There are several procedures which are involved in book-keeping. Those processes are as follows:
Accounting transactions are those business transactions which have required documentary proofs. These types of transactions are generally financial in nature. Any other kind of non-economic activities relating to respect, patriotism, and certain emotions do not hold its place in book-keeping. This section follows an extremely professional approach towards transaction identification of accounts.
Accounting transactions that are recognized are passed through certain books like sales book, purchase books, and through other books, which in combination are called subsidiary books. Some of those other books included in the subsidiary book are cash book, bills receivable book, returns inward book, bills payable book, returns outward book, and journal proper.
In a ledger account, every transaction details regarding any commodity, party, or even to any particular person are put together in a single place. The entire placement comes under one account which is a ledger.
If the example of Industrial Management and Training Institute (IMTI) is taken as a certain party, its ledger account will contain some of the essential things. Those will include sales information to IMTI, payment received from there, any discounts issued to IMTI and so on.Amount receipts of any of these are required to be put in this ledger account.
This format actually helps in comprehending about the dealings and IMTI’s actual position which is easily scalable. It is with the help of journal proper and subsidiary books when you can prepare a ledger account.
A ledger account is prepared with a very balanced format. Balanced in term of this account is the established difference between its credit and debit side. The amount which is payable to or which is receivable is highlighted in a personal account.The value of goods on a specific date can be seen in the assets account. It is the ledger account which discloses capital liability, revenue, balance of expenses and commodities of a company.
With the help of balances displayed by ledger accounts, a trial balance is constructed. It is very important to consider the dual aspects, i.e., the credit and debit balance of trial balance. It is an essentially regarding each transaction when it is passed through journal entries while preparing subsidiary books.
To be stated in simplified words, to check its mathematical accuracy, trial balances are prepared. Any mistake while calculating the total of credit and debit side of trial balance means a possible error during the entry. So, during its preparation, these errors are pinpointed and are corrected.