Ledger Account. Samir K Mahajan

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1 Ledger Account Samir K Mahajan

2 MEANING OF LEDGER ACCOUNT A Ledger is a book which contains all the accounts whether personal, real or nominal, which are first entered in journal or special purpose subsidiary books. Ledger is a principal or main book which contains all the accounts in which the transactions recorded in the books of original entry are transferred. Ledger is also called the Book of Final Entry or Book of Secondary Entry, because the transactions are finally incorporated in the Ledger. Ledger accounts are classified into : Asset Account Liabilities Account Capital Account Revenue Account Expenses Account

3 FORMAT OF LEDGER ACCOUNT Name of the Account Year Month Date To (Name of edit Account in Journal ) Year Month Date By (Name of Debit Account in Journal)

4 EXPLANATION: LEDGER ACCOUNT i. Each ledger account is divided into two parts. The left hand side is known as the debit side and the right hand side is known as the credit side. The words. and. are used to denote Debit and edit. ii. The name of the account is mentioned in the top (middle) of the account. iii. The date of the transaction is recorded in the date column. iv. The word To is used before the accounts which appear on the debit side of an account in the particulars column. Similarly, the word By is used before the accounts which appear on the credit side of an account in the particulars column. v. The name of the other account which is affected by the transaction is written either in the debit side or credit side in the particulars column. vi. The page number of the Journal or Subsidiary Book from where that particular entry is transferred, is entered in the Journal Folio (J.F) column. vii. The amount pertaining to this account is entered in the amount column.

5 POSTING The process of transferring the entries recorded in the journal or subsidiary books to the respective accounts opened in the ledger is called Posting.

6 Procedure of posting Procedure of posting for an Account which has been debited in the journal entry. Step 1 Locate in the ledger, the account to be debited and enter the date of the transaction in the date column on the debit side. Step 2 Record the name of the account credited in the Journal in the particulars column on the debit side as To... (name of the account credited). Step 3 Record the page number of the Journal in the J.F column on the debit side and in the Journal, write the page number of the ledger on which a particular account appears in the L.F. column. Step 4 Enter the relevant amount in the amount column on the debit side. Procedure of posting for an Account which has been credited in the journal entry. Step 1 Locate in the ledger the account to be credited and enter the date of the transaction in the date column on the credit side. Step 2 Record the name of the account debited in the Journal in the particulars column on the credit side as By... (name of the account debited) Step 3 Record the page number of the Journal in the J.F column on the credit side and in the Journal, write the page number of the ledger on which a particular account appears in the L.F. column. Step 4 Enter the relevant amount in the amount column on the credit side.

7 Balancing an Account Balance is the difference between the total debits and the total credits of an account. When posting is done, many accounts may have entries on their debit side as well as credit side. The net result of such debits and credits in an account is the balance. Balancing means the writing of the difference between the amount columns of the two sides in the lighter (smaller total) side, so that the grand totals of the two sides become equal. There are three possibilities while balancing an account during a given period. It may be a debit balance or a credit balance or a nil balance depending upon the debit total and the credit total. i. Debit Balance :The excess of debit total over the credit total is called the debit balance ii. edit Balance :The excess of credit total over the debit total is called the credit balance. iii. Nil Balance :When the total of debits and credits are equal, it is closed by merely writing the total on both the sides

8 Balancing an Account Debit Balance: Following ledger accounts have debit balance: 1. All assets account such as; cash, building, and furniture 2. All expenses and loss account i.e. wages, salaries, bad debts, discount allowed 3. Purchase account 4. Sales return or return inward account 5. awing account 6. Debtors account 7. Discount Allowed edit Balance: Following ledger accounts have credit balance: 1. Capital account 2. Liabilities account 3. Reserve fund account 4. Revenue and income account 5. Sales account 6. Purchase return or return outward account 7. editors account 8. Interest on drawing account 9. Discount received

9 LEDGER POSTING FORM JOURNAL Example 1: Pass the following journal entries and post them in ledger account 2005 Jan 1: Started business with cash Rs 20, 000 Jan 3: Purchased goods from Navneet Rs 5000 Jan 6: Paid to Navneet Rs4900 Discount Allowed Rs 100 Jan 9: Purchased Furniture Rs 2000 Jan 12: paid salaries Rs 1000 Jan 15 : Rent received Rs 500 Jan 18: Sold goods To Kartikeya Rs 4000

10 Example 1 contd. Journal Date Particular L.F. Debit Amount 2005 Cash A/C Jan 1 To Capital A/C (started business) Jan 3 Purchase A/C To Navneet A/C (Purchased goods from Navneet for credit) 5000 edit Amount Jan 6 Navneet s A/C To Cash A/C To Discount Received A/C (Amount paid to Navneet who allowed Discount ) Jan 9 Furniture To A/C To Cash A/C (Furniture Purchased for cash ) Balance c/d

11 Example 1 contd. Journal Balance b/d Jan 12 Salaries A/C To Cash A/C (payment of salaries ) Jan 15 Cash A/C To Rent A/C (Rent received ) Jan 18 Kartikeya s A/C To Sales A/C (sold goods to Kartikeya)

12 Example 1 contd. Ledger posting from Journal Ledger Cash Account 2005 Jan1 Jan 15 To Capital A/C To Rent A/C Jan 6 Jan 9 Jan 12 Jan 31 By Navneet A/C By By Furniture A/C By Salaries A/C By Balance c/d Feb 1 To Balance b/d

13 Example 1 contd. Capital Account 2005 Jan 31 To Balanced c/d Jan1 By cash A/C Feb 1 By Balance b/d 20000

14 Example 1 contd. Purchase Account 2005 Jan 3 To Navneet s A/C Jan 31 By Balance c/d 5000 Feb 1 To Balance b/d

15 Example 1 contd. Navneet s Account Date Particulars J.F. Amount 2005 Jan6 To Cash A/C To Discount Received A/C Jan 3 By Purchase A/C

16 Example 1 contd. Discount Received Account 2005 Jan 31 To Balance c/d Jan 6 By Navneet s A/C Feb 1 By Balance b/d 100

17 Example 1 contd. Furniture Account 2005 Jan 9 To Cash A/C Jan 31 By balance c/d Feb 1 To Balance b/d 2000

18 Example 1 contd. Salaries Account 2005 Jan 12 To Cash A/C Jan 31 By balance c/d Feb 31 To Balance b/d 1000

19 Example 1 contd. Rent Account 2005 Jan 31 To balance c/d Jan 15 By Cash A/C Feb 1 By Balance b/d 500

20 Example 1 contd. Kartikeya s Account 2005 Jan 18 To Sales A/c Jan 31 By Balance c/d Feb 1 To Balance b/d 4000

21 Example 1 contd. Sales Account 2005 Jan 31 To Balance c/d Jan 18 By Kartikeya s A/C Feb 1 By Balance b/d 4000

22 LEDGER POSTING FROM CASH BOOK Example 2 Enter the following transactions in a Cash Book and post them in ledger accounts with help of cash book Jan 1 : Cash in hand Rs Jan.5 : Received from Akash ---- Rs 300 Jan 7 : paid rent Rs 30 Jan 8 : sold goods Rs 300 Jan10 : Paid Sunny Rs 700 Jan 27: Purchased furniture Rs 200 Jan 31 : paid salaries Rs 100

23 Example 2: solution: Cash Book Receipts payments Date Particular R.N. L.F. Amount 1980 Jan 1 To Balance b/d Ledger Date Particular V.N. L.F. Amount 1980 Jan. 7 By rents 30 Jan.5 To Akash 300 Jan. 10 By Sunny 700 Jan. 8 To Sales 300 Jan. 27 By Furniture 200 Jan. 31 By Salaries 100 Jan 31 By Balance c/d Feb 1 To Balance b /d ,700

24 Example 2 contd. Ledger posting from debit side of cash book Akash Account 1980 Jan 31 To balance c/d Jan 5 By Cash A/C Feb 1 By Balance b/d 300

25 Example 2 contd. Ledger posting from credit side of cash book Rent Account 1980 Jan 7 To Cash Jan 31 By Balance c/d 30 Feb 1 To Balance b/d

26 Example 2 contd. Sales s Account 1980 Jan 31 To balance c/d Jan 8 By Cash A/C Feb 1 By Balance b/d 300

27 Example 2 contd. Sunny s Account 1980 Jan 10 To Cash Jan 31 By Balance c/d 700 Feb 1 To Balance b/d

28 Example 2 contd. Furniture Account 1980 Jan 27 To Cash Jan 31 By Balance c/d 200 Feb 1 To Balance b/d

29 Example 2 contd. Salaries Account 1980 Jan 31 To Cash Jan 31 By Balance c/d 100 Feb 1 To Balance b/d

30 LEDGER POSTING FROM PURCHASE BOOK Example 3 Enter the following transactions in a Purchase Book and post them in ledger accounts with help of Purchase book. Record the following transactions on purchase book 2006: March1 Purchases from Purohit Furnishers, Gandhi Nagar (Invoice no. 516) 20 Rs1500 each 2 Rs 4000 each Less trade 10% March7 Bought M/S Roy and Co., Ahmedabad (Invoice number 700) each 10 collapsible 2000 each Delivery and cartage Rs. 150 March 26 Purchase 10 Mini 500 on cash

31 Example 3: Solution PURCHASE BOOK/PURCHASE JOURNAL Date Inward Invoice Number Particulars Name of Suppliers (Account to be credited) L.F. Details Amount Total 2006 March Purohit Furnishers, Gandhinagar 20 Rs1500 each 2 Rs 4000 each Less: trade 10% March M/S Roy and Co., Ahmedabad each 10 collapsible chairs@rs each Add: Delivery and cartage Rs Purchase A/C 79350

32 Example 3 contd. Ledger Posting from Purchase book Ledger Purchase Account 2006 March 30 To Total amount as per purchase book March 30 By Balance c/d April1 To Balance b/d

33 Example 3 contd. Purohit Furnishers Account 2006 March 30 To Balance c/d March 1 By Purchase A/C April 1 By Balance b/d 34200

34 Example 3 contd. M/S M S Roy and Co. Account 2006 March 30 To Balance c/d March 1 By Purchase A/C April 1 By Balance b/d 45150

35 LEDGER POSTING FROM Sales BOOK Example 4 Enter the following transactions in a Sales Book and post them in ledger accounts with help of sales book. Enter the following transactions in the sales book of Ojha Enterprise, Ahmedabad 2006 May 4 sold M/S Dewan Brothers, Ahmedabad (Invoice no. 175) 10 dozens 20 per dozen 14 dozens Rs 60 per dozen May 14 Sold to Sun Enterprise, Gandhi Nagar (invoice no. 200) 5 dozens of gum Rs 5 per bottle 70 dozens Rs 15 per dozen Less: 10% trade discount May 30 sold old furniture to M/S Patel and Sons, on credit for Rs (invoice no.300)

36 Example 4: Solution SALES BOOK/SALES JOURNAL Date Outward Invoice Number Particulars Name of Suppliers (Account to be debited ) L.F. Details Amount Total 2006 May M/S Dewan Brothers, Ahmedabad 10 dozens 20 per dozen 14 dozens Rs 60 per dozen May Sun Enterprise, Gandhi Nagar 5 dozens of gum Rs 5 per bottle 70 dozens Rs 15 per dozen Less: 10% trade discount Sales A/C 2255

37 Example 4 contd. Ledger Posting from Sales book Ledger Sales Account 2006 May 30 To Balance c/d May 30 By Total amount as per sales book June 1 By Balance b/d 2255

38 Example 4 contd. M/S Dewan Brothers Account 2006 May 4 To Sales A/C May 30 By balance c/d 1040 June1 To Balance b/d

39 Example 4 contd. Sun Enterprise Account 2006 May 14 To Sales A/C May 30 By balance c/d 1215 June 1 To Balance b/d

40 Example 5: Ledger posting 0f compound journal entries. Jan. 12, 2003, Cash sales Rs.10,000, Cash received from Kannan Rs.5,000 and commission earned Rs.2,500 Solution: Journal Date Particular L.F. Debit Amount 2014 Cash A/C Jan 1 To Sales A/C To Kannan A/C To Commission A/C edit Amount (Received cash for sale, from Kannan and as commission))

41 Example 5 contd. Ledger Cash Account 2003 Jan 12 To Sales A/C To Kannan A/C To Commission A/C Jan31 By balance c/d Feb 1 To Balance b/d 17500

42 Example 5 contd. Sales Account 2003 Jan 12 To Sales c/d Jan31 By Cash A/C Feb 1 To Balance b/d

43 Example 5 contd. Kannan Account 2003 Jan 12 To Balance c/d Jan31 By Cash A/C Feb 1 By Balance b/d 17500

44 Example 5 contd. Ledger Commission Account 2003 Jan 12 To Balance c/d Jan31 By Cash A/C By Balance b/d Feb

TRIAL BALANCE. Samir K Mahajan

TRIAL BALANCE. Samir K Mahajan TRIAL BALANCE Samir K Mahajan TRIAL BALANCE: MEANING AND METHOD Trial balance is a statement which shows debit balances and credit balances of all accounts in the ledger. Since, every debit should have