UNIT 1

ACCOUNTING FOR MANAGERS

DEFINITION OF ACCOUNTING

Accounting operates within a broad socio-economic environment, and so, the knowledge required of the
accountant cannot be sharply compartmentalized. It is therefore, difficult to discuss one area without relating to
other areas of knowledge. We place a great emphasis on the conceptual knowledge. The accountant should not
only know but he should understand.

From the above it is clear that to define accounting as such, is rather difficult. Many accountants have defined
Accounting in very many languages. However, we can consider the following definitions:

1. H.Chakravorty: “Accountancy is the science of recording, classifying and summarizing transactions so that
relation with outsiders is exactly determined and result of operation during a particular period can be calculated,
and the financial position as the end of the period may be shown.

2. A.I.C.P.A.: "Accountancy may be defined as the art of recording, classifying and summarizing in a
significant manner and in terms of money, transactions and events, which are in part, at least of financial
character, and interpreting the results thereof".

From the above definition, we can say that accounting helps us to have some information regarding the
following:

1. The nature and amount of incomes & expenses.

2. The nature and amounts of possible and actual losses.
3. The size and volume of capital employed.
4. The nature and values of assets owned.
5. The nature and values of liabilities outstanding.
6. The specific amounts due to the business and their nature.
7. The specific amounts due to be paid to the government and their nature.
8. The reports regarding the interpretations of the financial results.
OBJECTIVES OF ACCOUNTING

1. To maintain the cash accounts through the Cash Book and to find out the Cash balance on any particular day.
2. To maintain various other Journals for recording day-to –day non –cash transactions.
3. To maintain various Ledger Accounts to find out the exact amounts of incomes and expenses or gain and
losses or receivables and payables.
4. To furnish information regarding Purchases and Sales, both Cash and Credit.
5. To find out the net profit or net loss or surplus or deficit for any particular period.
6. To find out the total capital on a particular date.
7. To find out the positions of assets on a particular date.
8. To find out the position of liabilities on a particular date.
9. To detect any defalcations and to check the frauds and misappropriations of money.
10. To detect the various errors and to rectify those through entries in the journal proper.
11. To confirm about the arithmetical accuracy of the books of accounts.
12. To help the management by supplying accounting ratios, reports and relevant data.
13. To calculate the cost of productions.
14. To help the management formulate policies for controlling cost, preparation of quotation for competitive
supply etc.

ATTRIBUTES/FEATURES OF ACCOUNTING FROM DEFINITION:

(i) Recording: It is concerned with the recording of financial transactions in an orderly manner, soon after their
occurrence in the proper books of accounts.
(ii) Classifying: It Is concerned with the systematic analysis of the recorded data so as to accumulate the
transactions of similar type at one place. This function is performed by maintaining the ledger in which different
accounts are opened to which related transactions are posted.
(iii) Summarizing: It is concerned with the preparation and presentation of the classified data in a manner
useful to the users. This function involves the preparation of financial statements such as Income Statement,
Balance Sheet, and Statement of Changes in Financial Position, Statement of Cash Flow, and Statement of
Value Added.
(iv) Interpreting: Nowadays, the aforesaid three functions are performed by electronic data processing devices
and the accountant has to concentrate mainly on the interpretation aspects of accounting. The accountants
should interpret the statements in a manner useful to action. The accountant should explain not only what has
happened but also (a) why it happened, and (b) what is likely to happen under specified conditions.
FOLLOWING ARE THE CHARACTERISTICS FEATURES OF FINANCIAL ACCOUNTING:

1) Monetary Transactions:

In financial accounting only transactions in monetary terms are considered. Transactions not expressed in
monetary terms do not find any place in financial accounting, howsoever important they may be from business
point of view.

2) Historical Nature:

Financial accounting considers only those transactions which are of historical nature i.e the transaction which
have already taken place. No futuristic transactions find any place in financial accounting, howsoever important
they may be from business point of view.

3) Legal Requirement:

Financial accounting is a legal requirement. It is necessary to maintain the financial accounting and prepare
financial statements there from. It is also obligatory to get these financial statements audited.

4) External Use:

Financial accounting is for those people who are not part of decision making process regarding the organization
like investors, customers, suppliers, financial institutions etc. Thus, it is for external use.

5) Disclosure of Financial Status:

It discloses the financial status and financial performance of the business as a whole.

6) Interim Reports:

Financial statements which are based on financial accounting are interim reports and cannot be the final ones.

7) Financial Accounting Process:

The process of financial accounting gets affected due to the different accounting policies followed by the
accountants. These accounting policies differ mainly in two areas: Valuation of inventory and Calculation of
depreciation.

Qualities of financial accounting

Financial accounting is the preparation of financial statements that can be consumed by the public and the
relevant stakeholders using either Historical Cost Accounting (HCA) or Constant Purchasing Power Accounting
(CPPA). When producing financial statements, they must comply to the following:[6]
  Relevance: Financial accounting which is decision-specific. It must be possible for accounting
information to influence decisions. Unless this characteristic is present, there is no point in cluttering
statements.
 Materiality: information is material if its omission or misstatement could influence the economic
decisions of users taken on the basis of the financial statements.
 Reliability: accounting must be free from significant error or bias. It should be easily relied upon by
managers. Often information that is highly relevant isn’t very reliable, and vice versa.
 Understandability: accounting reports should be expressed as clearly as possible and should be
understood by those to whom the information is relevant.
 Comparability: financial reports from different periods should be comparable with one another in order
to derive meaningful conclusions about the trends in an entity’s financial performance and position over
time. Comparability can be ensured by applying the same accounting policies over time.

SCOPE OF ACCOUNTING

Accounting has got a very wide scope and area of application. Its use is not confined to the business world
alone, but spread over in all the spheres of the society and in all professions. Now-a-days, in any social
institution or professional activity, whether that is profit earning or not, financial transactions must take place.
So there arises the need for recording and summarizing these transactions when they occur and the necessity of
finding out the net result of the same after the expiry of a certain fixed period. Besides, the is also the need for
interpretation and communication of those information to the appropriate persons. Only accounting use can help
overcome these problems.

In the modern world, accounting system is practiced no only in all the business institutions but also in many
non-trading institutions like Schools, Colleges, Hospitals, Charitable Trust Clubs, Co-operative Society etc. and
also Government and Local Self-Government in the form of Municipality, Panchayat. The professional persons
like Medical practitioners, practicing Lawyers, Chartered Accountants etc. also adopt some suitable types of
accounting methods. As a matter of fact, accounting methods are used by all who are involved in a series of
financial transactions.
The scope of accounting as it was in earlier days has undergone lots of changes in recent times. As accounting
is a dynamic subject, its scope and area of operation have been always increasing keeping pace with the changes
in socio-economic changes. As a result of continuous research in this field the new areas of application of
accounting principles and policies are emerged. National accounting, human resources accounting and social
Accounting are examples of the new areas of application of accounting systems.
Functions of accounting data:

Accounting data serves the following functions:

 Measurement: Account data helps to measure the performance & financial position of the enterprise. It
measures Assets, liabilities, Expenses & Incomes.
 Forecasting: On the basis of past accounting data, forecasting about future plans are made.
 Decision Making: Various decisions requires timely & correct information which is provided by
accounts.
 Evaluations: Evaluation of an enterprise’s performance & financial health is done from accounting
data.
 Control: By adopting various accounting techniques, checks & balances the activity of the enterprise is
controlled.

Need and Use of Accounting:

 In order to solve the day-to-day financial & operational problems, it becomes necessary to have
knowledge about the past and present economic events.
 Accounting is developed out of the need for communicating necessary information about the events.
 Maintenance of accounts would become unnecessary if a decision maker could remember and observe
all the relevant financial events personally.
 Since it is not possible for a human being to remember all the events which occurred at different places
& different times.
 All attributes of an event are not equally useful and important to the users.
 In a Medium & Large size organization, decision maker will himself not handle all the financial
transactions & events personally & hence there’s no question of remembering.

Basic care to be taken in maintenance of Accounts to make it useful:

 The events are to be recorded in such a manner as they could easily be comprehended and,
 At the same time, such records may also be used as evidences of the events in future.
 In order to avoid ambiguity of the recorded evidences, a clear-cut explanation becomes necessary.

Limitation of accounting:

 Accounting is not an exact science.

 It is based on many assumptions & conventions.
  It involves many estimation which results in to subjectiveness.
 There are different alternatives possible for the same item which gives scope for manipulation to get
desired result.
 It cannot record the effect of many important events which cannot be measured in terms of money like
value of human resources which an enterprise has.
 It does not consider the effect of inflation on income, expense, assets & liabilities.

BRANCHES OF ACCOUNTING

Accounting has basically three branches:

Financial Accounting:

 It is concerned with the maintenance of Books of Accounts of an enterprise,

 recording & classifying all its financial transactions & events with a view to prepare Annual Financial
Accounts
 This can be used by various stakeholders. (i.e. General Purpose Financial Statement)

Management Accounting:

 It refers to use of accounting data with Proper analysis in reporting, so as to serve the need of
management.
 To help them in decision making & exercising proper controls.

Cost Accounting:

 Generally manufacturing concerns maintains cost accounts

 with a view to ascertain the cost of goods manufactured or services rendered with proper break-up of
cost &
 Also providing useful data to management for effective cost control.

Tax Accounting

Social Responsibility Accounting

MANAGEMENT ACCOUNTING

Management Accounting is the process of analysis, interpretation and presentation of accounting information
collected with the help of financial accounting and cost accounting, in order to assist management in the process
of decision making, creation of policy and day to day operation of an organization. Thus, it is clear from the
above that the management accounting is based on financial accounting and cost accounting.

Following are the objectives of Management Accounting:

1) Measuring performance: Management accounting measures two types of performance. First is employee
performance and the second is efficiency measurement. The actual performance is measured with the
standardized performance and a report of deviation from the standard performance is reported to the
management for the effective decision making and also to indicate the effectiveness of the methods in use. Both
types of performance management are used to make corrective actions in order to improve performance.
2) Assess Risk: The aim of management accounting is to assess risk in order to maximize risk.
3) Allocation of Resources: is an important objective of Management Accounting.
4) Presentation of various financial statements to the Management.

Limitations of Management Accounting:

1) Management Accounting is based on financial and cost accounting, in which historical data is used to make
future decisions. Thus, strength and weakness of the managerial decisions are based on the strength and
weakness of the accounting records.

2) Management Accounting is useful only to those people who are in the decision making process.

3) Tools and techniques used in management accounting only provide information and not ready made decision.
Thus, it is only a supplementary service.

4) In Management Accounting, decision is based on the manager’s institution as management try to avoid
lengthy courses of scientific decision making.

5) Personal prejudices and bias affect the decisions as the interpretation of financial information is based on
personal judgment of the interpreter.

Following is the scope of Management Accounting:

1) Financial Accounting
2) Cost Accounting
3) Revaluation accounting
4) Control Accounting
5) Marginal Costing
6) Budgetary Control
7) Financial Planning and
8) Break Even Analysis
9) Decision accounting:
10) Reporting
11) Taxation
12) Audit

COST ACCOUNTING:

Cost Accounting is the process of classifying and recording of expenditure incurred during the operations of the
organization in a systematic way, in order to ascertain the cost of a cost center with the intention to control the
cost.
Following are the basic three objectives of Cost Accounting:
1) Ascertainment of Cost and Profitability
2) Cost Control
3) Presentation of information for managerial decision making.

Characteristic features of cost accounting:

1) Cost accounting views the whole organization from the individual component of the organization
like a job, a process etc.
2) Cost accounting aims at ascertaining the profitability of individual components of the
organization.
3) It is meant for those people who are part of the decision making process of the organization.
Thus, it is only for internal use.
4) It is not a legal requirement. It is not compulsory to maintain cost accounting records.
5) In Cost Accounting, data is immediately available which facilitates in decision making process.
6) Cost Accounting considers each and every transaction, whether related to past or future which
will have an impact on the business

Comparison between Financial Accounting and Cost Accounting

1) Financial Accounting protects the interests of the outsiders dealing with the organization e.g shareholders,
creditors etc. whereas reports of Cost Accounting is used for the internal purpose by the management to enable
the same in discharging various functions in a proper manner.
2) Maintenance of Financial Accounting records and preparation of financial statements is a legal requirement
whereas Cost Accounting is not a legal requirement.

3) Financial Accounting is concerned about the calculation of profits and state of affairs of the organization as
whole whereas Cost accounting deals in cost ascertainment and calculation of profitability of the individual
products, departments etc.

4) Financial Accounting considers only transactions of historical financial nature whereas Cost Accounting
considers not only historical data but also future events.

5) Financial Accounting reports are prepared in the standard formats in accordance with GAAP whereas Cost
accounting information is reported in whatever form management wants

PARTIES INTERESTED:

The users of financial statement & their information needs:

Sr.
Users Their information needs
No.
Investors (providers of Information to determine whether they should buy, hold or sell, the
risk capital and their shares of the company. The owners of proprietary/ partnership
1
advisors) – existing & concerns want to assess performance & financial health, to decide
potential the continuance of such unit.
Information to make decisions which have a bearing on the
2 Managers/ Directors performance of the enterprise so as to ensure proper return on
capital employed.
Information that enables them to assess the ability of the enterprise
Employees (Employees to provide remuneration, retirement benefits and employment
3 and their representative opportunities.
groups i.e. unions)
To assess their Bonus & other claims.
Information that enables them to determine whether their loans and
4 Lenders
the interest thereon, will be paid when due.
Suppliers and other trade Information that enables them to determine whether the amounts
5
creditors owing to them will be paid when due.
6 Customers Information about the continuance of an enterprise especially when
 they have a long-term involvement with, or are dependent on the
enterprise.
Information to regulate the activities of enterprises, to determine
Government and their
7 taxation policies and as the basis of national income and similar
agencies
statistics.
Information about the trends and recent developments in the
8 Public
prosperity of the enterprise and the range of its activities.
Information of strategic nature to assess their relative strengths and
9 Competitors
weaknesses and for comparison and benchmarking purposes.

DIFFERENCE BETWEEN BOOKKEEPING AND ACCOUNTING

Definition of Bookkeeping:

Literally, it means the activity of keeping (or maintaining) books. The books referred to, in this context, are the
books of accounts. This involves extensive data input. A few activities under book-keeping are:

1. Input of invoice and voucher details into the ERP system.

2. Receiving and recording payments by customers.
3. Making and recording payments to vendors.
4. Efficiently processing payroll information, etc.

Definition of Accounting:

Accounting, on the other hand, is the process which includes recording, classifying, summarizing and
interpreting the financial information of an economic unit. The economic unit is considered as a separate legal
entity. Accounting information is widely used by various types of parties for several different reasons. A few
activities under accounting are:

1. Preparation of a trial balance, ledger accounts, etc.

2. Preparation of financial statements.
3. Analysis of financial data.

Bookkeeping Accounting
1. Bookkeeping is mainly related to the process 1. Accounting is the process of summarizing, interpreting and
of identifying, measuring, recording and communicating financial transactions which were classified in
classifying financial transactions. the ledger account as a part of bookkeeping.

2. It is the beginning stage and acts as a base

2. Accounting begins where bookkeeping ends.
for accounting.

3. Management can’t take decisions based on

3. Management can take decisions based on accounting.
bookkeeping.

4. The objective of bookkeeping is to keep 4. The objective of accounting is to ascertain the financial
proper and systematic records of financial position and further communicate the information the relevant
transactions. parties.

5. Financial statements are not prepared during 5. Financial statements are prepared on the basis of records
bookkeeping. obtained through bookkeeping.

6. Bookkeeping doesn’t require any special 6. Accounting, on the other side, requires special skills due to
skills as it is mechanical in nature. its analytical and somewhat complex nature.

ACCOUNTING EQUATION

The equation is based on the principle that accounting deals with property & rights to property & the sum of the
properties owned is equal to the sum of the rights to the properties. The properties owned by a business are
called assets & the rights to properties are known as liabilities or equities of the business.

Assets = Liabilities + Capital

The Double-Entry System

The double-entry book-keeping system is based on the principle that for every business transaction that takes
place two entries must be made in the accounts: a debit entry, showing goods or value coming into the business,
& a corresponding credit entry, showing goods or value going out of the business.

RULES OF THE DOUBLE ENTRY SYSTEM OR RULES OF RECORDING

Personal Account: -
These accounts record business dealings with persons or firm.

The person receiving something is given debit and

The person giving something is given credit.

Real Account: -

These are the accounts of assets.

An asset entering the business is given debit and

An asset leaving the business is given credit.

Nominal Account: -

These accounts deal with expenses, incomes, profits and losses.

Accounts of expenses and losses are debited and

Accounts of incomes and gains are credited.

Advantages of Double Entry System

 Complete record of the financial transactions is maintained.
 It gives accurate information of amount due to & due by the business unit at any time.
 It is helpful in preventing frauds & errors
 Arithmetical accuracy of the account books can be tested.
 It is helpful in preparing profit & loss account and Balance sheet of a firm.
JOURNAL
Journal means a daily record of business transactions. Journal is a book of original entry because transaction is
first written in the Journal from which it is posted to the ledger.
FORMAT OF JOURNAL
Journal is just a chronological record of all business transactions. But, if we want to know the net effect of
various transactions affecting an item, we need to go through the whole journal. It takes time. You know that
time is money in business. Therefore, to overcome this difficulty, we maintain another book called ‘Ledger.’

LEDGER

Ledger is a book which contains, in a summarized and classified form, a complete record of all transactions.
Since it contains complete information about various transactions, it is called the ‘Principal Book’. Final
accounts of a business are prepared on the basis of ledger.

An accounting ledger refers to a book that consists of all accounts used by the company, the debits and credits
under each account, and the resulting balances.

While the journal is referred to as Books of Original Entry, the ledger is known as Books of Final Entry.

A ledger account may be defined as a summary statement of all the transactions relating to a person, asset,
expense or income which have taken place during a given period of time and shows their net effect.
FORMAT OF LEDGER

Each account in the ledger is divided into two equal parts by a vertical line. The left hand side of the account is
known as debit side and the right hand side is called credit side.
F’ stands for folio (page number) of the journal or subsidiary book.

LEDGER POSTING
Every transaction is first recorded in the journal in the form of a journal entry.
From the journal it is transferred to the concerned accounts in the ledger. This process of transferring the
transaction from the journal to the ledger is known as Posting.
 “Posting refers to the process of transferring entries in the journal into the accounts in the ledger. Posting to the
ledger is the classifying phase of accounting.”

Rules for Posting into Ledger:

1. Entries must be posted from the day books or journal only.

2. Posting of the entries must be date wise.

3. Date of entry in day books must be the date of entry in ledger.

4. All amounts shown in debit side in journal must be posted in debit side of a particular account.
In ‘particulars’ column of ledger, the name of the other account as shown in journal, relating to same entry,
must be written and the account head must start with ‘To’.

5. All amounts shown in credit side in journal must be posted in credit side of a particular account.
In ‘particulars’ column of ledger, the name of the other account as shown in journal, relating to same entry,
must be written and the account head must start with ‘By’.

6. After the entry, page number of journal from where the entry is posted, must be written in L/F column of
account and the page number of ledger account must be written in L/F column of journal.

7. Then the balancing of the ledger should be done. Balancing is may be done as running or can be done after
doing the totals of debit and credit side. If the total of debit side is more than credit side then the balance should
be shown as debit balance in balance column and if the total of credit side is more than the total of debit side
then balance should be shown as credit balance in balance column. If the totals of debit and credit sides are
equal then the balance should be shown as ‘nil’ in balance column.

BALANCING OF ACCOUNTS
Various accounts in the ledger are balanced with a view to preparing the final accounts.
1) Take the totals of the two sides of the account concerned.
2) Ascertain the difference between the totals of two sides.
3) Enter the difference in the amount column of the side showing less total writing against the difference in the
particular column “To, balance c / d” [ c/d means carried down] on the debit side of the account and “By,
Balance c/d” on the credit side of the account. In this way, the totals of two sides will agree.
4) The balance is brought forward at the beginning of the next period. If “To, Balance C/d” is written on the
debit side before balancing, it is brought forward on the credit side and “By, Balance b/d” [b/d means brought
down] is written against the balance in the particulars column and vice versa.
An account is said to have a debit balance if the total of its debit side is more than the total of its credit
side. On the other hand, an account is considered to have a credit balance if the total of its credit side is
more than the total of its debit side.
TRIAL BALANCE
Trial Balance is a list of balances extracted from the ledger accounts at the end of an accounting period.
Since the balances in ledger accounts are effects of double entries, the total of debit balances should be equal to
total of credit balances.

Uses of Trial Balances

1) It is the basis of preparation of Final Accounts.
2) It helps in verifying the arithmetical accuracy of ledger accounts.
The two sides of the trial balance will not tally if a mistakes has taken place in the following.
 Posting
 Totaling
 Balancing.

Nature of Balances: In the normal circumstances,

i) All assets accounts & also dues from persons will show debit balances.
ii) All liabilities accounts will show credit balances.
iii) All expenses account will show debit balances.
iv) All income accounts will show credit balances.

Errors Revealed by the Trial Balance:-

1) Incorrect balances of the cash book.

2) Incorrect totals in purchases, purchase returns, allowances or sales day books.
3) Entries posted to the wrong side of an account.
4) Omission of a debit or a credit in posting from the journals to the ledger.
5) Incorrect figures posted from a journal to the ledger account.
6) Discounts transferred incorrectly.

Procedures for locating Errors in the Trial Balance

a) Check the cash balance in the cash book against the actual cash in hand.
b) Check and reconcile the bank balance in the cash book against the balance in the bank statement.
c) Prove the purchases and purchases returns figures against the purchases control account.

Errors not revealed by the Trial Balance:-

1) Errors of omission:
This type of errors occurs when an accounting document, e.g. an invoice or a credit note, is lost or mislaid, the
result being that there is no debit or credit entry in either the book of first entry or the ledger account.

2) Errors of original entry:

This type of error occurs when an amount on an invoice, e.g. Rs. 600, is entered wrongly in the book of first
entry, e.g. Rs. 666, and then is posted wrongly to the ledger account, as Rs. 666. As there has been a debit entry
and a credit entry for the same amount, the totals of the trial balance will still be in agreement.

3) Errors of principle: This type of error occurs when a transaction has a debit entry and a credit entry but the
item is posted in principle to the wrong classification of account. E.g. Motor expenses of Rs. 300 have been
debited to motor vehicles account.

4) Errors of commission: When a wrong amount is entered either in the subsidiary books or in the ledger
accounts or when amount is posted on the wrong side, it is a case of errors of commission. For example, if fuel
costs are incorrectly debited to the postage account (both expense accounts). This will not affect the totals.

5) Compensating errors: An example of this type of errors is where the wages account has been over-added by
Rs. 5,000 & by coincidence the sales account has been over added by Rs. 5,000. So an error on debit side is
compensated by an error on the credit side. </li></ul>
6) Errors of duplication: An example of this type of error is when the same invoice is entered into the
purchases day book twice and posted from there to the ledger account twice.

7) The Suspense Account: - When trial balance does not tally, the difference is put into a newly opened
account named suspense account and the trial balance is thus made to tally.
In case, the debit side exceeds the credit side the difference is put on the credit side of suspense account.
Likewise, if the credit side of the trial balance exceeds the debit side, the difference is put on the debit side of
suspense account.

Difference between Journal and Ledger

Journal:
1. In the journal, business transactions are recorded first.

2. In journal, all transactions are recorded in the chronological order.

3. In journal , both debit and credit aspect are recorded for each transaction

4. In the case of journal, net positions of any account cannot be ascertained.

5. In journal, accounts are prepared on the basis of source documents and vouchers.

Ledger:
1. In ledger, business transactions are posted to various accounts from the journal.

2. A ledger contains various accounts and in each account, entries related to each account are posted
irrespective of their occurrence.

3. In ledger, entries are posted to their respective accounts and only one aspect is considered.

4. In the case of ledger, net position of any account can be ascertained.

5. In ledger, accounts are prepared on the basis of transactions recorded in journal.

Example: Posting Process

Let us illustrate how accounting ledgers and the posting process work using the transactions we had in the
previous lesson. Click here to see the journal entries we will be using.
 Date
Particulars Debit Credit
2014

Dec 1 Cash 10,000.00

Mr. Gray, Capital 10,000.00

Let's start. Take transaction #1 first.

Date
Particulars Debit Credit
2014

Dec 1 Cash 10,000.00

Mr. Gray, Capital 10,000.00

Now, go to the ledger and find the accounts. Post the amounts debited and credited to the appropriate side.
Debits go to the left and credits to the right. After posting the amounts, the cash and capital account would look
like:

Cash Mr. Gray, Capital

10,000.00 10,000.00

Explanation: First, we posted the entry to Cash. Cash in the journal entry was debited so we placed the amount
on the debit side (left side) of the account in the ledger. For Mr. Gray, Capital, it was credited so the amount is
placed on the credit side (right side) of the account. And that's it. Posting is simply transferring the amounts
from the journal to the respective accounts in the ledger.