Chapter 7 - Posting (Accounting)

# Chapter 7-Posting ## 7.1-Posting In previous chapters you were introduced to the ledger and the journal, which are the two important books in the accounting process. You are now ready to connect these two books and fully understand their roles in the accounting cycle. ### The Balance Column A...

# Chapter 7-Posting ## 7.1-Posting In previous chapters you were introduced to the ledger and the journal, which are the two important books in the accounting process. You are now ready to connect these two books and fully understand their roles in the accounting cycle. ### The Balance Column Account So far we have considered only the simple two-sided ledger account showing debits on one side and credits on the other. However a second style of ledger account, known as the balance column account, is actually more useful and convenient. The balance column account has three money columns: one for the debit amounts, one for the credit amounts, and a separate one for the balance. This method allows the balances to stand out more clearly. The T-account and the balance column account are compared in Figure 7.1 below. | **T-ACCOUNT** | **BALANCE COLUMN ACCOUNT** | |:--:|:--:| | Bank | Bank | | 5 000 350 | **Date** | **Particulars** | **P.R.** | **Debit** | **Credit** | **Dr/Cr** | **Balance** | | 700 1750 | Jul. | | 14 | 5000 | | Dr | 5000- | | 200 960 | 14 | | 14 | | 700- | Dr | 5700- | | 450 | 17 | | J5 | | 350- | Dr | 5350- | | 6 350 3 060 | 18 | | 15 | | 1750- | Dr | 3600 | | 3 290 | 18 | | 16 | | 200- | Dr | 3800 | | | 21 | | J7 | | 450 | Dr | 4250- | | | 23 | | 17 | | 960- | Dr | 3290- | | | | | | | | | | **Figure 7.1:** Comparison of entries made in a T-account (left) and in a balance column account (right). For this illustration, the familiar T is highlighted in green in the balance column account. ### Opening an Account An accounting entry often affects an item for which there is no existing account in the ledger. When this happens, it is necessary to open an account. Opening an account means preparing an account and placing it in its proper place in the ledger. The new account will need an account title, a name for which an account is prepared, and a number for identification. ## 7.2-Overcoming Errors Owners, bankers, investors, employees, and tax authorities represent some of the people who rely on the information produced by accounting systems. Accountants must work to a high degree of accuracy. The information produced by an accounting system must be trustworthy. Few errors should enter into an accounting system, and the small number that do get in must be discovered and corrected. If you have a clear understanding of the accounting concepts presented so far, you will be able to find and correct errors. ### Correcting Errors in the Books Manual accounting was traditionally done pen, not pencil. Accountants made it a rule not to erase or use liquid paper to correct errors. Erasures in the books might arouse the suspicions of the auditors, the official examiners of the books and records. For the benefit of auditors, even accounting software does not delete or cover up what was written in the past. Other methods are used for making corrections. ### Errors Found Immediately It is simple to correct an error that is found right away. Simply stroke neatly through the incorrect figures or letters and write the correct ones immediately above. Figures 7.7 below and 7.8 on the next page show this type of correction. **Figure 7.7:** Correcting a journal name **Figure 7.8:** Correcting amounts in an account ### Errors Found Later The accounting department may not learn of an error until quite some time has passed. In many cases, the error can be corrected by means of an accounting entry. For example, consider the following situation: On July 5, an accounting clerk noticed that an invoice for $752 had been debited to the wrong account. The invoice was clearly for supplies but had been debited to the Equipment account. The error had been made on January 17, almost six months earlier. **Missing a $752 debit** **Figure 7.9:** Two accounts with errors. Supplies is missing the $752; Equipment has the $752 but should not. The best way to correct an error of this type is by using a correcting journal entry. A correcting journal entry is an accounting entry that cancels the effect of an error. In the above case, the entry is needed to cancel the $752 in the Equipment account and set it up in the Supplies account. This correcting journal entry is shown in Figure 7.10. **Figure 7.10:** A correcting journal entry This method makes it unnecessary to squeeze $752 into the Supplies account and to stroke through and change several dollar amounts. After correction, the two accounts appear as shown in Figure 7.11. **Figure 7.11:** The two accounts after correction Understanding how to make correcting journal entries will help you when you do computer accounting, as well as manual. Accounting software helps reduce errors; yet, clerks can still select the wrong accounts and input erroneous amounts. ## 7.3-Comparing Accounting Software Programs to Manual Accounting Accounting software is a fundamental tool in the accounting profession. So far you have been doing pen-and-paper accounting, which has given you a strong understanding of the main parts of the accounting cycle. You can analyze source documents, record journal entries, post journal entries to a ledger, take off a trial balance, and prepare financial statements. Using accounting software will help you to understand all of the important procedures of the accounting cycle that you have learned so far. If you lack access to the software and computers needed for this section, move on to the Chapter Review Exercises and come back to Section 7.3 when convenient. The accounting software shown in most illustrations in this text is Sage Simply Accounting Premium 2011. Your goal is not to become a trained expert in Sage Simply Accounting software. Rather, your aim is to become familiar with this software's capabilities, keeping in mind that other accounting software programs have similar features. The biggest part of this section is an accounting exercise that is similar to the Chapter 7 Review Exercises 6 and 7 on pages 258 to 263. To help you compare manual accounting to computer accounting, keep track of the time it takes you to complete each of these three exercises. ### With Strings Attached Jessica Lucas wants to turn her passion for music into a successful business. She plans to build a recording studio, where artists and bands can record music. Customers can pay cash to rent the studio for a short time or to purchase larger recording packages on credit. Jessica knows several musicians, so she is confident that her business will have customers right from the start. The name of her business is With Strings Attached. The ledger accounts have already been created in Sage Simply Accounting software. You will make the entries for September and October 2012, the first two months of operation. The chart of accounts is shown in Figure 7.13 on this and the next page. **Figure 7.13:** The chart of accounts for With Strings Attached. **Notice that Sage Simply Accounting software uses a four-digit numbering system in this chart of accounts.** **Table 7.13**: Chart of Accounts | Account | Account Number | Account | Account Number | |:---------|:--------------------------|:---------|:--------------------------| | Assets | 1000 Assets | Equity | 3000 Equity | | | 1010 Bank | | 3010 J. Lucas, Capital | | | 1050 A/R - The Black Stripes | | 3050 J. Lucas, Drawings | | | 1060 A/R - Rebecca Green | | 3600 Current Earnings | | | 1070 A/R - The Weasels | | 3999 Total Equity | | | 1200 Supplies | Revenue | 4000 Revenue | | | 1300 Furniture and Equipment | | 4010 Fees Earned | | | 1999 Total Assets | | 4999 Total Revenue | | Liabilities | 2000 Liabilities | Expenses | 5000 Expense | | | 2010 Bank Loan | | 5010 Advertising Expense | | | 2050 A/P - Dave's Digital Music Emporium | | 5020 Bank Charges | | | 2060 A/P - Digital Marketing Solutions | | 5030 Miscellaneous Expense | | | 2070 A/P - Electric Circus | | 5040 Rent Expense | | | 2080 A/P - The Furniture King | | 5050 Telephone Expense | | | 2090 A/P - Hudson Music Equipment | | 5060 Utilities Expense | | | 2100 A/P - Mobile City | | 5070 Wages Expense | | | 2200 HST Payable | | 5999 Total Expense | | | 2300 HST Recoverable | | | | | 2400 HST Owed | | | | | 2999 Total Liabilities | | | ### Loading the Account Files There are several ways to load Sage Simply Accounting software onto your computer. Your teacher will tell you the best method for your computer lab. One way is to double-click the Sage Simply Accounting software file named WithStrings-Attached 1. When you load the Sage Simply Accounting software files for With Strings Attached, you will be asked to confirm a Session Date of September 1, 2012. Click the OK button, and you will see the Home window of Sage Simply Accounting software. It will look similar to Figure 7.14. **Figure 7.14**: The Home window for With Strings Attached showing the General Module. **Note:** You are using Sage Simply Accounting Premium 2011 for this module and will use all of the six modules. Sage Simply Accounting software has six modules, or sections, for different aspects of accounting. You will use all of the modules as you continue through the text. For now, you only need the General module, shown on the right in Figure 7.14. The icon near the top of the module is a stack of books, which represents the ledger accounts, or “books”, for With Strings Attached. The icon showing the open book with the arrow, represents the general journal, the book of original entry. Later on in the text, you will work with Reconciliation & Deposits, and its icon is shown at the bottom right of the screen. ### Making Journal Entries The first transaction for With Strings Attached appears below. There are three money columns. The first is the base amount of the transaction. The second is the HST calculated on the base amount. You will need to determine the account that will receive the HST portion. It will be either HST Payable or HST Recoverable. The total amount— base plus HST—is shown in the third column. **Table 7.15:** TRANSACTION 1 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | September 1 | 20,000 | - | 20,000 | For the exercises in this text, the HST rate will be 13%. To journalize this transaction double-click the General Journal icon in the Home window. A new window will open that allows you to enter the transaction details. The Source field is for source document numbers. If no source document number exists, type your initials. When entering general journal data, you can move from field to field by using the Tab key. To make the bank and capital accounts appear in the Account field, type their account numbers and press the Tab key. You can now enter the transaction into the General Journal window as shown in Figure 7.15 below. Remember that the debit item should be entered first. **Figure 7.15:** The General Journal data of the first transaction for With Strings Attached. The General Journal window in Figure 7.15 is easy to follow but looks slightly different from the format you saw in Chapter 6. To check your work in a more familiar format, choose Report, Display General Journal Detail. Your screen should look like Figure 7.16. **Figure 7.16:** The journal entry format for Transaction 1. Checking your journal entries in the format shown in Figure 7.16 may help you to prevent errors. Close this window once you are sure it is correct. You are now ready to post this transaction. ### Posting After you have returned to the General Journal window, you may post your transaction. Click the Post button at the bottom-right corner of the window. To check what Sage Simply Accounting has done with your journal entry once posted, return to the Home window and choose Reports, Financials, Trial Balance and click OK. Your screen should look like Figure 7.17. Notice that the cursor now looks like a small magnifying glass with a plus sign. **Figure 7.17:** The trial balance after the first transaction has been posted. The amounts in the first transaction have been posted to the Bank and J. Lucas, Capital accounts. The new balances in those show up instantly on the trial balance. Sage Simply Accounting lets you follow the trail, or path, of transactions. When viewing the trial balance (Figure 7.17), move the cursor (the magnifying glass) on top of the 20 000 debit to Bank. Double-click the 20,000 and the ledger account #1010 for Bank appears. Double-click the 20,000 debit in the ledger account, and the original journal entry appears. Moving from the trial balance to the ledger to the journal entry in the above manner is called drilling down. Accountants find it very useful to do this when they need to answer questions about amounts that appear on financial statements. ### **TRANSACTION 2** Open the general journal and enter the second transaction (below). **Table 7.16**: TRANSACTION 2 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | September 1 | 42,000 | - | 42,000 | If you do not remember the With Strings Attached account number for Bank Loan, you could look at the chart of accounts on pages 245 and 246. However, there is a faster way. When your cursor is in the Account field, press the Enter key. A chart of accounts will appear. Select the account you want by doubleclicking on the account from the list. Post Transaction 2 when you are sure it is correct. ### **TRANSACTION 3 - Correcting Errors** A mistake has been made. The amount of the loan from the bank is $40 000, not $42 000. You might think that it would be best to delete Transaction 2 and start again. Accountants and auditors, however, like to see any changes that are made. Therefore, instead of deleting the incorrect entry, you can make another journal entry (or entries) to adjust the totals in the accounts. You could make two separate journal entries to fix the mistake. The first entry would be the exact opposite of the error. To reverse this entry, you would debit Bank Loan for $42 000 and credit Bank for $42 000. Then, you would redo Transaction 2 properly. This procedure is easy to understand but it takes time to complete. A better way is to use the software’s features for correcting entries. In the General Journal window there is an icon showing a book and a pencil eraser. Click this icon or press Ctrl/A, which is the keyboard shortcut for adjusting a previously processed entry. You are presented with search options. Use them to find the erroneous entry. Then, change the journal entry to what it should have been (Bank Debit, $40 000; Bank Loan Credit, $40 000). In this case, all you have to do is change the amounts. Post the adjusting entry after you change the amounts to $40 000. Then, from the Home window, choose Reports, Journal Entries, All. Finally, make sure you click the Corrections box and press Enter. Your monitor will look similar to Figure 7.18 on the next page. **Figure 7.18:** Transaction details with the correcting journal entries for the bank loan highlighted. Notice that entries J3 and J4 were created for you automatically. The second and third entries are highlighted for you in Figure 7.18 to clearly show that J3 cancels J2. The fourth entry records the correct amounts and accounts (J4). All you had to do to create these two entries was change two numbers. Try showing this report again, but this time take the check mark off the Corrections box. All you will see is J1 and J4. The second and third entries are there for auditors to see, but since they cancel each other out, there is no sense in cluttering up your journal report. ### Transaction 4—Changing Default Amounts Transaction 4 is your first chance to work with HST using Sage Simply Accounting software. The details of Transaction 4 are shown below. **Table 7.17**: TRANSACTION 4 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | September 1 | 3,000 | 390 | 3,390 | Enter the amounts for Rent Expense and HST Recoverable. Stop when your screen looks like Figure 7.19. **Figure 7.19:** A partial journal account with incorrect HST results. The $3000 credit to HST Recoverable appeared by default, and it is not what you want. Sage Simply Accounting software anticipated that you wanted a credit entry of $3000, because Rent Expense was debited $3000. In most cases, Sage Simply Accounting software defaults are correct and will save you time. However, the software cannot think for you, and sometimes it guesses incorrectly. In this example, the software did not know how to calculate the HST. From Transaction 4’s source document information, you know HST should be $390 ($3000 × 13%). While the $3000 credit to HST Recoverable is still highlighted, type in -390, and then press the Tab key. The negative sign transfers the $390 to the debit side, because that is the negative or opposite of a liability account. (You can also delete the $3000 figure and enter $390 on the debit side). On the third line of the entry, add the Bank account. Your screen will look like Figure 7.20 on the next page. Notice that the $3390 credit to Bank appeared by default. This time, Sage Simply Accounting software guessed correctly. Post your entry when you are sure it is correct. **Figure 7.20:** The amount to credit the account. The correct journal entry for the rent payment. You are now ready to complete the rest of the journal entries for the first two months of business for With Strings Attached. Remember that this is the very start of the business; there are many large purchases needed to get the recording studio up and running. With Strings Attached has two main types of customers— those who rent the studio by the hour and are required to pay in cash, and those who agree to package deals on credit and are invoiced. **Table 7.21**: TRANSACTION 5 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | September 2 | 2312.11 | 300.57 | 2,612.68 | **Table 7.22**: TRANSACTION 6 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 4 | 14,131.88 | 1,837.14 | 15,969.02 | **Table 7.23**: TRANSACTION 7 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 8 | 7,837.52 | 1,018.88 | 8,856.40 | **Table 7.24**: TRANSACTION 8 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 9 | 2,481 | 322.53 | 2,803.53 | **Table 7.25**: TRANSACTION 9 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 14 | 600 | 78 | 678 | **Table 7.26**: TRANSACTION 10 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 15 | 995 | - | 995 | **Table 7.27**: TRANSACTION 11 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 17 | 900 | 117 | 1,017 | **Table 7.28**: TRANSACTION 12 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 21 | 600 | 208 | 808 | **Table 7.29**: TRANSACTION 13 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 23 | 200 | 156 | 356 | **Table 7.30**: TRANSACTION 14 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 28 | 840 | 109.20 | 949.20 | **Table 7.31**: TRANSACTION 15 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 30 | 220 | - | 220 | **Table 7.32**: TRANSACTION 16 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 30 | 995 | - | 995 | **Table 7.33**: TRANSACTION 17 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 30 | 2,000 | - | 2,000 | **Table 7.34**: TRANSACTION 18 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | October 1 | 3,000 | 390 | 3,390 | **Table 7.35**: TRANSACTION 19 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 5 | 15,969.02 | - | 15,969.02 | **Table 7.36**: TRANSACTION 20 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 6 | 219.98 | 28.60 | 248.58 | **Table 7.37**: TRANSACTION 21 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 9 | 6,000 | - | 6,000 | **Table 7.38**: TRANSACTION 22 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 9 | 2,803.53 | - | 2,803.53 | **Table 7.39**: TRANSACTION 23 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 12 | 560.00 | 202.80 | 1,762.80 | **Table 7.40**: TRANSACTION 24 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 15 | 1,995.00 | - | 1,995.00 | **Table 7.41**: TRANSACTION 25 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 16 | 717.00 | - | 717.00 | **Table 7.42**: TRANSACTION 26 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 19 | 82.44 | - | 82.44 | **Table 7.43**: TRANSACTION 27 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 20 | 2,312.11 | - | 2,312.11 | **Table 7.44**: TRANSACTION 28 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 20 | 248.58 | - | 248.58 | **Table 7.45**: TRANSACTION 29 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 23 | 3,600 | 468 | 4,068 | **Table 7.46**: TRANSACTION 30 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 26 | 2,120 | 275.60 | 2,395.60 | **Table 7.47**: TRANSACTION 31 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 31 | 418.73 | 54.43 | 473.16 | **Table 7.48**: TRANSACTION 32 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 31 | 1,995 | - | 1,995 | **Table 7.49**: TRANSACTION 33 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 31 | 2,400 | - | 2,400 | **Table 7.50**: TRANSACTION 34 | Transaction Amount | Base | HST | Total | |:--------------------|:-------|:------|:------| | 31 | 3,512.92 | - | 3,512.92 | **Hint:** Check the trial balance for September 30 to help you analyze Transaction 34. This HST refund is for September only. ### Preparing to Print or Export Before you print or export, you need to check and perhaps change two items. First, choose Setup, Settings, Company, Information, and ensure your name is typed where indicated in the brackets. This will make your name appear on printed reports. Next, choose Maintenance, Change Session Date. Enter 10/31/12. You may have done this step before you started entering transactions. **Note:** To change the Session Date, the only Sage Simply Accounting window you can have open is the Home window. Check with your teacher about which reports to print or export. (Popular formats for exporting are pdf and html.) When you want to print or export a report, you first have to view it on your screen. For example, choosing Reports, Financials will allow you to view an income statement and balance sheet. When choosing an income statement, you will enter the start and end dates for the first two months that With Strings Attached operated. The balance sheet is for one day only, so you will enter 10/31/12. Once you see a financial report on your screen, you can choose File, Print or File, Export. If your teacher wants to see your journal entries, choose Reports, Transaction Details, All. Like the income statement, you must enter the start and end dates for the journal entries you want to see and print. ## Review Questions 1. Explain what the session date is in Sage Simply Accounting software. 2. In the Home window of Sage Simply Accounting software, what does the stack of books represent? 3. What does drilling down mean? 4. What is a software default, and why is it helpful? ## Exercises 1. Use Sage Simply Accounting software to complete your Workbook exercise for Sam’s Softball City. ## Chapter 7 Summary ### Chapter Highlights **Chapter 7 Summary** Now that you have completed Chapter 7, you should be able to: * Post journal entries correctly. * Work out an opening entry from a balance sheet and to open an account. * Understand why both a journal and a ledger are used in the accounting process. * Use a balance column account correctly and with ease. * Understand the purpose of cross-referencing. * Forward the balance of an account to a new page. * Know the first four steps in the accounting cycle. * Make corrections in the journal and in the accounts, and how to make correcting journal entries. * Use quick tests correctly in locating trial balance errors. * Use accounting software for the steps in the accounting cycle you have learned to this point. * Compare manual and software accounting methods. ### Accounting Terms: * Account Title * Balance Column Account * Correcting Journal Entry * Cross-referencing * Decimal Point Error * Forwarding * Opening an Account * Posting * Transposition Error ## Chapter 7 Review Exercises ### Using Your Knowledge 1. Indicate whether each of the following statements is true or false by entering a T or an F in the space indicated in your Workbook. Explain the reason for each F response in the space provided. a) The chief advantage of the balance column account is that there is room for the account balance. (T) b) Both sides of an account page (front and back) are used for the same item (for example, Bank). (F) The front is for debits and the back is for credits. c) Entering the journal page number in the account is the sixth step in the posting process. (F) This is step 2. d) The step described in Statement C above is performed in the journal. (T) e) The process of setting up an account is known as forwarding. (F) This is called opening an account. f) The fourth step in the accounting cycle, as we know it, is the taking off of a trial balance. (T) g) It is not possible for the ledger to be out of balance and also to be correct. (T) h) If the trial balance difference is an even amount, the error could not be a transposition error. (F) It could be a transposition error if the difference is divisible by 9. i) If the trial balance difference is zero, the ledger is correct. (T) j) Posting a debit item incorrectly as a credit produces a trial balance credit total that is smaller than the debit total by twice the amount of the error. (T) k) Very rarely does a transaction affect only one account. (F) Most transactions effect at least two accounts. l) Ledger accounts are arranged alphabetically to make them easier to find. (F) They can be arranged in any order. m) The presence of the account number in the journal indicates that the posting of an item has been completed. (F) Step 6 is recording the account number in the journal. 2. Complete the chart below in your Workbook about the effect of errors on a trial balance. **Table 7.51** |Error situations| Debits greater than credits by ($) | Credits greater than debits by ($) | Trial Balance will balance, but will not be correct | |:-------------|:-------------|:-------------|:-------------| | A. An entire journal entry is posted as $400 instead of $100. | $300 | | X | | B. A debit of $200 is posted twice. | $200| | X | | C. A debit of $150 is posted as a credit. | $300 | | X | | D. The Bank account is over-added by $80. | | $80 | X | | E. The Drawings account balance of $5500 is missed when preparing the trial balance. | | $5500 | X | | F. The Revenue account balance of $72 000 is listed on the trial balance as a debit. | $72,000 | | X | | G. An entire general journal entry for $325 is not posted. | | $325 | X | | H. An entire general journal entry for $50 is posted in reverse. | $100 | | X | | I. A $40 debit is not posted. | $40 | | X | | J. A $500 credit is posted as $50. | $450 | | X | | K. A debit of $60 to Bank was posted to a customer's account instead of to Bank. | $60 | | X | | L. A $40 debit is posted as $400. | $360 | | X | 3. An accounting student prepares his trial balance as of June 30, 20- and determines that total debits equal total credits. He breathes a sigh of relief and informs his teacher that his ledger is in balance and that therefore the accounts are correct. His teacher tells him that this is not necessarily the case. She asks him to prepare a list of four possible errors that could occur and yet not