Level: Intermediate
Intermediate Worked Examples: Ledger
Six graded examples on the ledger: account classification and normal balances, the double-entry system, balancing accounts, posting from the journal, and preparing the Receivables and Payables Control Accounts including contra entries.
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Example 1: Account Classification & Normal Balances
Question
Solution plan
A Real Account is an asset account that physically exists (Motor Vehicle, Inventory, Cash) and carries a debit balance. A Nominal Account records expenses and revenue: Purchases, Salaries and Insurance are expenses (debit balance); Sales and Rent Received are revenue (credit balance). Normal-balance rule: assets and expenses increase on the debit side; liabilities, owner's equity and revenue increase on the credit side.
| Account | Group | Normal Balance |
|---|---|---|
| Motor Vehicle | Real Account | Debit |
| Inventory | Real Account | Debit |
| Cash | Real Account | Debit |
| Purchases | Nominal Account | Debit |
| Salaries | Nominal Account | Debit |
| Insurance | Nominal Account | Debit |
| Sales | Nominal Account | Credit |
| Rent Received | Nominal Account | Credit |
| Account Type | Normal Balance | Examples |
|---|---|---|
| Asset | Debit | Cash, Motor Vehicle |
| Liability | Credit | Creditors, Loan |
| Owner's Equity | Credit | Capital |
| Revenue | Credit | Sales, Rent Received |
| Expense | Debit | Purchases, Salaries |
Answer
Real Accounts: Motor Vehicle, Inventory, Cash (all debit balances). Nominal Accounts: Purchases, Salaries, Insurance (debit balances) plus Sales and Rent Received (credit balances). Group normal balances: assets (Dr), liabilities (Cr), owner's equity (Cr), revenue (Cr), expenses (Dr).
Where marks are usually lost
Example 2: Double Entry & Balancing Accounts
Question
Solution plan
Each transaction is recorded in two accounts (one debit, one credit). Opening capital: Dr Cash & Dr Bank, Cr Capital. Cash purchases: Dr Purchases, Cr Cash. Cash sales: Dr Cash, Cr Sales. Rent: Dr Rent, Cr Bank. Banking cash (contra): Dr Bank, Cr Cash. To balance: total both sides, enter the difference as Balance c/d, then bring it down as Balance b/d.
| Particulars (Dr) | RM | Particulars (Cr) | RM |
|---|---|---|---|
| Capital | 12,000 | Purchases | 3,000 |
| Sales | 5,000 | Bank | 4,000 |
| Balance c/d | 10,000 | ||
| 17,000 | 17,000 | ||
| Balance b/d | 10,000 |
| Particulars (Dr) | RM | Particulars (Cr) | RM |
|---|---|---|---|
| Capital | 20,000 | Rent | 1,000 |
| Cash | 4,000 | Balance c/d | 23,000 |
| 24,000 | 24,000 | ||
| Balance b/d | 23,000 |
| Particulars (Dr) | RM | Particulars (Cr) | RM |
|---|---|---|---|
| Balance c/d | 32,000 | Cash | 12,000 |
| Bank | 20,000 | ||
| 32,000 | 32,000 | ||
| Balance b/d | 32,000 |
| Particulars (Dr) | RM | Particulars (Cr) | RM |
|---|---|---|---|
| Purchases Account | |||
| Cash | 3,000 | ||
| Sales Account | |||
| Cash | 5,000 | ||
| Rent Account | |||
| Bank | 1,000 |
These nominal accounts have entries on one side only this month, so they are not balanced; their balances are transferred to the Trading Account or the Profit and Loss Account at the end of the period.
Answer
The Cash Account balance b/d is RM10,000 (debit), the Bank Account RM23,000 (debit) and the Capital Account RM32,000 (credit). Purchases shows a debit balance of RM3,000, Sales a credit balance of RM5,000 and Rent a debit balance of RM1,000.
Where marks are usually lost
Example 3: Posting from the General Journal to the Ledger
Question
Solution plan
The General Journal is the book of prime entry for the opening entry. All assets are debited, all liabilities credited, and the balancing figure is Capital (credited). Capital = Total Assets - Total Liabilities = (5,000+15,000+8,000+22,000) - 6,000 = RM44,000. Each item is then posted to its own account: assets to the debit side, liabilities and capital to the credit side.
| Date | Particulars | Debit (RM) | Credit (RM) |
|---|---|---|---|
| 2024 Jul 1 | Cash | 5,000 | |
| Bank | 15,000 | ||
| Inventory | 8,000 | ||
| Motor Vehicle | 22,000 | ||
| Creditor (Kedai Borong Maju) | 6,000 | ||
| Capital | 44,000 | ||
| (Recording opening assets, liabilities and capital) | |||
| Total | 50,000 | 50,000 |
| Particulars (Dr) | RM | Particulars (Cr) | RM |
|---|---|---|---|
| Motor Vehicle Account | |||
| General Journal | 22,000 | ||
| Creditor Account (Kedai Borong Maju) | |||
| General Journal | 6,000 | ||
| Capital Account | |||
| General Journal | 44,000 |
Answer
The General Journal balances at RM50,000 on both sides. Opening capital is RM44,000. After posting: the Motor Vehicle Account shows a debit balance of RM22,000, the Creditor Account a credit balance of RM6,000 and the Capital Account a credit balance of RM44,000.
Where marks are usually lost
Example 4: Receivables Control Account
Question
Solution plan
Debtors carry a debit balance. Debit side (increases what is owed): opening balance, credit sales, dishonoured cheque (debt reinstated) and overdue interest. Credit side (reduces what is owed): receipts, discount allowed, returns inwards and bad debts. Balance c/d = total debit - total credit.
| Particulars (Dr) | RM | Particulars (Cr) | RM |
|---|---|---|---|
| Balance b/d | 12,000 | Bank | 30,000 |
| Sales | 35,000 | Discount allowed | 800 |
| Bank (dishonoured cheque) | 500 | Returns inwards | 1,500 |
| Interest | 200 | Bad debts | 700 |
| Balance c/d | 14,700 | ||
| 47,700 | 47,700 | ||
| Balance b/d | 14,700 |
Answer
Both sides total RM47,700. The balance b/d (debtors balance) on 31 May 2024 is RM14,700 on the debit side.
Where marks are usually lost
Example 5: Payables Control Account
Question
Solution plan
Creditors carry a credit balance. Credit side (increases what we owe): opening balance, credit purchases and discount cancelled (an earlier discount reversed because a cheque was dishonoured). Debit side (reduces what we owe): payments, discount received and returns outwards. Balance c/d = total credit - total debit.
| Particulars (Dr) | RM | Particulars (Cr) | RM |
|---|---|---|---|
| Bank | 24,000 | Balance b/d | 9,000 |
| Discount received | 600 | Purchases | 28,000 |
| Returns outwards | 1,200 | Discount cancelled | 150 |
| Balance c/d | 11,350 | ||
| 37,150 | 37,150 | ||
| Balance b/d | 11,350 |
Answer
Both sides total RM37,150. The balance b/d (creditors balance) on 30 June 2024 is RM11,350 on the credit side.
Where marks are usually lost
Example 6: Contra Entry: A Debtor Who Is Also a Creditor
Question
Solution plan
Syarikat Maju Jaya owes us (a debtor) and we also owe it (a creditor). The contra entry sets off (removes) the same amount from both accounts: a credit in the Receivables Control Account (reducing debtors) and a debit in the Payables Control Account (reducing creditors). The remainder is balanced as usual.
| Particulars (Dr) | RM | Particulars (Cr) | RM |
|---|---|---|---|
| Balance b/d | 18,000 | Bank | 33,000 |
| Sales | 40,000 | Returns inwards | 2,000 |
| Contra (Payables CA) | 3,000 | ||
| Balance c/d | 20,000 | ||
| 58,000 | 58,000 | ||
| Balance b/d | 20,000 |
| Particulars (Dr) | RM | Particulars (Cr) | RM |
|---|---|---|---|
| Bank | 25,000 | Balance b/d | 14,000 |
| Returns outwards | 1,000 | Purchases | 30,000 |
| Contra (Receivables CA) | 3,000 | ||
| Balance c/d | 15,000 | ||
| 44,000 | 44,000 | ||
| Balance b/d | 15,000 |
Answer
After the RM3,000 contra: the Receivables Control Account totals RM58,000 with a balance b/d of RM20,000 (debit); the Payables Control Account totals RM44,000 with a balance b/d of RM15,000 (credit).