21st Systematized Learning Material for Basic Accounting

iv. Corporate Liquidation

1. Meaning
📌Corporate liquidation is the process of selling off all the assets of an entity, settling its liabilities, distributing any remaining funds to shareholders, and closing it down as a legal entity.


2. Insolvency
📌When an entity is unable to pay its liabilities as they become due and demandable
When an entity’s financial condition is which its total liabilities is greater than all of its assets at fair value
Voluntary insolvency is when the entity declares itself to be insolvent while involuntary solvency is when 3 or more creditors petitions to declare the entity as insolvent.


3. Process of Liquidation
a. Declaration of insolvency
b. Assets and liabilities are placed under the jurisdiction and control of the court.
c. An assignee/ trustee is appointed by the court or by the creditors to take care of the liquidation process and all the corporation’s estate.
d. All assets are realized @ FV
e. Goodwill and Prepaid expenses are zeroed
f. Creditors and shareholders are paid according to the order of preference in debt settlement as stipulated by the law
g. Statement of Affairs and Statement of Realization and Liquidation and other required reports are submitted to the court by the trustee.

4. Order of Preference of Debts Settlements
a. Fully Secured Creditors
b. Partially Secured Creditors
c. Unsecured Creditors with priority
d. Unsecured Creditors without priority
e. Preference Stockholders
f. Ordinary Stockholders

5. Statement of Affairs
🚩Meaning
- A financial condition prepared for a corporation entering into the stage of liquidation or bankruptcy containing the amounts that would be received by each class of creditors

🚩 Assets
A. Assets pledged to fully secured creditors.
•Assets that would be realized in an amount enough or greater to satisfy the debt.
•Example is a PPE sold for 100,000 which secures a debt of 50,000, excess is considered a free asset

B.Assets pledged to partially secured creditors.
•Assets that would be realized in an amount lesser to satisfy the debt.
•Example is a PPE sold for 50,000 which secures a debt of 70,000, deficit is considered as deficiency to unsecured creditors

C. Free Assets
•Assets that are not pledged and available to satisfy claims of other creditors

D. Net Free Assets
•Free assets less unsecured liability with priority

🚩 Liabilities

🔹Fully Secured Liability
~Fully paid/payable liabilities from proceeds of selling assets that was pledged

🔹Partially Secured Liability
~ Partially paid/payable liabilities from insufficient proceeds of selling assets that was pledged

🔹Unsecured Liability with priority
~ Liabilities prioritized by law
~ Funeral expenses, salaries and wages, employee compensation, legal expenses, government fines and penalties, local and national taxes

🔹Unsecured Liability with no priority
~ Liabilities with no collateral, deficit from partially secured creditors and liabilities with no priority under the law.

6. Recovery Percentage of Unsecured Creditors

Estimated Recovery Percentage= (Net Free Assets) / (Unsecured Liabilities w/o Priority)

7. Statement of Realization and Liquidation

🔸An activity statement containing the progress of liquidating the corporation’s estate and the transactions that happened during the liquidating period.
©Accounting 101

iii. CORPORATION OPERATION

1. Shareholders’ Equity

* refers to the corporation’s total capital section that can be found on the statement of financial position
* the owner’s contributions are generally credited to the share capital account without identifying the specific person making the investment
* Total Asset – Total Liabilities = Shareholders’ Equity

2. Accounting for Share Capital Transactions

3. Authorization
• recording of capital share upon approval of SEC

4. Subscription

• recording of share capital that will be paid in the future

• delinquent subscription- if a subscriber cannot pay his on the agreed date the delinquent shares can be sold to the highest bidder (a person who will pay the offer price and is willing to receive the smallest amount of share.

5. Issuance

• accounting for share capital payments that can be paid by cash or noncash payments, discounts can also be recognized
• certificate can only be issued upon full payment of the subscribed capital share
• can be a direct payment or payment for subscribed share

*Direct payment
*Payment for subscribed share

6. Reacquisition

• shares are reacquired and retained by the corporation (treasury shares)

7. Reissuance
• treasury shares are reissued

8. Retirement
• retirement of shares resulting to loss or gain

9. Conversion
• from preference to ordinary
• if OS>PS add to accumulated profit
• if PS+SPPS> OS add to SPOS

10.Recapitalization
• to avoid improperly accumulated profit or to avoid negative accumulated profit

A. Change of Par Value
* increase
* decrease
B. Change from Par to No Par
C. Change from No Par to Par
D. Share Split (for all issued shares)
* Split up- increase of number of shares, decrease of PV
* Split down- decrease of number of shares, increase of PV

11. Donation
A. Cash Donation
B. Noncash Donation
C. Shares (from the same corporation)

12. Accounting for Dividends

• (DPS- dividends per share)
• for both ordinary share and preference share DPS= Accumulated Profits Outstanding Shares

A. Type of Dividends
a. Dividends out of Capital/Liquidating Dividends- during liquidation
b. Dividends out of Earnings- from accumulated profit
⏩ Cash Dividend
⏩ Property Dividend- noncash assets
⏩ Share Dividend- the corporation will give
additional share in exchange of cash
▶ Small Share Dividend- less than 20% of
the outstanding share and with premium
▶ Large Share Dividend- 20% or more of
the outstanding share, with no premium
⏩ Scrip Dividend

13. Accounting for Corporate Earnings

•(EPS- earnings per share)
-only for ordinary shares

EPS= Net Income- DPS / Average Outstanding Share

14. Accounting for BVPS
✔ for both ordinary share and preference share

✔ Book Value= Total Assets- Total Liabilities

BVPS = TSHE / Outstanding Shares
©Accounting 101

ii. Corporation Formation

💫Steps in Organizing a Corporation

A. Promotion (initial stage of formation)
B. Incorporation
a. Registration of corporate name with SEC

b. Making of the Articles of Incorporation
* must be submitted to SEC
* base on Section 14 of the Corporate Code of the Philippines
* majority of BOD/BOT must be residing in the Philippines

c. Ex*****on of sworn affidavit and bank certificates
* base on Section 14 of the Corporate Code of the Philippines

d. Payment of filling and publication fees etc.
~ Organization expenses
• incurred during the formation of the corporation prior to the commencement of corporate business are treated as expenses
~ Direct issue Costs for share capital issuance
• costs arising from capital stock issuance must be charged directly to the related share premium or additional paid-in capital
~ Recurring costs for share capital issuance
• indirect in nature and charged against corporate income

e. Issuance of certificate of incorporation

C. Formal Organization and commencement of business operations

1. Commencement of Corporate business
* base on section 22 of the Corporate Code of the Philippines
* If a corporation does not formally organize and commence the transaction of its business or the construction of its works within two (2) years from the date of its incorporation, its corporate powers cease and the corporation shall be deemed dissolved. However, if a corporation has commenced the transaction of its business but subsequently becomes continuously inoperative for a period of at least five (5) years, the same shall be a ground for the suspension or revocation of its corporate franchise or certificate of incorporation.

2. Corporate Officers
a. Corporate President (must be a member of the BOD)
b. Vice Presidents (the corporation may employ several VPs)
c. Other officers (need not to be a member of the BOD unless stated in the By-laws)
d. Corporate Secretary (who will keep corporate records etc.)
e. Corporate Treasurer (authorized to receive and keep the corporation’s funds)

3. By-laws
* Provided in section 47 of the Corporate Code of the Philippines

4. Books and Records
* Provided in section 74 of the Corporate Code of the Philippines
* Every corporation shall keep and carefully preserve at its principal office:
a. Minutes Books
b. Stocks and Transfer book
c. Books of accounts (journal and ledger)
d. Subscription book
e. Shareholder’s ledger
f. Subscriber’s ledger
g. Share certificate book
©Accounting 101

i. Corporation Theories

1. Corporation
• An artificial being with ownership consisting of shares (at least 5 owners)
• Managed by Board of Directors (BOD) (at least 5 stockholders but not more than 15) for profit corporations and Board of Trustees (BOT) for a non-profit organization
• Created by operation of law and requires special authority/grant by the state

2. Advantages of a Corporation
a. limited liability
b. transferability of shares
c. continued life existence
d. greater source of funds

3. Disadvantages of a Corporation
a. Complicated and complex formation and operation
b. Greater government control and supervision
c. Centralized management (not all shareholders can participate in the management of the business which may lead to abuse of power)
d. Heavier income tax (tax exemptions can be given to nonprofit and non-stock corporations)

4. Kinds of Corporation
A. As to shares
1. Stock corporation
2. Non-Stock corporation

B. As to nationality
1. Domestic corporation
2. Foreign corporation

C. As to purpose
1. Government Corporations
a. Public corporation
b. Government owned and controlled corporation (GOCC)
2. Privately owned Corporation
a. Civil corporation (for business and profit)
b. Wasting Asset corporation (extract natural resources)
c. Eleemosynary corporation (for charitable purpose)
d. Ecclesiastical corporation (religious purpose)
3. Quasi-Public Corporation (privately financed but for a public purpose)

D. As to legal right
1. De jure corporation (fully complied with the law)
2. De facto corporation (partially complied with the law)

E. As to number of persons
1. One Person Corporation (owned and registered by one corporator/member and his successors)
2. Aggregate corporation (more than one corporator or member)

F. As to extent of membership
1. Open corporation (shares are open to public subscription)
2. Close corporation (shares are not open to public subscription and owned/managed by a family or close relative)

G. As to relation to other corporations
1. Parent or holding corporation
2. Subsidiary corporation

H. Religious Corporation
1. Corporation Sole- incorporated by one individual
2. Religious Societies- incorporated by more than one person

5. Components of a Corporation
a. Incorporators (people who originally formed the corporation)
b. Corporator (all shareholders and members)
c. Shareholder (profit) and Member(nonprofit) *can be a natural or an artificial person
d. Subscribers (people who agreed to buy shares for a future payment)

6. Rights of Shareholders
a. Right to vote
b. Right to profit
c. Right to inspect corporate books/records
d. Right to financial statements
e. Right to corporate assets in case of dissolution

7. Major Classifications of Share Capital
a. Ordinary Share/ Common Stock
* 2nd priority when it comes to dividend contribution
* ordinary shareholder has the right to vote and be voted in the BOD
* when a corporation offers only 1 kind of stocks then it must be ordinary shares

b. Preference Share/ Preferred Stock
* 1st priority when it comes to dividend contribution
* preference shareholder has no voting rights and cannot be voted in the BOD
* has a fixed dividend percentage (e.g. 15% preference share)

8. Other Classifications of Share Capital

9. Legal Capital
• amount that cannot be distributed to shareholders

• issued OS + issued PS + Subscribed Shares

10. Trust Fund Doctrine
• a legal principle that prohibits a private corporation to distribute its legal capital to its shareholders to protect corporate creditors.
©Accounting 101

VI. CORPORATION🏢

i. Corporation Theories
ii. Corporation Formation
iii. Corporation Operation
iv. Corporate Liquidation

v. Partnership Liquidation 👥

1. Reasons of Liquidation
•bankruptcy
• death of a partner
• mutual agreement of the partners to end the business
• accomplishment of its purpose
• termination of the partnership period

2. Order of Payment Priority
a. Liquidation Expenses
b. Liabilities to outside creditors
c. Liabilities to partners
d. Partner’s capital

3. Last Transactions
a. Payment of Liquidation Expenses
•expenses incurred during liquidation process must be directly paid and deducted to the partners’ capital balances base on P&L ratio

b. Payment of Liabilities
• liabilities of the partnership are paid

c. Realization
• gain or loss of selling noncash assets is realized and distributed to partners base on P&L ratio

d. Absorption
• Negative capital of a limited or insolvent partner will be absorbed by partners with positive capital balances. A limited partner can only absorb until his capital balance is zeroed while a general partner will absorb deficiency in capital and would still invest additional cash if needed
•a general solvent partner will invest additional cash in case of capital deficiency

e. Offset
•Loans to the partners will be paid in cash, however if a partner has a negative capital balance then the loan will be offset to his/her capital only until his capital balance is zeroed.

f. Additional Investment
• a solvent general partner will invest additional cash if he/she has a negative capital balance

g. Final Settlement
• remaining cash after payment of all liabilities will be contributed to partners

4. Statements Needed
a. Statement of Liquidation
• a report that shows the progress of liquidation over time

b. Schedules of Safe Payment (hypothetical)
• a conservative approach of distributing available cash to partners under installment liquidation
~ Maximum Probable Loss = unpaid liability + unsold noncash assets + cash withheld

c. Cash Distribution Plan/ Cash Priority Program/ Predistribution Plan
~ another approach to guarantee that no overpayment will happen in making premature payments under installment liquidation
~ Maximum Loss Absorption Capacity = (Capital ± Loans) / P&L ratio

5. Methods of Liquidation
a. Lump Sum Liquidation
* All noncash assets are converted into cash all at once and payment to the partners are made only once.

b. Installment Liquidation/ Piecemeal Liquidation
• cash is given to partners upon sell of a noncash asset

* MLAC= (Capital ± Loans) / P&L ratio

* Difference of the first and second highest is divided by P&L ratio to get the cash priority of the partner. This is done until MLAC is already equalized. Remaining cash after paying all partners’ cash priority is divided to all partners base on P&L ratio.
©Accounting 101

iv. Partnership Dissolution🚻

1. Dissolution
🚩 Termination of the life of the existing partnership, however it does not mean that business activities will not continue

2. Causes of Dissolution
a. Admission of a new partner
b. Withdrawal/ Death/ Retirement/ Insanity of a partner
c. Insolvency of a partner/partnership- the business or a partner cannot pay outstanding debts as they mature which impairs the mutual agency principle
d. liabilities are greater than the fair value of assets
e. Incorporation of the partnership

3. Incoming Partner
a. Direct Purchase
* Total Capital of the old partnership is equal to the total capital of the new partnership (TCO=TCN)
* only capital accounts are involved

b. Direct Investment
* Total Capital of the old partnership is less than the total capital of the new partnership (TCO

iii. Partnership Operation⌚

Partnership Operation:

1. Rules in Profit and Loss Contribution
🔹 no agreement on capital = equal
🔹 no agreement on profit and loss (no industrial partner) = base on capital contribution
🔹 no loss agreement = follow profit agreement but exclude industrial partner

2. Methods in Computing Profit and Loss
A. Equally
B. Specified Ratio or Percentage
C. Capital ratio
a. Original Capital
b. Beginning Capital
c. Ending Capital
d. Average Capital
* Simple Average- (Ending Balance – Beginning Balance)/2
* Weighted Average – with dates

D. Interest on Partner’s Capital + Remainder in an agreed ratio

E. Salaries and Bonus for partner’s services + Remainder in an agreed ratio

F. Multiple Allocations
* up to whatever extent possible
* follow priorities

3. Other Computations
a. Salaries- base on agreement
b. Interest- base on capital
c. Bonus
* Bonus is given to a managing partner
only when there is a profit
* Bonus = Bonus Rate x Net Income
* Bonus = Bonus Rate (Net Income – Salaries – Interest – Bonus)
* sample
B= .15(300,000-50,000- B)
B= 37,500- .15B
B+ .15B= 37,500
1.15B= 37,500
B= 32,608.69

d. Distribution of Insufficient Income (w/o parentheses)
✅ Salaries and interest should be given and the earnings deficiency shall be allocated among partners base on profit and loss ratio
✅ Bonus to a managing partner will be given if the bonus is based on income before deducting the salary and interest. However, if the bonus is based on the income after deducting salaries and interest and will result to an income deficit then there will be no bonus to the managing partner.

✅sample insufficient income of 100,000

e. Distribution of Partnership Losses (w/ parentheses)
🔸 Salaries and interest should be given but no bonus.
🔸 Only the partner with a negative share will have a debit on his capital account.

f. Indifference Point- both options shall be equal
🔗Bonus = Bonus Rate (Net Income – Salaries – Interest – Bonus)

🔗salary 250,000 vs salary of 70,000 + 10%B
70,000= .1(NI-70,000-70,000)
70,000= .1NI-14,000
70,000+ 14,00= .1NI
NI= 840,000
©Accounting 101

ii. Partnership Formation📋

1. Partnership Accounts
a. Partner’s Capital
b. Partner’s Drawing
c. Loans Receivable from Partners
d. Loans Payable to Partners

2. Formation
a. ex*****on of partner’s agreement
b. valuation of partner’s agreement
c. adjustments of accounts
*net asset= asset – liability

3. Issues on Capital Contribution
a. Amount of contribution
b. Valuation of partner’s contribution
* (money, property, industry)

4. Capital Contribution
a. Additional investments and withdrawals
b. Bonus Method- (all partners’ capital must be equal)
c. Goodwill- (imaginary contribution)

5. Stages of Partnership Formation
a. First time in business
b. Conversion of a single proprietorship to a partnership
1. Record adjustments of the sole proprietorship business (based on the
agreed value or fair value)
2. Close the books of the sole proprietorship business
c. Admission of a new partner to an existing partnership (form of
dissolution)

6. Notes
*The contribution of an industrial partner is recorded in the general ledger as a memorandum entry
* Assets are to be recorded at the agreed value or by using the fair market value.
©Accounting 101

i. Partnership Theories⚡

💡MEANING:
✅ Partnership “The act of one is the act of all.”
✅ at least 2 persons sharing a business fund (money, property and industry)

💡KINDS/CLASSIFICATION OF PARTNERSHIP
A. As to object
1. Universal Partnership
* of all present property
* of profit
2. Particular Partnership

B. As to liability
1. General/ Unlimited Partnership
2. Limited Partnership

C. As to duration
1. Partnership at Will
2. Partnership with a Fixed Term

D. As to the nature of business
1. Trading partnership
2. Non-trading Partnership

E. As to purpose
1. Commercial Partnership
2. Professional Partnership

F. As to the legality of existence
1. De jure Partnership
2. De facto Partnership

💡KINDS OF PARTNERS
A. As to contribution
1. Capitalist Partner
2. Industrial Partner
3. Capitalist- Industrial Partner

B. As to liability
1. General Partner
2. Limited Partner

C. As to participation
1. Universal Partner
2. Particular Partner

D. As to third-person/public
1. Secret Partner
2. Ostensible Partner

E. As to relationship with the partnership
1. Real Partner
2. Nominal Partner
3. Silent Partner
4. Dormant Partner

F. As to management of work
1. Managing Partner
2. Liquidating Partner

💡ADVANTAGES OF PARTNERSHIP
1. ease of formation
2. broader sources of capital
3. broader management base
4. tax implications
5. Juridical Personality

💡 DISADVANTAGES OF PARTNERSHIP
1. unlimited liability
2. limited or uncertain life
3. difficulty in transferring ownership
4. limitations in raising capital
©Accounting 101

V. PARTNERSHIP👫

i. Partnership Theories
ii. Partnership Formoration
iii. Partnership Operation
iv. Partnership Disolution
v. Partnership Liquidation

IV. MANUFACTURING CONCEPTS📂

Manufacturing Concepts

➡ Prime Cost/Direct Cost: Direct Material + Direct Labor

➡ Conversion Cost: Direct Labor + Factory Overhead

➡ Total Manufacturing Cost: Direct Material + Direct Labor + Factory Overhead

➡ Gross margin: Sales – CGS

➡ Net Income: Gross Margin- Operating Expenses

1. Raw Materials

2. Work in Process

3. Finished Goods
©Accounting 101

iv. Costing Methods👓

Costing Methods (determination of MI, CGS, Gross Margin)

💡 Specific Identification- the cost of units is identified as coming from specific purchase

💡 FIFO-first merchandise acquired is the first merchandise sold

💡 Moving Average- An average unit price is computed each time a purchase is made. The average unit price is used to determine the cost of items sold until another purchase is made (for perpetual inventory system)

💡 Weighted Average- The average unit cost is computed by dividing the total cost of goods available for sale by the total number of goods available for sale (for periodic inventory system)
©Accounting 101

iii. Inventory System📊

Periodic Inventory System vs Perpetual Inventory System:

📍 periodic -no continuous record of inventory.
📍 perpetual-continuous record of inventory and cost of goods sold.
©Accounting 101

ii. Credit Terms 💳

📌 Cash Discount- 5,8,15, 2/10, 3/15, 10/20, EOM, n/30 (journalized)
-gross method: cash discount is not yet deducted
-net method: cash discount is already deducted

📌 Trade Discount-5,8,15, 2/10, 3/15, 10/20, EOM, n/30 (not journalized)

📌 EOM- start counting from the first day of the next month

📌 List price- before discounts

📌 Invoice price- after discounts, what you can see on a receipt
©Accounting 101

i. Freight Terms
©Accounting 101

III. MERCHANDISING CONCEPTS📶

i. Freight Terms
ii. Credit Terms
iii. Inventory System
iv. Costing Method

xii. Correcting Entries ✅

↪ Use to correct accounting errors and necessary accounting changes.

↪ Normally, part of adjustments.

↪ If books are already closed, close the accounts to either the Income Summary or the Capital.
©Accounting 101

xi. Post- Reversing Trial Balance🔎

🚩Includes all accounts from the post-closing trial balance reflecting accounts that were already reversed

🚩Optional
©Accounting 101

x. Reversing Entries🔁

🔃Reverse all Accounts from the Post- Closing Trial Balance that came from the adjustments

🔃 Certain adjusted entries recorded at the end of the period are reversed at the beginning of a new accounting period.

🔃 Necessary for recording expense payments and revenue receipts in the new period in the usual manner

🔃 Optional

1. Accrued Expense

2. Accrued Income

3. Prepayment/Prepaid Expense (expense method)

4. Precollections/ Unearned Revenue/ Deferred Revenue (revenue method)
©Accounting 101

ix. Post-Closing Trial Balance🔐

✅A trial balance that only contains amounts from real accounts. Nominal accounts that were closed is not a part of this trial balance.
©Accounting 101

viii. Closing Entries
* Only nominal accounts are being closed plus drawings

1. Closing entries for Servicing
1.1 To Close Revenue
1.2 To Close Expense
1.3 To Close Income Summary
1.4 To Close Drawing

2. Closing entries for Merchandising
2.1 Closing Entries for CGS
2.2 Closing Entries for Income Summary
2.3 Closing Entries for Capital
©Accounting 101

vii. Financial Statements💵💸

✔Formal records of all financial transactions of an entity presented according to Accounting Standards and Principles.

5 Types of Financial Statements

a. Statement of Financial Performance/ Statement of Comprehensive Income/ Income Statement
➡ a formal statement containing all revenue and expense.

b. Statement of Changes in Owner’s Equity
➡ a formal statement containing the owner’s capital, withdrawal, income, and additional investments.

c. Statement of Financial Position/ Balance Sheet
➡ a formal statement containing all assets, contra- assets, liabilities and equity accounts.

d. Statement of Cash Flows
➡ a formal statement containing records of all cash inflows and cash outflows.

e. Notes to the Financial Statement
➡ a formal statement containing necessary notes, descriptions or disclosures about the first four financial statements.
©Accounting 101

vi. Worksheet 📝

Worksheet:
A working paper showing the account balances from the trial balance, adjustments, unadjusted trial balance, income statement, and balance sheet. Though this part is optional, it does facilitate the preparation of financial statements.

Below is an example showing as a guide in preparing your working paper.

1st column: unadjusted trial balance

2nd column: all the amounts from the adjusting entries

3rd column: adjusted trial balance- a trial balance reflecting the amounts from the adjusting entries

4th column: Income Sheet- a column that will reflect all the revenue and expense accounts.

5th column: Balance Sheet- a column that will show all the balances of asset, liability, and equity accounts.
©Accounting 101

v. Adjusting Entries📒

* Updating the balances of certain accounts which is necessary before preparing the financial statements, usually at the end of the accounting period

* Supports the matching principle and also to avoid overstatement and understatement

* These entries should also be posted

1. Accruals
a. Accrued Revenue
b. Accrued Expense

2. Prepayments/ Prepaid Expense

3. Precollections/ Unearned Revenue/ Deferred Revenue

4. Bad debts/ Uncollectible Accounts * percentage from sales= bad debts expense * percentage from Accounts Receivable= Allowance Ends

5. Depreciation and Amortization * Dep'n Expense = Cost- Salvage Value / Estimated Useful Life in Years
©Accounting 101

iv. 📒 Trial Balance

Trial Balance:
~A statement created to test the equality of the debit and the credit side. A correct trial balance is proof of accuracy in posting and journalizing your transactions.

*The amounts of the accounts should be posted on their normal side.

*Take note that both sides should always be equal. If not, go ahead and check your journal entries and t-accounts, you must have missed something, recorded a wrong amount, totaled incorrectly, posted to a wrong account, etc.
©Accounting 101

iii. 👓Posting

T-accounts- Has 3 main parts:
1. Account Title
2. Debit (left side)
3. Credit (right side)

💼Same accounts from the journal entry will be posted in just one account. This is done in order to monitor the amounts of a specific account. Remember that if the journal entry is on the debit side then it will also be posted on the debit side of the t-account, same with the credit sides.

Totaling your Ledger Accounts:
After posting all your journal entries to your t-accounts/ledger accounts, the next step is to total the amounts. In doing this you need to identify if the account is open or closed:

Closed Account: equal amounts in both debit and credit side.

Open Account: amount in both sides are unequal.
© Accounting 101