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 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)

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 ‘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.

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 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

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. 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

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.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

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 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

10. DateParticularL.F.Debit Amount (Rs) Credit Amount (Rs) 2005 Jan 1 Cash A/C Dr To Capital A/C (started business) 20000 5000 2000 20000 5000 4900 100 2000 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.

11. Balance b/d Jan 12 To Salaries A/C Dr To Cash A/C (payment of salaries ) 1000 500 4000 1000 5000 4000 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.

12. 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 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 12 600 Example 1 contd. Ledger posting from Journal Ledger

13. Capital Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan 31To Balanced c/d20000 2005 Jan1 Feb 1 By cash A/C By Balance b/d 20000 Example 1 contd.

14. 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 5000 2005 Jan 31 By Balance c/d5000 Example 1 contd.

15. Navneet’s Account DrCr DateParticularsJ.F. Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan6To Cash A/C To Discount Received A/C 4900 100 2005 Jan 3 By Purchase A/C5000 Example 1 contd.

16. Discount Received Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan 31To Balance c/d100 2005 Jan 6 Feb 1 By Navneet’s A/C By Balance b/d 100 Example 1 contd.

17. Furniture Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan 9 Feb 1 To Cash A/C To Balance b/d 2000 2005 Jan 31 By balance c/d2000 Example 1 contd.

18. Salaries Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan 12 Feb 31 To Cash A/C To Balance b/d 1000 2005 Jan 31 By balance c/d1000 Example 1 contd.

19. Rent Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan 31 To balance c/d500 2005 Jan 15 Feb 1 By Cash A/C By Balance b/d 500 Example 1 contd.

20. 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 4000 2005 Jan 31 By Balance c/d4000 Example 1 contd.

21. Sales Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 2005 Jan 31 To Balance c/d4000 2005 Jan 18 Feb 1 By Kartikeya’s A/C By Balance b/d 4000 Example 1 contd.

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

23. 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 11 200 300 1980 Jan. 7 Jan. 10 Jan. 27 Jan. 31 Jan 31 By rents By Sikha By Furniture By Salaries By Balance c/d 30 700 200 100 10770 11800 10,700 Example 2: solution: Ledger

24. 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/d300 1980 Jan 5 Feb 1 By Cash A/C By Balance b/d 300

25. 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 30 1980 Jan 31 By Balance c/d 30

26. Example 2 contd. Sales‘s Account DrCr DateParticularsJ.F.Amount (Rs) DateParticularsJ.F.Amount (Rs) 1980 Jan 31 To balance c/d300 1980 Jan 8 Feb 1 By Cash A/C By Balance b/d 300

27. 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 700 1980 Jan 31 By Balance c/d 700

28. 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 200 1980 Jan 31 By Balance c/d 200

29. 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 100 1980 Jan 31 By Balance c/d 100 1200 100

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 Chairs @ Rs 1500 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

31. 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 7 516 700 Purohit Furnishers, Gandhinagar 20 Chairs @ Rs 1500 each 2 Tables @ Rs 4000 each Less: trade discount @ 10% M/S Roy and Co., Ahmedabad 20 Stools @Rs. 1250each 10 collapsible chairs@Rs. 2000 each Add: Delivery and cartage Rs. 150 Purchase A/C Dr 30000 8000 34200 45150 38000 3800 25000 20000 45000 150 79350 Example 3: Solution

32. 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 79350 2006 March 30 By Balance c/d 79350 Ledger

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

34. 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 45150 2006 March 1 April 1 By Purchase A/C 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 pencils @Rs 20 per dozen 14 dozens rubbers @ Rs 60 per dozen May 14 Sold to Sikha 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)

36. 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 14 175 200 M/S Dewan Brothers, Ahmedabad 10 dozens pencils @Rs 20 per dozen 14 dozens rubbers @ Rs 60 per dozen Sikha Enterprise, Gandhi Nagar 5 dozens of gum bottles @ Rs 5 per bottle 70 dozens rulers @ Rs 15 per dozen Less: 10% trade discount Sales A/C Cr 200 8401040 1215 300 1050 1350 135 2255 Example 4: Solution

37. 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 2255 2006 May 30 By Total amount as per sales book 2255 Ledger

38. 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 1040 2006 May 30 By balance c/d 1040

39. 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 1215 2006 May 30 By balance c/d 1215

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 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)) 17500 10000 5000 2500 Journal Solution:

41. 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 10000 5000 2500 2003 Jan31 By balance c/d 17500 1040 17500 Ledger

42. 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 10000 2003 Jan31 By Cash A/C 10000

43. 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 5000 2003 Jan31 By Cash A/C 5000 17500

44. 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 2500 2003 Jan31 By Cash A/C 17500 2500 Ledger