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UNIT 2 The Ledger and Trial Balance

Recommended Prior KnowledgeNo prior knowledge is needed other than students personal experiences as consumers and possibly workers for andobservers of organisations.

Context This Unit covers fundamental aspects of bookkeeping. It can be studied on its own or in conjunction with Unit 1. Later Units are based on knowledgegained in this Unit so it is important to study this Unit early in a course of study. Students may find it useful to refer to a glossary of accounting terms as theystudy.

OutlineThe Unit focuses on double entry bookkeeping which underlies all bookkeeping and accounting in examinations. It also covers reconciling the cashbook and the bank statement.

SyllabusRef.

Learning Outcomes Suggested Teaching Activi ties Online Resources Other resources

1.1

1.3

Candidates should be able to: process accounting data usingthe double entry system

explain the sub-division of theledger into the sales ledger, thepurchases ledger, and thegeneral ledger

post the ledger entries from thebooks of prime entry

distinguish between, and accountfor, cash and trade discounts

Ensure students understand theimplications of double entry. This can beshown by indicating how a transactionaffects the assets and liabilities on a

balance sheet. Students need to be clearabout the accounting equation (Assets =Capital + Liabilities) and its variations.

Relate the books of original entry to theledger. Emphasise double-entry is used inthe ledger.

It helps students understand by showing

and testing them with several examples ofsales on credit and purchases on credit,taking the transactions through each stage.Contrast these with cash sales and cashpurchases.

Following above explanations, studentsshould practice transactions to clarifyunderstanding of posting from the books of

prime entry, including dealing withdiscounts.

http://accounting10.tripod.com/Slides2.1.ppthttp://accounting10.tripod.com/content.htmhttp://panoptic.csustan.edu/2110/03/sld012.htm

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BKA 2IGSCE1MB 1

BKAAppendix C MCQs

BKA 12IGSCE4MB 19

BKA 3, 4, 5, 6IGSCE2, 4, 6

MB 20, 21, 22, 23

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SyllabusRef.

Learning Outcomes Suggested Teaching Activi ties Online Resources Other resources

1.4 Candidates should be able to: give the correct treatment to bankcurrent accounts, bank depositaccounts, bank overdrafts, bankloans and other loans

draw up a reconciliation of thecash book with the bankstatement in respect of thefollowing: unpresented cheques,bank charges, direct debits,

standing orders, credit transfers,dividends, correction of errors,and uncredited deposits

Explain the importance of banks tobusiness including financing in terms ofoverdrafts and loans and ensure studentsunderstand terminology like bank charges,standing orders, direct debits and so on

which they will meet in businesstransactions through the bank.

Explain how businesses regularly checkthe accuracy of their accounting and that ofthe bank by bank reconciliations. Illustrateand practice. Emphasise the importance ofclear and detailed presentation and

accuracy.

Some texts show the bank reconciliationstatement beginning with the adjusted cashbook balance. Others start with the bankstatement balance. Either is acceptablealthough the most logical, having justupdated the cash book, is the adjustedcash book balance. It is helpful to students

to be consistent in approach as it helpsthem remember.

Students find overdrafts difficult to dealwith. Practice will assist.

http://accounting10.tripod.com/content.htm

http://teachers.cie.org.uk/tea

cher_support/pdf/7110_s03_qp_2.pdf

BKA GlossaryMB Glossary

BKA 14, 15IGSCE12MB 8, 9, 10, 11, 12, 13

CIEJun 2003 Paper 2 Q1

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Syllabus

Ref.

Learning Outcomes Suggested Teaching Activi ties Online Resources Other resources

1.6

1.7

Candidates should be able to: prepare ledger accounts usingthe T account format

post transactions to the ledgeraccounts

balance the ledger accounts asrequired

interpret ledger accounts andtheir balances

Candidates need notknow theuse of the folio columns.

Candidates should be able to: recognise that it is a statement ofledger balances on a particulardate

extract a trial balance

outline its uses and limitations

draw up a suspense account andshow its use

identify and explain those errorswhich do not affect the trialbalance - omission, commission,principle, compensating, originalentry, and reversals

Returning to ledger accounts after bankreconciliation provides students opportunityto think about the former topic. Testunderstanding with examples (such ascash book bank accounts used for bankreconciliation) checking understanding ofthe various transactions.

Students should be given ample practicepreparing and checking ledger accounts.Ensure they routinely balance accountscorrectly.

Illustrate how ledger accounts preparedcan be combined in a trial balance. It isgood practice for students to be given a listof ledger account balances and to have toprepare the trial balance reinforcing thatdebit entries are expenses or assets andcredit entries primarily comprise income,liabilities and capital.

Students should appreciate that the trialbalance is a check on arithmeticalaccuracy. Running through the errors,using examples where possible, will helpthem appreciate the limitations. Examplesare also useful in illustrating when thesuspense account is needed and how it isused.

http://www.bized.ac.uk/stafsup/options/accounting/work03.htm

http://accounting10.tripod.com/content.htm

http://teachers.cie.org.uk/teacher_support/pdf/7110_w03_qp_1.pdf

http://accounting10.tripod.com/Slides11.1.ppthttp://www.bized.ac.uk/stafsup/options/accounting/work04.htm

http://www.bized.ac.uk/stafsup/options/accounting/mod2_t_suspense.htmhttp://teachers.cie.org.uk/teacher_support/pdf/7110_w03_qp_1.pdf

CIENov 2003 Paper 1 Q7, 8

BKA 7, 32IGSCE3, 13MB 26, 27, 28, 63, 64

CIENov 2003 Paper 1 Q9,10

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Syllabus

Ref.

Learning Outcomes Suggested Teaching Activi ties Online Resources Other resources

2.4 Candidates should be able to: make journal entries supportingthe correction of errors

open and post entries to asuspense account wherenecessary

It is useful to illustrate how the journalwould be used to show corrections in theaccounts. Include the narratives in thesejournal illustrations to avoid students fallinginto the common misconception of using,say, error of commission as a journalnarrative.

Emphasise that suspense accounts aretemporary and follow double entryprinciples.

http://www.bized.ac.uk/stafsup/options/accounting/mod2_w_suspense.htm

http://teachers.cie.org.uk/teacher_support/pdf/7110_w03_qp_2.pdf

CIENov 2003 Paper 2 Q2

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