Account 3 Marks Question

A balance of an account is the difference between the total of its debit and credit sides. If the total of debit side is more than the total of credit side, the account is said to have a debit balance. It has a credit balance when total of credit side is more than the total of debit side. Balancing a Cash Account.

		₹			₹
1.	Cash sales	50,000	2.	Sold goods to X on credit	80,000
3.	Cash received from X	56,000	4.	Purchased goods from Y on credit	44,000
5.	Paid to Y	30,000	6.	Cash purchases from Y	16,000

Transactions are recorded in the Journal and thereafter, they are posted to the relevant account in the ledger. All the accounts put together make a Ledger. Stating differently, Ledger is a book in which various accounts (Asset Accounts, Liability Accounts, Capital Accounts, Revenue Accounts and Expense Accounts) are opened and transactions are posted from the Journal Book. A ledger is also called the book of final entry, since all transactions recorded in Books of Original Entry (i.e., Journal) are transferred (posted) in the ledger.

After posting the transactions in the accounts and balancing them, a statement is prepared to show separately the debit and credit balances. Such a statement is known as Trial Balance. The total of the debit side of Trial Balance should be equal to that of its credit side. This is based on the Dual Aspect Concept which states for every debit there is a corresponding credit of equal amount.

In accounting, an account is a record in the general ledger that is used to sort and store transactions. For example, companies will have a Cash account in which to accounts. For example, a cash sale will increase the Cash account and will increase the Sales account.

The process of transferring the transaction written in the Journal to a Ledger is called posting. In other words, the process of transferring of debits and credits from the Journal to the Ledger Accounts is called posting. Posting is necessary as it summarises all transactions relating to the account at one place and also shows how transactions have changed the account balances.

The main objective is to keep systematic records:

• To determine profits and loss.
• To ascertain financial position.
• To communicate the information.