PQ magazine is for part qualified accountants.
Read the latest web issue here if you like what you see sign up today
A Quick Look at... the nominal ledger
Today, the role of IT and the internet are wide ranging in industry, government and society.
It is more so with the growth of Software as a Service (SaaS) and outsourcing. Organisations use internet and communication technologies to streamline their business processes and make them more efficient.
Organisational computerised accounting function plays a major role in assembling accounts by collecting, recording, classifying, presenting and communicating accounting information. The nominal ledger is the core of any computerised accounting system. It provides central control over the accounting requirements of the accounting system and account maintenance through to trial balance, profit and loss account and balance sheet.
The trial balance is a listing of all of the accounts in the chart of accounts with their account balances (values). The balances are listed under one of two columns, either as a debit or credit. The totals of the two columns should always be the same. On a computerised system the total of debits will always equal the total of credits.
Errors not affecting trial balance agreement:
Errors of commission wrong persons account, for example sale to B Smith is entered in the account of F Smith.
Errors of principle wrong class of account, e.g. fixed asset entered as an expense
Errors of original entry figure entered is incorrect (for both debit and credit).
Errors of omission transaction completely omitted from books.
Compensating errors errors cancel each other out.
Complete reversal of entries correct amounts but on wrong sides of accounts
Profit and loss account
The profit and loss account shows the expenses and revenues for a period. The expenses are deducted from the revenues to give the profit or loss.
The profit and loss account will deal with the revenues and expenses for a period. The remaining account balances are shown on the balance sheet, which lists a companys assets, liabilities and capital in a specified format.
Chitharanjandas Chinnapaka is an AIA Achieve e-tutor. The AIA Achieve team is producing a series of A Quick Look at . articles and more can be found on the AIA website:
Subscribe to RSS