I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

 

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Ledger accounts summarise all the individual transactions listed in the books of prime entry. 

 

The principal accounts are contained in a ledger called the general or nominal ledger. 

 

The accounting equation is ASSETS = CAPITAL + LIABILITIES. 

 

When business transactions are accounted for, it should be possible to restate the assets and liabilities 

of the business after the transactions have taken place. 

 

Trade accounts payable are liabilities. Trade accounts receivable are assets. 

 

The matching convention requires that revenue earned is matched with the expenses incurred in earning 

it. 

 

Double entry bookkeeping is based on the idea that each transaction has an equal but opposite effect. 

Every accounting event must be entered in ledger accounts both as a debit and as an equal but opposite 

credit. 

 

A debit entry will: 

 

– 

Increase an asset 

 

– 

Decrease a liability 

 

– 

Increase an expense 

 

A credit entry will: 

 

– 

Decrease an asset 

 

– 

Increase a liability 

 – Increase 

income 

 

Some accounts in the nominal ledger represent the total of very many smaller balances. For example, 

the trade accounts receivable account represents all the balances owed by individual customers of the 

business, while the trade accounts payable account represents all money owed by the business to its 

suppliers. 

 

The journal is the record of prime entry for transactions which are not recorded in any of the other books 

of prime entry. 

 

Entries in the day books (books of prime entry) are totalled and analysed before posting to the nominal 

ledger. 

 

The receivables and payables ledgers contain the personal accounts of individual customers and 

suppliers. They do not normally form part of the double entry system. 

 

 

CHAPTER ROUNDUP 

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