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 DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) Year Month Date To (Name of Credit 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 ‘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.

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 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. Procedure of posting

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. Credit 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.Drawing account 6.Debtors account 7.Discount Allowed Credit 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.Creditors 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 Rs 4900 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

DateParticularL.F.Debit Amount (Rs) Credit Amount (Rs) 2005 Jan 1 Cash A/C Dr To Capital A/C (started business) Jan 3Purchase A/C Dr To Navneet A/C (Purchased goods from Navneet for credit) Jan 6 Navneet’s A/C Dr To Cash A/C To Discount Received A/C (Amount paid to Navneet who allowed Discount ) Jan 9 Furniture To A/C Dr To Cash A/C (Furniture Purchased for cash ) Balance c/d Journal Example 1 contd.

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

Cash Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan1 Jan 15 Feb 1 To Capital A/C To Rent A/C To Balance b/d 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 Example 1 contd. Ledger posting from Journal Ledger

Capital Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan 31To Balanced c/d Jan1 Feb 1 By cash A/C By Balance b/d Example 1 contd.

Purchase Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan 3 Feb 1 To Navneet’s A/C To Balance b/d Jan 31 By Balance c/d5000 Example 1 contd.

Navneet’s Account DrCr DateParticularsJ.F. Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan6To Cash A/C To Discount Received A/C Jan 3 By Purchase A/C5000 Example 1 contd.

Discount Received Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan 31To Balance c/d Jan 6 Feb 1 By Navneet’s A/C By Balance b/d 100 Example 1 contd.

Furniture Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan 9 Feb 1 To Cash A/C To Balance b/d Jan 31 By balance c/d2000 Example 1 contd.

Salaries Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan 12 Feb 31 To Cash A/C To Balance b/d Jan 31 By balance c/d1000 Example 1 contd.

Rent Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan 31 To balance c/d Jan 15 Feb 1 By Cash A/C By Balance b/d 500 Example 1 contd.

Kartikeya’s Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan 18 Feb 1 To Sales A/c To Balance b/d Jan 31 By Balance c/d4000 Example 1 contd.

Sales Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan 31 To Balance c/d Jan 18 Feb 1 By Kartikeya’s A/C By Balance b/d 4000 Example 1 contd.

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 Sikha Rs 700 Jan 27: Purchased furniture Rs 200 Jan 31 : paid salaries Rs 100

Cash Book Dr Receipts paymentsCr DateParticularR.N.L.F.Amount (Rs) DateParticularV.N.L.F.Amount (Rs) 1980 Jan 1 Jan.5 Jan. 8 Feb 1 To Balance b/d To Akash To Sales To Balance b /d Jan. 7 Jan. 10 Jan. 27 Jan. 31 Jan 31 By rents By Sikha By Furniture By Salaries By Balance c/d ,700 Example 2: solution: Ledger

Example 2 contd. Ledger posting from debit side of cash book Akash’ Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 1980 Jan 31 To balance c/d Jan 5 Feb 1 By Cash A/C By Balance b/d 300

Example 2 contd. Ledger posting from credit side of cash book Rent Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 1980 Jan 7 Feb 1 To Cash To Balance b/d Jan 31 By Balance c/d 30

Example 2 contd. Sales‘s Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 1980 Jan 31 To balance c/d Jan 8 Feb 1 By Cash A/C By Balance b/d 300

Example 2 contd. Shikha’s Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 1980 Jan 10 Feb 1 To Cash To Balance b/d Jan 31 By Balance c/d 700

Example 2 contd. Furniture Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 1980 Jan 27 Feb 1 To Cash To Balance b/d Jan 31 By Balance c/d 200

Example 2 contd. Salaries Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 1980 Jan 31 Feb 1 To Cash To Balance b/d Jan 31 By Balance c/d

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 Rs 1500 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

PURCHASE BOOK/PURCHASE JOURNAL DateInward Invoice Number Particulars Name of Suppliers (Account to be credited) L.F.Amount Details (Rs)Total (Rs) 2006 March 1 March Purohit Furnishers, Gandhinagar 20 Rs 1500 each 2 Rs 4000 each Less: trade 10% M/S Roy and Co., Ahmedabad each 10 collapsible 2000 each Add: Delivery and cartage Rs. 150 Purchase A/C Dr Example 3: Solution

Example 3 contd. Ledger Posting from Purchase book Purchase Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2006 March 30 April1 To Total amount as per purchase book To Balance b/d March 30 By Balance c/d Ledger

Example 3 contd. Purohit Furnishers Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2006 March 30 To Balance c/d March 1 April 1 By Purchase A/C By Balance b/d 34200

Example 3 contd. M/S M S Roy and Co. Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2006 March 30 To Balance c/d March 1 April 1 By Purchase A/C 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 20 per dozen 14 dozens Rs 60 per dozen May 14 Sold to Sikha 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)

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

Example 4 contd. Ledger Posting from Sales book Sales Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2006 May 30 June 1 To Balance c/d To Balance b/d May 30 By Total amount as per sales book 2255 Ledger

Example 4 contd. M/S Dewan Brothers Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2006 May 4 June1 To Sales A/C To Balance b/d May 30 By balance c/d 1040

Example 4 contd. Sikha Enterprise Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2006 May 14 June 1 To Sales A/C To Balance b/d May 30 By balance c/d 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 DateParticularL.F.Debit Amount (Rs) Credit Amount (Rs) 2014 Jan 1 Cash A/C Dr To Sales A/C To Kannan A/C To Commission A/C (Received cash for sale, from Kannan and as commission)) Journal Solution:

Example 5 contd. Cash Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2003 Jan 12 Feb 1 To Sales A/C To Kannan A/C To Commission A/C To Balance b/d Jan31 By balance c/d Ledger

Example 5 contd. Sales Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2003 Jan 12 Feb 1 To Sales c/d To Balance b/d Jan31 By Cash A/C 10000

Example 5 contd. Kannan Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2003 Jan 12 Feb 1 To Balance c/d To Balance b/d Jan31 By Cash A/C

Example 5 contd. Commission Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2003 Jan 12 Feb 1 To Balance c/d To Balance b/d Jan31 By Cash A/C Ledger