: Sold goods on account Rs. 6,000 to Aslam.
// June 25: Ali account settled receiving Rs. 150 as discount.

// June 30: Aslam account settled allowing Rs. 200 as discount.

P#03:

Journalize the following transactions in the books a Trader:

2007 Dec. 01: Started business with Cash Rs. 50,000 and Furniture Rs. 20,000.
2007 Dec. 03: Goods bought for cash Rs. 30,000.
// Dec. 03: Furniture bought for cash Rs. 5,000.

// Dec. 07: Sold goods for Cash Rs. 10,000.

// Dec. 09: Sold goods to M. Rauf Rs. 8,000.

// Dec. 12: Goods bought from ZulfiqarRs. 5,000.

// Dec. 16: Goods sold to Ali and allowed him 10 % Trade discount Rs. 6,000.

// Dec. 22: cash received from M. Rauf in full settlement of his Account Rs. 7,600.

// Dec. 25: Cash paid to Zulfiqar Rs. 1,900 and he allowed discount Rs. 100.

// Dec. 28: Cash paid for purchase of stationery Rs. 250.

// Dec. 30: Paid office Rent Rs. 800.

// Dec. 31: Goods returned to Zulfiqar Rs. 200.

// Dec. 31: Paid salaries to staff Rs. 900.

4 Financial Accounting Notes

P#04:

Journalize the following transactions:

2007 Sep. 01: Mr. Ali started business with cash Rs. 500,000.
// Sep. 01: Goods bought for cash Rs. 300,000.

// Sep. 05: Goods withdrawn by owner Mr. Ali for Rs. 10,000.

// Sep. 10: Goods lost by fire Rs. 5,000.

// Sep. 12: Goods distributed as free samples Rs. 10,000.

// Sep. 15: Goods given as charity Rs. 10,000.

// Sep. 20: Drawings made in cash Rs. 20,000.

// Sep. 25: Cash given as charity Rs. 5,000.

// Sep. 30: Goods lost in an accident Rs. 5,000.

P#05:

Record the following transactions:

2006 Jan. 01: Mr. Hassan Rasool started business with cash Rs. 100,000, Building Rs. 100,000 and Goods Rs.
50,000.
// Jan. 03: Goods bought for cash Rs. 30,000.

// Jan. 04: Gave away as charity cash Rs. 5,000 and Goods Rs. 5,000.

Mati Ur Rehman
 // Jan. 06: Sold Goods to Mr. Khawar at list price less Trade Discount 10 %; Cash Discount 5% for Rs. 8,000.
// Jan. 08: Khawar makes payment of 80 % of amount due availing the proportionate cash discount.

// Jan. 10: Purchased goods worth Rs. 700 from Zaheer and supplied them to Kabeer at Rs. 1,000.

// Jan. 15: Kabeer returned goods worth Rs. 50 which in turn was sent to Zaheer.

// Jan. 16: Purchased goods on account from Raheem for Rs. 7,500; terms being (2/10, n/30).

// Jan. 18: Goods given as charity on behalf of owner for Rs. 700.

// Jan. 20: Sold goods to Kamal, terms (2/10, n/30) for Rs. 7,500.

// Jan. 25: Cash received from Kamal.

// Jan. 30: Paidcash less discount, to Raheem in full settlement of Account.

// Jan. 31: Paid tuition fee of owner’s children Rs. 5,000; Salaries Rs. 2,000, Wages Rs. 1,000, Bank Charges Rs.

1,500 and Insurance Premium Rs. 3,000.

Problems relating to Ledger:

P#01:

Enter the following transactions in journal and post them into ledger:
5 Financial Accounting Notes
2008 Jan. 01: Mr. Javed started business with cash Rs. 50,000.
// Jan. 02: He purchased furniture for Rs. 10,000.

// Jan. 03: He purchased goods for Rs. 30,000.

// Jan. 04: He sold goods for cash Rs. 40,000.

// Jan. 05: He paid salaries Rs. 5,000.

P#02:

Prepare Journal and then Ledger from the following transactions:

2006 April 01: Mr. Anwar started business with Cash Rs. 40,000 and Furniture Rs. 10,000.
// April 02: Bought goods on credit worth Rs. 15,000 from Ahsan.

// April 03: Sold goods for cash Rs. 8,000.

// April 04: Sold goods on credit to Shakeel Rs. 5,000.

// April 05: Cash received from Shakeel Rs. 4,900 in full settlement.

P#03:

Record the following transactions in a Journal and classify them into a ledger.

2007 Jan. 01:Mr. Irfan started business with cash Rs. 5,000 and goods Rs. 2,000.
// Jan. 05: Goods bought from Akhtar Rs. 1,000.

// Jan. 15: Cash paid to Akhtar Rs. 900 in full settlement.

// Jan. 25: Goods bought for cash Rs. 200

// Jan. 30: Rent paid Rs. 100.

Mati Ur Rehman
 Note: Prepare Trial Balance for problem no: 1, 2 and 3.

6 Financial Accounting Notes

Mati Ur Rehman