What is a ledger?
A collection of all accounts used by a business.
What is a T-account?
A simplified account format showing debits (left) and credits (right).
What are the two steps to calculate a T-account balance?
Add both sides (pin totals)
Subtract smaller from larger and write the balance on the larger side
What is a “pin total” (pencil footing)?
The subtotal of each side of a T-account.
Where do you write the final balance in a T-account?
On the side with the larger total.
What is an exceptional balance?
When an account’s balance is on the opposite side of its normal balance.
Give an example of an exceptional balance.
Overpaying accounts receivable or spending more cash than available.
Why is “Bank” used instead of “Cash”?
Because businesses use electronic payments and cheques, not just cash.
What does “on account” mean?
Buying or selling now and paying later.
What are the 4 uses of credit?
Purchase on account
Payment on account (A/P)
Sale/service on account
Receipt on account (A/R)
What is a trial balance?
A list of all accounts and their balances.
What is the purpose of a trial balance?
To prove total debits = total credits.
What are the steps to prepare a trial balance?
List WHO, WHAT, WHEN
List accounts and balances
Total debit and credit columns
What must always be true in a trial balance?
Total debits must equal total credits.
What does a trial balance NOT prove?
That all transactions are recorded or correct.
What should you do if the trial balance doesn’t balance?
Re-add columns
Check accounts copied correctly
Recalculate T-accounts
Recheck transactions
