Skip to content

Financial Accounting · Accounting Fundamentals

Journal, Ledger and Trial Balance for CMA Inter

Updated 10 October 2026 · Fact-checked

The journal records each transaction first, as a debit and credit entry. The ledger collects these entries account by account through posting. The trial balance lists all ledger balances and checks that total debits equal total credits. To solve problems, classify accounts, apply debit-credit rules, post, balance, then list.

Understand Journal, Ledger and Trial Balance

Every transaction has two sides. You receive something and you give something. This is the double entry system: each transaction affects at least two accounts, and total debits always equal total credits.

The journal is the book of original entry. You record the date, the accounts debited and credited, the amounts and a short narration. Busy businesses do not put everything in one journal. They use subsidiary books (also called special journals) for repeated transactions: Cash Book, Purchases Book, Sales Book, Purchase Returns Book, Sales Returns Book, Bills Receivable and Bills Payable Books. Whatever does not fit these goes into the Journal Proper, such as opening entries, adjustments, rectifications and non-cash items.

The ledger is the book of final entry. It has one page (account) for each person, asset, expense, income or capital item. You post from the journal and subsidiary books so that you can see the total effect on each account. Each account is then balanced.

The trial balance is a list of ledger balances on a given date. It is not an account. If it tallies, the arithmetic of the books is probably right. It does not prove they are fully correct. Some errors do not affect agreement, such as omitting a whole transaction, posting to a wrong account of the same type, or errors that cancel out.

So the flow is: transaction, then journal or subsidiary book, then ledger, then trial balance, which leads on to final accounts.

Key rules to remember

Personal accounts rule
Debit the receiver; Credit the giver
Applies to accounts of persons, firms, companies and the like, including debtors, creditors and the proprietor's capital.
Real accounts rule
Debit what comes in; Credit what goes out
Applies to assets such as cash, stock, machinery and land.
Nominal accounts rule
Debit all expenses and losses; Credit all incomes and gains
Applies to rent, salaries, interest, discount, commission and the like.
Modern approach (accounting equation)
Assets = Liabilities + Capital
Debit increases in assets and expenses; credit increases in liabilities, capital and income. The reverse decreases them.
Trial balance agreement
Total of debit balances = Total of credit balances
Assets, expenses, losses and drawings have debit balances. Liabilities, capital, incomes and reserves have credit balances.
Closing balance of an account
Balance = Larger side total − Smaller side total
Write the balance c/d on the smaller side so that both sides total equally. Bring it down b/d on the opposite side.

How to solve Journal, Ledger and Trial Balance questions

Use this order for any question that asks for journal entries, ledger accounts or a trial balance.

  1. 1Read each transaction and ask what two accounts are affected. Decide whether each is personal, real or nominal, or an asset, liability, capital, income or expense.
  2. 2Apply the rule to find which account is debited and which credited. Mark cash and credit transactions clearly.
  3. 3Write the journal entry with date, particulars, Dr and Cr lines, amounts and a one-line narration. For subsidiary books, enter in the correct book and total it.
  4. 4Open ledger accounts in T-form. Post each entry on the same side as in the journal, with the other account's name and the date.
  5. 5Total each ledger account and find the balance. Carry down the balance to the opposite side.
  6. 6List every balance in the trial balance: debit balances in one column, credit balances in the other. Total both columns.
  7. 7If totals differ, find the difference and check posting, balancing and carry-over. Show the working clearly.

Quickest way: Direct trial balance by nature of account

When to use it: Use this when the question gives a list of balances or asks only for the trial balance, and not for the journal or ledger.

  1. Go down the list and tag each item as Dr or Cr by nature: assets, expenses, drawings, purchases, stock at start and debtors are Dr.
  2. Capital, creditors, sales, loans taken, reserves and income items are Cr.
  3. Watch for contra-type items: sales returns are Dr, purchase returns are Cr, provision for bad debts is Cr.
  4. Total each column and compare. If a single figure is missing, the difference gives it, and it goes on the smaller side.
  5. Check that closing stock given in adjustments is not in the trial balance. Only opening stock appears there.

Common mistakes in Journal, Ledger and Trial Balance

  • Treating drawings as an expense and crediting them

    Drawings feel like a payment, so students link them with expenses.

    Fix: Drawings reduce capital. Debit Drawings Account and credit Cash or Bank. In the trial balance it shows on the debit side.

  • Placing sales returns on the credit side of the trial balance

    Students link all 'sales' words with credit.

    Fix: Sales returns are a reduction of sales and carry a debit balance. Purchase returns carry a credit balance.

  • Journalising credit purchases of goods in the Journal Proper or in the wrong subsidiary book

    Students forget that only credit purchases of goods for resale go to the Purchases Book.

    Fix: Cash purchases go to the Cash Book. Credit purchase of goods goes to the Purchases Book. Credit purchase of a fixed asset goes to the Journal Proper.

  • Posting to the wrong side or leaving postings incomplete

    Students rush and post only one side of the entry.

    Fix: Every journal entry creates at least one debit posting and one credit posting. Tick each line when posted.

  • Assuming a tallying trial balance means no errors

    Students believe agreement proves accuracy.

    Fix: State clearly that errors of omission, commission, principle and compensating errors do not disturb agreement. Examiners reward this point in theory answers.

  • Putting closing stock in the trial balance

    Students see stock and automatically list it.

    Fix: If closing stock is given as an adjustment, it is not in the trial balance. If a stock figure is listed in the trial balance itself, it is opening stock unless stated otherwise.

Worked examples

Example 1

Journalise the following transactions of Mr. Ramesh Iyer for January 2027 and post to the ledger: (1) 1 Jan: Started business with cash ₹2,00,000. (2) 3 Jan: Bought goods on credit from Suresh Traders ₹60,000. (3) 10 Jan: Sold goods for cash ₹45,000. (4) 15 Jan: Paid Suresh Traders ₹30,000. (5) 20 Jan: Paid rent ₹5,000.

Show the solution
  1. 1 Jan: Cash A/c Dr ₹2,00,000 to Capital A/c ₹2,00,000 (capital introduced in cash).
  2. 3 Jan: Purchases A/c Dr ₹60,000 to Suresh Traders ₹60,000 (goods bought on credit). This goes in the Purchases Book.
  3. 10 Jan: Cash A/c Dr ₹45,000 to Sales A/c ₹45,000 (cash sale).
  4. 15 Jan: Suresh Traders Dr ₹30,000 to Cash A/c ₹30,000 (part payment).
  5. 20 Jan: Rent A/c Dr ₹5,000 to Cash A/c ₹5,000.
  6. Ledger Cash A/c: Dr side ₹2,00,000 + ₹45,000 = ₹2,45,000. Cr side ₹30,000 + ₹5,000 = ₹35,000. Balance ₹2,10,000 Dr.
  7. Suresh Traders: Cr ₹60,000, Dr ₹30,000. Balance ₹30,000 Cr.
  8. Capital ₹2,00,000 Cr. Purchases ₹60,000 Dr. Sales ₹45,000 Cr. Rent ₹5,000 Dr.

Answer: Cash ₹2,10,000 Dr; Suresh Traders ₹30,000 Cr; Capital ₹2,00,000 Cr; Purchases ₹60,000 Dr; Sales ₹45,000 Cr; Rent ₹5,000 Dr.

Example 2

Prepare a trial balance of Anita Traders as on 31 March 2027 from these balances (₹): Capital 3,00,000; Drawings 20,000; Furniture 80,000; Purchases 2,50,000; Sales 4,10,000; Sales returns 10,000; Purchase returns 15,000; Debtors 1,10,000; Creditors 70,000; Salaries 60,000; Rent 24,000; Cash in hand 5,000; Bank balance 2,06,000 (Dr); Opening stock 60,000; Loan from bank 30,000.

Show the solution
  1. Debit items: Drawings 20,000; Furniture 80,000; Purchases 2,50,000; Sales returns 10,000; Debtors 1,10,000; Salaries 60,000; Rent 24,000; Cash 5,000; Bank 2,06,000; Opening stock 60,000.
  2. Add the debit items in this order: 20,000 + 80,000 = 1,00,000; + 2,50,000 = 3,50,000; + 10,000 = 3,60,000; + 1,10,000 = 4,70,000; + 60,000 = 5,30,000; + 24,000 = 5,54,000; + 5,000 = 5,59,000; + 2,06,000 = 7,65,000; + 60,000 = 8,25,000.
  3. Credit items: Capital 3,00,000; Sales 4,10,000; Purchase returns 15,000; Creditors 70,000; Bank loan 30,000.
  4. Add the credit items: 3,00,000 + 4,10,000 = 7,10,000; + 15,000 = 7,25,000; + 70,000 = 7,95,000; + 30,000 = 8,25,000.
  5. Debit total is ₹8,25,000 and credit total is ₹8,25,000, so the trial balance agrees.
  6. Remember that only opening stock appears here. Closing stock, if given, is an adjustment for the final accounts and is not listed.

Answer: Total debits ₹8,25,000 equal total credits ₹8,25,000, so the trial balance agrees and no Suspense Account is needed.

Exam tips

  • In the MCQ section, expect questions on which account is debited, the book where an entry goes, and the effect of an error on trial balance agreement. Learn the nature of each account type to answer in seconds.
  • Always show the narration, the date and the Dr/Cr labels in written answers. Missing narration and wrong layout cost step marks even when amounts are right.
  • In ledger questions, write 'To' and 'By' with the opposite account's name. Balance every account and show the carried down amount.
  • If the trial balance does not agree, show the difference and place it in Suspense only when the question asks. Never force agreement without saying so.
  • Check opening stock versus closing stock and sales returns versus purchase returns before totalling. These are the most common traps.

Practice questions from Accounting Fundamentals

Journal, Ledger and Trial Balance in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Journal, Ledger and Trial Balance: frequently asked questions

What are the golden rules of debit and credit?

For personal accounts, debit the receiver and credit the giver. For real accounts, debit what comes in and credit what goes out. For nominal accounts, debit expenses and losses and credit incomes and gains.

How do I prepare a trial balance step by step?

Balance every ledger account first. List each debit balance in the debit column and each credit balance in the credit column. Total both columns and check that they agree. If they do not, find the difference and trace the error.

What are subsidiary books with examples?

Subsidiary books are special journals for repeated transactions. Examples are the Cash Book, Purchases Book, Sales Book, Purchase Returns Book, Sales Returns Book, and Bills Receivable and Bills Payable Books. They save time and allow work to be divided.

If the trial balance agrees, are the books correct?

Not necessarily. Agreement shows that total debits equal total credits. It does not catch errors of omission, wrong account of the same type, errors of principle or compensating errors.