Basic accounting

Basic accounting 2

What is ledger?

Answer:   A ledger is an accounting book in which all similar transactions related to a particular person or thing are maintained in a summarized form.Ledger is a Principal book of accounting or the book of final entry.

Why the ledger is called king of all books?

Answer:  Because ledger has records of all books .No other book keeps so much detail in itself. Ledger alone is sufficient to provide actual status of a business. Therefore, Ledger is king of all books.

What is trial balance?

Answer:  A trial balance is a list of all the general ledger accounts (both revenue and Capital) contained in the ledger of a business.

What is suspense account in trial balance?

Answer:  The suspense account is a general ledger account that acts as a holding account until the error is discovered or the unknown transaction is identified.

Why it is prepared?

A suspense account is an account in the general ledger in which accounts are temporarily recorded .The suspense accounting is used because the proper account could not be determined at the time that the transaction was recorded.

What is adjusting entry? Why it’s prepared?  

 Answer: Adjusting entries are accounting entries that convert a company’s accounting records to the accrual basis of accounting.  

Prepared Adjusting entries are made at the end of the accounting period in order for a company’s  accounting record and financial statement to be up-to-date o n the accrual basis of accounting.

What Error cannot be found out by trial balance

Answer: -Different types of errors which don’t affect the trial balance,

Error of omission Where in the full transaction is omitted from the books of accounts.

Error of Commission Where we have entered the correct amounts but in wrong person’s account.

Error of principle This type of error takes place when an item is entered in wrong head or class of accounts.

Error of compensation: Are that errors which cancel the effects of each other.