Recording in Accounts
This lesson introduces the format of the columnar ledger accounts and shows how they are used to record business transactions. Students will learn to calculate running balances and properly close the capital account, as well as asset and liability accounts.
Related Lessons:
Format Of Columnar Account
The columnar account comprises of the following information:
Header – Name of account
This is recorded as a title to the account to identify what this account represents
1st column – Date
Records the date that the transaction happened. It is a must to record the day, month and year of the transaction.
2nd column – Particulars
Records the name of the other account affected by this transaction
3rd column – Debit
Records the amount to be debited for this account
4th column – Credit
Records the amount to be credited for this account
5th column – Balance
Records the updated balance of this account after each entry
Calculating Running Balances
To calculate running balance in a columnar account, we add or minus from the balance after each transaction. This shows the account balance at any point in time.
Starting with the opening balance, we then update the balance row by row by adding amounts on the same side, and minus the amounts on the opposite side.
Debit balance:
Add the amount in the debit column and minus the amount in the credit column.
Credit balance:
Add the amount in the credit column and minus the amount in the debit column.
Recording In Columnar Account
To record a transaction in the columnar account, we first state the name of the account that we are preparing in the header.
Next, we record the date of the transaction.
Just like journal recording, we identify which account increases, and which decreases in value, then decide which account to debit and which to credit based on the nature of the accounts.
The name of the other account affected by this transaction is recorded under the Particular column.
If the account that we are preparing is to be debited, we record the amount under the Debit column. If it is to be credited, we record the amount under the Credit column.
Closing Assets, Liability, Capital Accounts
Assets, liability and capital accounts are part of the Statement of financial position of a business. They represent the business financial position at a point in time. Therefore, these accounts are considered permanent accounts of a business.
Balances of these accounts are brought down to the following month for continuation.
On the first day of the following month, the balance from previous month is recorded as Balance Brought Down.