BAF3M: Financial Accounting Principles, Grade 11, University/College Preparation

Unit 2: Balance Sheet and Transactions

Lesson 5: Ledger, Trial Balance, and T-Accounts

Overview

Each balance sheet account (Bank, Equipment, Supplies, Loan, Accounts Payable
Capital, etc.) in a business has its own General Ledger Account. In this activity, you will
learn how to record transactions in General Ledger T-accounts and prepare a Trial
Balance to see that the ledger is in balance. T-accounts are used as a training tool to
familiarize students with the concept of debits and credits. They are, in essence,
simplified Ledger accounts.

Learning Goals

Learning Goals
By the end of this activity, you will be able to:

• understand the concept of debits and credits in terms of accounting.

• use a spreadsheet to record transactions and prepare a Trial Balance and
Balance Sheet.

Success Criteria
I will know I am successful when I can:

• correctly input transactions in a Ledger T-account;

• create a Trial Balance to verify that my debits equal the credits;
• create a correctly formatted Balance Sheet using the borders and functions
features of spreadsheet software program.
Expectations

Overall Expectations:

FAV.03 demonstrate an understanding of the basic procedures and principles of the

accounting cycle for a service business;
AFV.03 apply accounting practices in a computerized environment.

Specific Expectations:

FA3.02 record transactions using the journals and ledgers of a service business;
FA3.03 prepare a trial balance and the financial statements for a service business;
AF3.03 use accounting or application software to prepare financial statements.

Content

Did You Know?

Did you know that a ledger is a term referring to a book remaining

regularly in one place, and so it was used for the copies of the scriptures
and service books kept in a church?

The Ledger
The ledger is used to record business transactions and keep track of the balances in
each specific account. If you wanted to know how much cash the business has to write
a cheque, you would look in the ledger. If you wanted to know how much the business
owes on a bank loan, you would look in the ledger. For the time being we are going to
be working with a General Ledger because it will hold all the accounts of the
business. To keep things simple, accountants usually call the General Ledger just the
Ledger.

A T-account is an accounting form we use to keep track of the specific balance in an

account. If a business has a total of 25 accounts in the Ledger, there will be 25 pages
with each account having a T-account format page. Below you will see what a T-
account looks like.
 Debits and Credits
Debit = Left
Credit = Right

Do not attach any kind of special meaning to the words DEBIT and CREDIT. They are
just accountants' terms for left and right. In accounting, we debit first then credit second
with every transaction. Debits must always equal Credits for every transaction. The
short form for DEBIT is DR and the short form for CREDIT is CR.
Recording Opening Balances in the Ledger
The balances from the Balance Sheet should be recorded in the Ledger. Assets are
recorded with an opening debit balance or on the left side of the T-account. Liabilities
and Owner’s Equity are recorded on the credit side or the right side of the T-account.

Click to watch T-accounts and the Ledger - Part 1.

Recording Business Transactions

Now that we have placed the opening balances in the Ledger we need to record the
business transactions which will change the balances in our accounts.

Remember:

1. Every transactions effects at least two accounts

2. Total Debits must be equal to Total Credits in the ledger after recording the
transaction in the Ledger.

Balancing the T-account

In order to balance the T-account we follow a three step process:

1. Total both sides of the T-account

2. Subtract the smaller amount from the bigger
3. Record the balance on the side of the larger

Trial Balance
Once you have recorded all the transactions in your general ledger you must check to
make sure your Ledger is in balance. Your ledger is in balance when the total of all
debit accounts is equal to the total of all credit accounts.

Remember the Accounting Equation: Assets = Liabilities + Owner’s Equity. The same
is true here but also Debits must equal Credits
 Click to watch T-accounts and the Ledger - Part 2.

Assignments

Assignment 1: T-Accounts, Trial Balance, Balance Sheet

Complete the following assignment and submit your work

Using the T-accounts template, set up the T-accounts with the balances from the
Balance Sheet below.

1. Input the transactions below into each account. Do not add the transaction
reference number.
2. Calculate the balance of each account at the end of the December transactions.
Use the function feature of your spreadsheet.
3. Create a trial balance to make sure your debits = credits. Use the template
provided in the 2ndtab in the spreadsheet.
4. Create a new Balance Sheet dated December 31, 2015. Use the template
provided in the 3rdtab in the spreadsheet.

Bonnie's Batting Cages and Softball Services

BALANCE SHEET
November 30, 2015

Assets Liabilities

Bank $ 56 450 Accounts Payable

Accounts Receivable - Cannon Sports $ 20 000

- Infield Flyers 3 300 - Ewert Equipment 32 000

- Remdal Red Sox 1 500 - Sandhu Sporting Goods 2 500

Supplies 13 500 Bank Loan 45 000

Equipment 52 000 Total Liabilities $99 500

Owner's Equity

B. Birch, Capital 27 250

Total Assets $126 750 Total liabilities and Owner's Equity $126 750

Transactions for December:

1. B. Birch, the owner, invested $40 000 in the business.

2. Borrowed $45 000 from the bank, which was deposited in the business' bank
account.
3. Paid $7 500 to Turtle Dove Properties Ltd. for the monthly rent.
4. Purchased office and various sport supplies for $6 000 cash.
5. Purchased $13 000 worth of bats, helmets, and other sports equipment from
Cannon Sports on account. The amount is due in 30 days.
6. Bought pitching machines from Ewert Equipment for $12 000 on account and
have 30 days to pay.
7. Bought $8 800 of miscellaneous sports supplies on account from Sandhu
Sporting Goods.
8. Sold a one month team membership to the Infield Flyers for $1 300 on
account. The amount is to be received in 15 days.
9. Sold a two-month team membership to the Remdal Red Sox for $2 600 on
account. The bill is due in 30 days.
10. Cash sales for the month amounted to $7 200.
11. Bank charges for services fees and interest amounted to $550, which was
taken directly out of the business' bank account.
 Assignment 2: Exercises from the Text

Complete:

• Unit 3 Apply Your Knowledge Exercises 1, 3, 5, 8, 14 on pages

56- 65.
• Case 2: Accounting Standards – Interpreting Accounting Data
– Read the case study and answer questions 1,2,3 (page 66-
67)

The Study Guide and Working Papers are attached

after the text pages. You can use them or just use
them for reference.

Rubric
T-accounts, Trial Balance, Balance Sheet

Categories Level 1 Level 2 Level 3 Level 4

(50 – 59%) (60 – 69%) (70 – 79%) (80 – 100%)
Knowledge and Records transactions in Records transactions in Records transactions in Records transactions in the
Understanding: the T-accounts with the T-accounts with the T-accounts with few T-accounts perfectly or with
prepare a trial balance and many errors. some errors. errors. limited errors.
the financial statements for
a service business.
FA3.02.
Record transactions in the
corresponding T-accounts

Communication; Prepares trial balance Prepares trial balance Prepares trial balance Prepares trial balance
prepare a trial balance and poorly with many issues with some issues in with few issues in perfectly or with limited
the financial statements for in format and calculating format and calculating format and calculating issues in format and
a service business. balances. balances. balances. calculating balances.
FA3.02.
Prepare trial balance
correctly.

Prepare a trial balance and Prepares the Balance Prepares the Balance Prepares the Balance Prepares the Balance Sheet
the financial statements for Sheet poorly with many Sheet with some issues Sheet with few issues in perfectly or with few issues
a service business. issues in format and in format and format and calculating in format and calculating
FA3.02. calculating balances. calculating balances balances. balances.
Prepare and format Balance
Sheet correctly.

Application: Opens and formats T- Opens and formats T- Opens and formats T- Opens and formats T-
record transactions using accounts with many accounts with some accounts with few errors accounts perfectly or with
the journals and ledgers of errors and formatting errors and formatting and formatting issues. limited errors and
a service business. issues. issues. formatting issues.
FA3.02.
Open and format T-
accounts.

Use application software to Calculates balances with Calculates balances Calculates balances with Calculates balances with a
record transactions for a limited accuracy and use with some accuracy and considerable accuracy high-degree of accuracy and
service business. of functions. use of functions. and use of functions. use of functions.
AF3.01.
Calculate balances using a
function.

Communicates meaning Meaning is unclear Meaning is somewhat Meaning is understood Meaning is communicated
with accuracy and clear with high levels of
objectivity effectiveness
Note: A student whose achievement is below Level 1 (50%) has not met the expectations for this assignment or
activity.

Total: /40