Ledger Account Samir K Mahajan
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
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)
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.
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.
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.
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
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
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
Example 1 contd. Journal Date Particular L.F. Debit Amount 2005 Cash A/C 20000 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 20000 5000 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 5000 2000 4900 100 2000
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) 1000 500 4000 1000 5000 4000
Example 1 contd. Ledger posting from Journal Ledger Cash Account 2005 Jan1 Jan 15 To Capital A/C To Rent A/C 20000 500 2005 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 4900 2000 1000 12 600 20500 20500 Feb 1 To Balance b/d 12 600
Example 1 contd. Capital Account 2005 Jan 31 To Balanced c/d 20000 2005 Jan1 By cash A/C 20000 20000 20000 Feb 1 By Balance b/d 20000
Example 1 contd. Purchase Account 2005 Jan 3 To Navneet s A/C 5000 2005 Jan 31 By Balance c/d 5000 Feb 1 To Balance b/d 5000 5000 5000
Example 1 contd. Navneet s Account Date Particulars J.F. Amount 2005 Jan6 To Cash A/C To Discount Received A/C 4900 100 2005 Jan 3 By Purchase A/C 5000 5000 5000
Example 1 contd. Discount Received Account 2005 Jan 31 To Balance c/d 100 2005 Jan 6 By Navneet s A/C 100 100 100 Feb 1 By Balance b/d 100
Example 1 contd. Furniture Account 2005 Jan 9 To Cash A/C 2000 2005 Jan 31 By balance c/d 2000 2000 2000 Feb 1 To Balance b/d 2000
Example 1 contd. Salaries Account 2005 Jan 12 To Cash A/C 1000 2005 Jan 31 By balance c/d 1000 1000 1000 Feb 31 To Balance b/d 1000
Example 1 contd. Rent Account 2005 Jan 31 To balance c/d 500 2005 Jan 15 By Cash A/C 500 500 500 Feb 1 By Balance b/d 500
Example 1 contd. Kartikeya s Account 2005 Jan 18 To Sales A/c 4000 2005 Jan 31 By Balance c/d 4000 4000 4000 Feb 1 To Balance b/d 4000
Example 1 contd. Sales Account 2005 Jan 31 To Balance c/d 4000 2005 Jan 18 By Kartikeya s A/C 4000 4000 4000 Feb 1 By Balance b/d 4000
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. 1980 Jan 1 : Cash in hand ------------- Rs 11200 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
Example 2: solution: Cash Book Receipts payments Date Particular R.N. L.F. Amount 1980 Jan 1 To Balance b/d Ledger 11 200 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 10770 Feb 1 To Balance b /d 11800 11800 10,700
Example 2 contd. Ledger posting from debit side of cash book Akash Account 1980 Jan 31 To balance c/d 300 1980 Jan 5 By Cash A/C 300 300 300 Feb 1 By Balance b/d 300
Example 2 contd. Ledger posting from credit side of cash book Rent Account 1980 Jan 7 To Cash 30 1980 Jan 31 By Balance c/d 30 Feb 1 To Balance b/d 30 30 30
Example 2 contd. Sales s Account 1980 Jan 31 To balance c/d 300 1980 Jan 8 By Cash A/C 300 300 300 Feb 1 By Balance b/d 300
Example 2 contd. Sunny s Account 1980 Jan 10 To Cash 700 1980 Jan 31 By Balance c/d 700 Feb 1 To Balance b/d 700 700 700
Example 2 contd. Furniture Account 1980 Jan 27 To Cash 200 1980 Jan 31 By Balance c/d 200 Feb 1 To Balance b/d 200 200 200
Example 2 contd. Salaries Account 1980 Jan 31 To Cash 100 1980 Jan 31 By Balance c/d 100 Feb 1 To Balance b/d 100 1200 100
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 Chairs @ Rs1500 each 2 Tables @ Rs 4000 each Less trade discount @ 10% March7 Bought M/S Roy and Co., Ahmedabad (Invoice number 700) 20 Stools @Rs. 1250each 10 collapsible chairs @Rs. 2000 each Delivery and cartage Rs. 150 March 26 Purchase 10 Mini Chairs @ 500 on cash
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 1 516 Purohit Furnishers, Gandhinagar 20 Chairs @ Rs1500 each 2 Tables @ Rs 4000 each 30000 8000 Less: trade discount @ 10% 38000 3800 34200 March 7 700 M/S Roy and Co., Ahmedabad 20 Stools @Rs. 1250each 10 collapsible chairs@rs. 2000 each Add: Delivery and cartage Rs. 150 25000 20000 45000 150 45150 Purchase A/C 79350
Example 3 contd. Ledger Posting from Purchase book Ledger Purchase Account 2006 March 30 To Total amount as per purchase book 79350 2006 March 30 By Balance c/d 79350 April1 To Balance b/d 79350 79350 79350
Example 3 contd. Purohit Furnishers Account 2006 March 30 To Balance c/d 34200 2006 March 1 By Purchase A/C 34200 34200 34200 April 1 By Balance b/d 34200
Example 3 contd. M/S M S Roy and Co. Account 2006 March 30 To Balance c/d 45150 2006 March 1 By Purchase A/C 45150 45150 45150 April 1 By Balance b/d 45150
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 pencils @Rs 20 per dozen 14 dozens rubbers @ Rs 60 per dozen May 14 Sold to Sun Enterprise, Gandhi Nagar (invoice no. 200) 5 dozens of gum bottles @ Rs 5 per bottle 70 dozens rulers @ Rs 15 per dozen Less: 10% trade discount May 30 sold old furniture to M/S Patel and Sons, on credit for Rs 17000 (invoice no.300)
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 4 175 M/S Dewan Brothers, Ahmedabad 10 dozens pencils @Rs 20 per dozen 14 dozens rubbers @ Rs 60 per dozen 200 840 1040 May 14 200 Sun Enterprise, Gandhi Nagar 5 dozens of gum bottles @ Rs 5 per bottle 70 dozens rulers @ Rs 15 per dozen 300 1050 Less: 10% trade discount 1350 135 1215 Sales A/C 2255
Example 4 contd. Ledger Posting from Sales book Ledger Sales Account 2006 May 30 To Balance c/d 2255 2006 May 30 By Total amount as per sales book 2255 2255 2255 June 1 By Balance b/d 2255
Example 4 contd. M/S Dewan Brothers Account 2006 May 4 To Sales A/C 1040 2006 May 30 By balance c/d 1040 June1 To Balance b/d 1040 1040 1040
Example 4 contd. Sun Enterprise Account 2006 May 14 To Sales A/C 1215 2006 May 30 By balance c/d 1215 June 1 To Balance b/d 1215 1215 1215
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 17500 Jan 1 To Sales A/C To Kannan A/C To Commission A/C edit Amount 10000 5000 2500 (Received cash for sale, from Kannan and as commission))
Example 5 contd. Ledger Cash Account 2003 Jan 12 To Sales A/C To Kannan A/C To Commission A/C 10000 5000 2500 2003 Jan31 By balance c/d 17500 17500 17500 Feb 1 To Balance b/d 17500
Example 5 contd. Sales Account 2003 Jan 12 To Sales c/d 10000 2003 Jan31 By Cash A/C 10000 Feb 1 To Balance b/d 10000 10000 10000
Example 5 contd. Kannan Account 2003 Jan 12 To Balance c/d 5000 2003 Jan31 By Cash A/C 5000 5000 5000 Feb 1 By Balance b/d 17500
Example 5 contd. Ledger Commission Account 2003 Jan 12 To Balance c/d 2500 2003 Jan31 By Cash A/C 2500 2500 2500 By Balance b/d Feb 1 2500