Accounting

The check over Ledger is based on The Dual Aspect Concept i.e., all debits = all credits, the trial all Ledger postings must pass.

To know the “position” of the business, we use a new layout titled the Position Statement, comprising of Equity-Liabilities and Assets.

Here, we’ll spend some time not learning anything new but connecting the dots between the concepts we’ve learned earlier.

Since we’ve gotten the hang of the accounting cycle, it is time we dig deeper into financial statements, starting with the Income Statement.

The partition of Income Statement, based on the categorisation of expenses, resulted into the birth of Trading account and P&L account.

Before discussing the layout of Balance Sheet, we must first discuss one of its components: Reserves & Provisions, born out of the “prudence concept”.

It is now time that we explore our second financial statement: the Position Statement or what the accounting world calls the “Balance Sheet”.

Any recordings made in our financial statements, particularly the Income Statement, require a entry of their own, called the “Closing Entry”.