UNIT – I Journal and ledger posting DEPARTMENT OF MANAGEMENT STUDIES UNIT – I Journal and ledger posting 8/28/2018 Dr. G. MAHESWARAN/AP 1/55

Meaning of Journal Journal is a record that keeps accounting transactions in chronological order, i.e. as they occur. Ledger is a record that keeps accounting transactions by accounts. Account is a unit to record and summarize accounting transactions.

Some unusual transactions and their journal entries 8/28/2018 Dr. G. MAHESWARAN/AP 3/55

June 1, 2004 – Anju contributed capital Rs. 50,000 June 1, 2004 – Anju contributed capital Rs. 50,000 Manju contributed capital Rs. 70,000 8/28/2018 Dr. G. MAHESWARAN/AP 4/55

17. June 1, 2004 – Anju contributed capital Rs. 50,000 17. June 1, 2004 – Anju contributed capital Rs. 50,000 Manju contributed capital Rs. 70,000 Journal 8/28/2018 Dr. G. MAHESWARAN/AP 5/55

July 1, 2004 – Ajay contributed capital – Cash Rs. 90,000, Furniture Rs. 20,000 Vijay contributed capital – Cash Rs. 50,000 Stock Rs. 70,000 8/28/2018 Dr. G. MAHESWARAN/AP 6/55

July 1, 2004 – Ajay contributed capital – Cash Rs. 90,000, Furniture Rs. 20,000 Vijay contributed capital – Cash Rs. 50,000, Stock Rs. 70,000 Journal 8/28/2018 Dr. G. MAHESWARAN/AP 7/55

July 13, 2003 – Received cash Rs.24,700 from Shanthi in full settlement of her account of Rs.25,000. 8/28/2018 Dr. G. MAHESWARAN/AP 8/55

July 13, 2003 – Received cash Rs.24,700 from Shanthi in full settlement of her account of Rs.25,000. 8/28/2018 Dr. G. MAHESWARAN/AP 9/55

20. July 14, 2003 – Paid cash to Thenmozhi s 20. July 14, 2003 – Paid cash to Thenmozhi s.14,500, in full settlement of her account of Rs.15,000. 8/28/2018 Dr. G. MAHESWARAN/AP 10/55

21. Jamuna who owed us Rs.10,000 is declared insolvent and 25% in a rupee is received from her on 15th July, 2003. Insolvent:   Unable to meet debts or  discharge liabilities 8/28/2018 Dr. G. MAHESWARAN/AP 11/55

What is bad debts? The term bad debts usually refers to accounts receivable (or trade accounts receivable) that will not be collected.  However, bad debts can also refer to notes receivable that will not be collected. The bad debts associated with accounts receivable is reported on the income statement as Bad Debts Expense or Uncollectible Accounts Expense. 8/28/2018 Dr. G. MAHESWARAN/AP 12/55

21. Jamuna who owed us Rs.10,000 is declared insolvent and 25% in a rupee is received from her on 15th July, 2003. Journal 8/28/2018 Dr. G. MAHESWARAN/AP 13/55

Received cash for a Bad debt written off last year Rs Received cash for a Bad debt written off last year Rs.7,500 on 18th January, 2004. Insolvent Solvent 8/28/2018 Dr. G. MAHESWARAN/AP 14/55

Received cash for a Bad debt written off last year Rs Received cash for a Bad debt written off last year Rs.7,500 on 18th January, 2004. Journal 8/28/2018 Dr. G. MAHESWARAN/AP 15/55

Ledger posting 8/28/2018 Dr. G. MAHESWARAN/AP 16/55

Ledger A Ledger is a book which contains all the accounts which are first entered in journal. According to L.C. Cropper, ‘the book which contains a classified and permanent record of all the transactions of a business is called the Ledger’. It’s a permanent record of transactions that can not changed. 8/28/2018 Dr. G. MAHESWARAN/AP 17/55

Format of Ledger Name of The Account Dr. Cr. Date Particulars JF Amount AED Year Month Accounts name 8/28/2018 Dr. G. MAHESWARAN/AP 18/55

Explanation: 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 ‘Dr.’ and ‘Cr.’ are used to denote Debit and Credit. 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. 8/28/2018 Dr. G. MAHESWARAN/AP 19/55

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. 8/28/2018 Dr. G. MAHESWARAN/AP 20/55

Procedure of posting I. 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. 8/28/2018 Dr. G. MAHESWARAN/AP 21/55

Procedure of posting II. 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. 8/28/2018 Dr. G. MAHESWARAN/AP 22/55

Example of Ledger and Posting Dr. G. MAHESWARAN/AP 8/28/2018 23/55

Write the journal of this transaction Journal Mr. Ram started business with cash Rs.5,00,000 on 1st June 2003. Write the journal of this transaction 8/28/2018 Dr. G. MAHESWARAN/AP 24/55

Journal Mr. Ram started business with cash Rs Journal Mr. Ram started business with cash Rs.5,00,000 on 1st June 2003. 8/28/2018 Dr. G. MAHESWARAN/AP 25/55

Try to find how many accounts involved in the journal Cash Account Ram,s Capital Account 8/28/2018 Dr. G. MAHESWARAN/AP 26/55

For ledger posting draw 2 Ledgers Cash Account Ram,s Capital Account 8/28/2018 Dr. G. MAHESWARAN/AP 27/55

Name of Account Name of Account Dr. Cr. Date Particulars JF Amount AED Year Month Accounts name Name of Account Dr. Cr. Date Particulars JF Amount AED Year Month Accounts name 8/28/2018 Dr. G. MAHESWARAN/AP 28/55

Write the name of Accounts at the top of each ledger. Cash Account Ram,s Capital Account 8/28/2018 Dr. G. MAHESWARAN/AP 29/55

Cash Account Ram’s Capital Account Dr. Cr. Date Particulars JF Amount AED Year Month Accounts name Ram’s Capital Account Dr. Cr. Date Particulars JF Amount AED Year Month Accounts name 8/28/2018 Dr. G. MAHESWARAN/AP 30/55

Input the dates 8/28/2018 Dr. G. MAHESWARAN/AP 31/55

Cash Account Dr. Cr. Date Particulars JF Amount AED 2003 June 1 Accounts name Year Month 8/28/2018 Dr. G. MAHESWARAN/AP 32/55

Start Debit side with “To” Start “Credit side with “By” 8/28/2018 Dr. G. MAHESWARAN/AP 33/55

Cash Account Dr. Cr. Date Particulars JF Amount AED 2003 June 1 To Rams Account Year Month Accounts name 8/28/2018 Dr. G. MAHESWARAN/AP 34/55

Insert the amount 8/28/2018 Dr. G. MAHESWARAN/AP 35/55

Cash Account Dr. Cr. Date Particulars JF Amount AED 2003 June 1 To Rams Account 500,000 Year Month Accounts name 8/28/2018 Dr. G. MAHESWARAN/AP 36/55

Sum up debit and credit side 8/28/2018 Dr. G. MAHESWARAN/AP 37/55

Cash Account Dr. Cr. Date Particulars JF Amount AED 2003 June 1 To Rams Account 500,000 Year Month Accounts name 8/28/2018 Dr. G. MAHESWARAN/AP 38/55

Adjust debit credit with Balance Carried Down or Balance C/d 8/28/2018 Dr. G. MAHESWARAN/AP 39/55

Cash Account Dr. Cr. Date Particulars JF Amount AED 2003 June 1 To Rams Account 500,000 June 30 Balance c/d 8/28/2018 Dr. G. MAHESWARAN/AP 40/55

Carry forward the adjusted balance Balance Brought Down or Balance b/d 8/28/2018 Dr. G. MAHESWARAN/AP 41/55

Cash Account Dr. Cr. Date Particulars JF Amount AED 2003 June 1 July 1 To Rams Account Balance b/d 500,000 June 30 Balance c/d 8/28/2018 Dr. G. MAHESWARAN/AP 42/55

Rams Capital Account Dr. Cr. Date Particulars JF Amount AED 2003 June 30 Balance c/d 500,000 June 1 July 1 By Cash A/c Balance b/d 8/28/2018 Dr. G. MAHESWARAN/AP 43/55

Illustration 3. Journalise the following transactions in the books of Amar and post them in the Ledger:- 2004 March1 Bought goods for cash Rs. 25,000 2 Sold goods for cash Rs. 50,000 3 Bought goods for credit from Gopi Rs.19,000 5 Sold goods on credit to Robert Rs.8,000 7 Received from Robert Rs. 6,000 9 Paid to Gopi Rs.5,000 20 Bought furniture for cash Rs. 7,000 8/28/2018 Dr. G. MAHESWARAN/AP 44/55

Journal of Amar 8/28/2018 Dr. G. MAHESWARAN/AP 45/55

8/28/2018 Dr. G. MAHESWARAN/AP 46/55

so six accounts are to be opened in the ledger. There are six accounts involved: Cash, Purchases, Sales, Furniture, Gopi & Robert, so six accounts are to be opened in the ledger. 8/28/2018 Dr. G. MAHESWARAN/AP 47/55

In the Books of Amar Cash Account 8/28/2018 Dr. G. MAHESWARAN/AP 48/55

Purchases Account 49/55 8/28/2018 Dr. G. MAHESWARAN/AP

Sales Account 8/28/2018 Dr. G. MAHESWARAN/AP 50/55

Furniture Account 8/28/2018 Dr. G. MAHESWARAN/AP 51/55

Gopi Account 8/28/2018 Dr. G. MAHESWARAN/AP 52/55

Robert Account 8/28/2018 Dr. G. MAHESWARAN/AP 53/55

ADVANTAGES OF LEDGER The following are the advantages of ledger: i. Complete information at a glance: All the transactions pertaining to an account are collected at one place in the ledger. By looking at the balance of that account, one can understand the collective effect of all such transactions at a glance. ii. Arithmetical Accuracy With the help of ledger balances, Trial balance can be prepared to know the arithmetical accuracy of accounts. iii. Result of Business Operations It facilitates the preparation of final accounts for ascertaining the operating result and the financial position of the business concern. iv. Accounting information The data supplied by various ledger accounts are summarized, analyzed and interpreted for obtaining various accounting information. 8/28/2018 Dr. G. MAHESWARAN/AP 54/55

Posting of Compound Journal Entries Compound or Combined Journal Entry is one where more than one transactions are recorded by passing only one journal entry instead of passing several journal entries. Since every debit must have the corresponding equal amount of credit, special care must be taken in posting the compound journal entry, where there may be only one debit aspect but many corresponding credit aspects of equal value or vise versa. The posting of such transactions is done in the same way as already explained. 8/28/2018 Dr. G. MAHESWARAN/AP 55/55

Illustration 3 :. Jan. 12, 2003, Cash sales Rs Illustration 3 : Jan. 12, 2003, Cash sales Rs.10,000, Cash received from Kannan Rs.5,000 and commission earned Rs.2,500. Journal 8/28/2018 Dr. G. MAHESWARAN/AP 56/55