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How to Prepare a General Journal - Component 1

Prior to answering the question "How to organize a common ledger", let us remember what this accounting idea means. We are able to understand common ledger as a summary of accounts which are used in the accounting of the particular company. This ledger includes balance sheet and income statement accounts, which summarize all the financial data and changes to the financial data for the particular time period, i.e. generally it is a month.

We are able to stipulate three primary steps in preparing this ledger:

  1. Its planning is among the steps in the accounting cycle and this is accomplished only after all the business transactions which happened during the accounting time period had been recorded or journalized within the common journal. So the first step is preparing this edger is to journalize transactions.
  2. Afterward common journal records are published in to the common ledger accounts. The account is also an accounting idea and is accustomed to report alternation in person type of asset, legal responsibility, equity, income or expenses. Each type of those financial statement components may have its own account, i.e. cash may have cash account, stock may have stock account, accounts payable may have accounts payable account in the main ledger.
  3. After all the common journal records had been published in to the common ledger corresponding accounts, all the accounts are made clear, meaning amounts within the accounts are calculated and will be utilized additional to organize trial balance and financial statements.

And further let's explore brief example assisting to understand how to make a common ledger:

We now have the following data concerning the transactions within the company ABC. At first of July the company had stock, the price of that was Dollar150, the debt to providers was Dollar230, cash in the bank was Dollar800. The next transactions is going to be regarded as happened in July:

a. bought stock on credit score for Dollar1500 Or b. compensated providers a part of debt, i.e. Dollar560 extra cash from financial institution.

1 action: journalize these transactions. The next records is going to be done:

a deal

D Inventory Dollar1500

_C Accounts payable Dollar1500

Explanation: purchase of stock on credit score

b deal

D Accounts payable Dollar560

C Cash in financial institution Dollar560

Explanation: having to pay from financial institution to providers a part of debt

In the next part of this post we'll ongoing with this example.


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