CHAPTER 5

Ledger and Trial Balance

Ledger
After journalizing the transactions, the
entries will be posted to the ledger account,
which is known as posting. Posting must be
in chronological order and must be done on
timely basis. Ledger is a complete collection
of all accounts of a company.
There are two types of ledgers: T-accounts,
and the 3-column ledger. In Malaysia, most
commonly used ledger is the T-account.

Figure 1
2012

Cash(1)
RM

2012

RM

Jan 1(3) Capital (4)

50,000

Jan 4 Purchases

5,000

26 Sales

6,000

31 Balance c/f

51,000(6)

56,000(5)
Feb 1 Balance b/f

Figure 2
2012
Jan 31 Balance c/f

56,000(5)

51,000(7)

Capital
RM
50,000

2012
Jan 1 Cash (4)

50,000

RM
50,000
50,000

Feb 1 Balance b/f

50,000

Figure 3
2012
Jan 4 Cash

Purchases
RM
5,000

2012
Jan 31 Balance c/f

5,000
Feb 1 Balance b/f

Figure 4
2012
Jan 31 Balance c/f

RM
5,000
5,000

5,000

Sales
RM
6,000

2012
Jan 26 Cash

6,000

RM
6,000
6,000

Feb 1 Balance b/f

6,000

1. Title of account, CASH, is placed on top of the account.

2. The left side of the account represent DEBIT entry, and the
right side of the account represent CREDIT entry.
3. Record the date.
4. The reference of the account must also be recorded, with
the amount
5. Total both side, and the larger sum will be the main total.
6. The difference will then be added to the smaller sum to
bring the total to be the same as the main total, i.e. larger
sum. At the end of every month, this will be the closing
balance, which indicate the balance of the account. This
balance is called balance carry forward (c/f). If the balance
appeared on CREDIT side of the same month, then the
account has a DEBIT balance.
7. The balance c/f will then be carried forward to the the next
month, which will indicate the balance of the account at the
beginning of the month, known as balance brought forward
(b/f). It will appear on the opposite site of account.

Trial Balance
After posting the entries into Ledger and closing the
account, then the company has information of the
balances of each account recorded in the ledger.
To ensure that the accounts had been recorded
using Double Entry Accounting System, then a Trial
Balance will be drawn out.

Definition of Trial Balance

A trial balance is a list of all ledger accounts with balances at a
particular date (all ledger accounts with zero balances are
excluded).
All the accounts with debit balances will be listed in one
column and those with credit balances will be listed in the
second column.
Note that all those ledger accounts with debit balances must
be either asset accounts or expense accounts. Likewise, all
accounts with credit balances must be either liability, owners
equity or revenue accounts.
The equality of the totals of the debit and credit balances, at a
particular date, are then determined to prove the arithmetical
accuracy of the double-entry system used.

Purpose of Trial Balance

1.It acts as a test of the equality of the debit and credit
balances in the ledger.
2.It helps to localise errors within a given time period.
3.It helps to facilitate the preparation of the financial
statements.

Preparation of Trial Balance

The trial balance is prepared by taking the following steps:
1.The name of the business is written at the top of the Trial
Balance and the title Trial Balance as at (a specific date) is
written under the name of the business.
2.The names of the accounts appearing in the ledger are
listed in the body of the trial balance along with their balances.
3.The amounts in each column of the trial balance are then
totalled.

Example from figure 1 to 4:

ABC Trading
Trial Balance at at 31 Jan 2012

Debit Credit
RM
RM
51,00
0
50,00
0
5,000
6,000
56,00 56,00
0
0

Cash
Capital
Purchases
Sales

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