Next one is step 13 and under this step we will be summarizing general ledger accounts. Summarizing of general ledger accounts mean that we calculate balances of all the accounts and those balances will be used further to prepare trial balance and to prepare financial statements. So we start from cash account and her you see all the data from all the transactions which impacted this account so debit side entries and credit side entries.
What we do we calculate closing balance and to calculate closing balance we do the following. We adopt all debit entries which reflect increasing cash and we deduct all the credit entries which represent decreasing cash. Since cash is asset category account it must have balance on the debit side and the different between debits and credits is on the debit side and this is the final balance of cash account.
So total debits minus total credits and we get the final balance 8,030 which reflects impacts of all the transactions on the cash account. The next one is cash in bank and we do the same actions as it was done with cash account. We calculate the final balance. We adopt all debit entries. We adopt all credit entries and we deduct total credits from total debits in order to get the final balance of the bank account.
And since this is asset category account it must have a balance on the debit side. The next one is prepaid insurance you can see right now we are covering all the asset category account and here we have only one entry on the debit side. Again we adopt total debits. We adopt total credits and we have the difference between them. Total debits minus total credit so total increase in prepaid insurance minus total decrease and prepaid insurance and we get the final balance. This is the closing balance in this account.
The next under assets category accounts is accounts receivable. We have on entry here. We adopt total debits. We adopt total credits or we should have some of credit entries however there were no such entries and we calculate the difference and final balance is on the debit side since this is asset category account and it is $1,000 closing balance.
The next one is stationary. We do the same as with previous accounts total sum of debits minus total sum of credits and final closing balance is on the debit side. Again, this is asset category account and it must have debit balance. And another one is inventory and here we have dual entries so we adapt total debits, which was increase in inventory and we adapt total credits.
We deduct from total debit amount, total credit amount and we get a closing balance equal to zero. Here we have our closing balance equal to zero because all the inventory were solved. However, in practice it might happen of course that not all the inventory will be solved and some inventory will remain on hand. In the next video we will continue with summary of general ledger accounts.
Here we continue to calculate balances for four general ledger accounts so this is summary of all the accounts conclusion balance and we continue with office space. Since this is asset category account it should have a balance on the debit side and we adopt total debits, we adopt total credits and deduct from debits total amount of credits to get final balance which is $7,000 and which is on the debit side.
So this was the final account from asset category and now we go to the next categories liability and equity accounts payable it is liability category account and this account must have a balance on the credit side since relates to the right side of accounting equation and all the increases in accounts payable are recollected on the credit side and the final balance should be also on the credit side.
Here we have a lot of entries and we first adopt credit entries and only afterwards we adapt debit entries so this is vice versa comparing to the asset category accounts and please pay attention that we deduct from total credits, total debits for asset category accounts we were doing the opposite thing. Here we deduct from total credits, total debit amount.
Since this account must have a final balance on the credit side and we get the closing balance $6,100 this is the closing balance of the accounts payable account. Then we go to share capital account. This equity category account and it must have balance closing balance on the credit side since it relates to the right side of accounting equation and we start from calculating total value of credits, credit entries.
Total value of debit entries and we did that from total credit amount total debit amount to get the final balance. Of course in this account there were no debit entries however if they would be such we will be making calculations in this way as it is indicated and final balance it must be on the credit side. The next one income account here we adopt total credits and we adopt total debits.
Credits show increase in income debits show decrease in income which might happen and we deduct from candidates debits to get the final balance. Under this step we will have a final balance on the credit side and further on you will see that income and expense accounts we should not have any balance at all but this will be done in the next of the accounting cycle.
And the last account of the general ledger to be summarized expenses account and since expenses account it has a negative impact on equity or increases in expense that are indicated on the debit side and all the decreases on the credit side so we start from debits like in the asset case, asset category account case and we then calculate total credit interest and we deduct from total amount of debits, total amount of credits to get the final balance which should be on the debit side.
So this was the final account and final balance was calculated. The next step, we will be preparing trial balance which will include list of all the balances from general ledger accounts.