Textbook Notes (280,000)
CA (160,000)
UTSC (20,000)
MGA (400)
MGAB01H3 (100)
Chapter 3.3

Chapter 3.3

Financial Accounting
Course Code
Liang Chen

of 1
Chapter 3
The Ledger
The entire group of accounts that are maintained by a company is referred to as the ledger. The ledger
keeps all the information about changes in specific account balances in one place. A general ledger
contains all the asset, liability, equity, revenue and expense accounts. Most companies list their ledger
accounts in a chart of accounts. The chart of accounts is the framework for the accounting database. The
1XXX series belong to assets, 2XXX series belong to liabilities, 3XXX belong to equity, 4XXX revenue, and
5XXX expense accounts.
The procedure of transferring journal entries to the general ledger accounts is called posting. This phase
of the recording process accumulates the effects of journalized transactions in the individual accounts.
Posting should be done chronologically.
The basic steps in the recording process shown in the (1) transaction analyses, (2) general journal, and (3)
general ledger are the first three steps in what is called the accounting cycle. The accounting cycle is as
1. Analyze business transactions
2. Journalize transactions
3. Post to the ledger
4. Prepare trial balance
5. Journalize and post adjusting entries
6. Prepare an adjusted trial balance
7. Prepare statements: income statement, retained earnings, balance sheet
8. Journalize and post closing entries
9. Prepare post-closing trial balance
Or analyze, journalize, post, TB, adjusting, TB, statements, close, TB
The Trial Balance
A trial balance is a list of general ledger accounts and their balances at a specific time. The main purpose
of the trial balance is to prove that debits equal credits. If they do not agree, then a mistake in
journalizing or posting has occurred.
Limitations of a Trial Balance
A balanced trial balance does not prove everything is correct. Missing transactions, incorrect account
balances, double posting, or errors that cancel out will not be shown in a trial balance.