Master Note of Accounting and Finance

Meaning of Adjustment The transactions that do not appear in a ledger account are to be noted as adjustments. It is also known as accounting or year-ended adjustments. Adjustments are necessary for financial reporting that are made on accrual basis. The year-end adjustment typically made by journal entries (adjusting entries) that reflects in the company's financial statements. It is made before financial statements are prepared to ensure that company's financial records adhere revenue recognition and matching principle. Those financial transactions not included in the concerned ledger account are mentioned separately as adjustments after the preparation of trial balance. Features of Adjustments The following are some of the major features of adjustment that can help the accountant to identify and make adjusting entries.  It is given by named as accrual or deferred incomes or expenses It is given at the end of all the transactions It always affects the profit and loss and balan...

Meaning and Concept of Ledger  We know that all financial transactions are recorded first in the journal in a chronological order. Then in the next step, those journalized transactions are classified periodically into various accounts as per their nature. When all transactions of a particular account are collected at one place, then it is called 'ledger'. In other words, a ledger is a book in which all the accounts of a business relating to persons, assets, expenses, incomes etc re maintained. In a ledger, a separate account is opened for each different types of transaction. The journal is known as the book of original entry and the ledger is known as the principal book of accounts. The main function of the ledger is to classify and summarize all the items appearing in journal and other books of original entry under appropriate accounts, so that at the end of the accounting period, each account contains the entire information of all transactions relating to it. "The ledg...

Meaning of Trial Balance A trial balance is that statement which shows wither the balances or total amounts of debit items and credit items of all the ledgers. It is a statement of debit and credit totals or balances of the ledger account, which is prepared to check the arithmetical accuracy of the recorded transactions. The fundamental principle of double entry system of accounting is that "for every debit there must be a corresponding credit for the same amount". Thus, when the balances of all ledger accounts are extracted and are written in a statement to see whether its total of debit equal to total of credit or not,then it is called Trial Balance. Trial Balance can be prepared as daily,weekly, monthly, quarterly, half-yearly or yearly as per the need of the organization. "A trial balance is a statement of debit and credit totals, or balances extracted from the ledger with a view to test the arithmetic accuracy of the books".- C.L. Chaturvedi and L.N. Agrawal Fe...