2 JOURNAL-LEDGERJournal is a book of records where daily monetary transactions of a business is posted. Though it brings all the transactions together, it creates confusion between small and important expenses.Thus, a ledger was introduced, where all the transactions are recorded under the individual accounts.
3 Thus, a group of accounts is known as ledger. WHAT IS A LEDGER:A ledger account can be defined as a summary statement of all the transactions relating to a person, asset, expense or income which have taken place during a given period of time and shows their net effect.Thus, a group of accounts is known as ledger.
4 LEDGER: IN A NUTSHELL Ledger contains same information as journal. It summarizes the transactions relating to person, asset, expense or income.It is a book of accounts as it helps in achieving the objective of accounts.It’s easier to understand and maintain than journal.
5 A ledger should answer: What are the total sales to an individual customer?What are the total purchases from an individual supplier?How much amount is owed by debtors?How much amount is owed to debtors?What is the amount of profit or loss made during a particular period?What is the financial position of the firm on a particular date?
6 TYPES OF LEDGER: GENERAL LEDGER SUBSIDIARY LEDGER A collection of group of accounts that supports the value items shown in the major financial statementsSUBSIDIARY LEDGERSubset of general ledger
7 FORMAT OF LEDGER: Dr. Cr. DATE PARTICU-LARS F. AMOUNT To Name Of Credit AccountRs.By Name Of Debit Account
8 ITEMS IN LEDGER:Each account in the ledger is divided into two equal parts by a vertical line.The left hand side is known as debit (Dr.) side.The right hand side is known as credit (Cr.) side.The two sides are further divided into four columns, date, particulars, folio and amount.‘F’ is the folio page number of the journal or subsidiary book.
9 LEDGER POSTING OF JOURNAL: Every transaction is initially recorded in journal as journal entry. From the journal, it’s transferred to the respective accounts in the ledger.This process of transferring from the journal to ledger is known as posting.Lets see how do we post an entry from journal to ledger:
10 Now, lets see how the posting on ledger takes place: Journal entry:2010, April 1. Goods sold for cash Rs. 2,500Dr Cr.2010April 1Cash Account Dr.To Sales AccountRs.2,500Now, lets see how the posting on ledger takes place:
11 CASH ACCOUNT SALES ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 APRIL 1 To Sales AccountRs.2,500SALES ACCOUNTDATEPARTICU-LARSF.AMOUNTRs.2010April 1By Cash Account2,500
12 Now lets see how the posting in ledger takes place: Now lets see how the compound journal entry works:Ledger posting of compound journal entry is:2010, April 30 paid for: Charity- Rs. 101Salaries- Rs. 2,000Stationery- Rs. 199Dr Cr.2010April 30Charity Account Dr.Salaries Account Dr.Stationery Account Dr.To Cash Account(Being amount paid for charity, salaries and stationery)Rs.1012,0001992,300Now lets see how the posting in ledger takes place:
13 CHARITY ACCOUNT SALARIES ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 APRIL 30To Cash AccountRs.101SALARIES ACCOUNTDATEPARTICU-LARSF.AMOUNT2010APRIL 30To Cash AccountRs.2,000
14 STATIONERY ACCOUNT CASH ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 APRIL 1To Sales AccountRs.2,500CASH ACCOUNTDATEPARTICU-LARSF.AMOUNT2010APRIL 1To Sales AccountRs.2,500
15 EXAMPLE:Question: Post the following transactions in the ledger of Imran:Rs.Jan. 1 Started business with cash ,000Jan. 2 Paid into bank ,000Jan. 2 Goods purchased for cash , 000Jan. 3 Purchase of Furniture and payment by cheque ,000Jan. 5 Sold goods for cash ,500Jan. 8 Sold goods to Arvind Walia ,000Jan. 10 Good purchased from Amrit Lal ,000Jan. 12 Goods returned to Amrit Lal ,000Jan. 15 Goods returned to Arvind Walia
16 Jan. 18 Cash received from Arvind Walia Rs. 3,760 and discount allowed to himJan. 21 Withdrew from bank for private use ,000Withdrew from bank for use in the business ,000Jan. 25 Paid telephone rent for one yearJan. 28 Cash paid to Amrit Lal in full settlement of his account 5,940Jan. 30 Paid for: StationeryRent ,000Salaries to staff ,500
17 CASH ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN. 1 5 18 21 31 To Capital A/cTo Sales A/cTo Arvind WaliaTo Bank A/cTo Balance b/dRs.45,0008,5003,7605,00062,26012,2202252830By Bank A/cBy Purchase A/cBy Telephone rent A/cBy Amrit LalBy Stationery A/cBy Rent A/cBy Salaries A/cBy Balances c/d25,00015,0004005,9402001,0002,500
18 CAPITAL ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 30 To Balance c/d 45,0001DEC.1By Cash A/cBy Balance b/d
19 BANK ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 1 31 To Cash A/c To Balance b/dRs.25,00014,00032130By Furniture A/cBy Drawings A/cBy Cash A/cBy Balance c/d5,00045,000
20 PURCHASES ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 2 10 31 To Cash A/cTo Amrit LalTo Balance b/dRs.15,0007,00022,00014,00030By Balance c/d
21 FURNITURE ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 3 31 To Bank A/cTo Balance b/dRs.5,00030By Balance c/d
22 SALES ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 30 31 To Balance c/dTo Balance b/dRs.12,50014,00058By Cash A/cBy Arvind Walia8,5004,000
23 ARVIND WALIA DATE PARTICU-LARS F. AMOUNT 2010 JAN 8 To Sales A/c Rs. 4,00022,0001518By Returns InwardsBy Cash A/cBy Discount A/c2003,76040
24 AMRIT LAL DATE PARTICU-LARS F. AMOUNT 2010 JAN 12 28 To Returns OutwardsTo Cash A/cTo Discount A/cRs.1,0005,940607,00010By Purchase A/c