Ledger
by Asok Nadhani
6.1 Ledger
For each and every item (or
group of items of similar nature), an account is opened in a book called
“Ledger Book” or commonly known as “Ledger”. Entries are made into the Ledger
accounts from the various books of journal.
Every accounts has two
parts :- (i) The left side is known as debit side. (ii) The right side is known
as credit side.
Each side of the account
has following column: - 1. Date 2. Particulars 3. Journal Folio 4. Amount
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Dr.
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Sample of a Ledger
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Cr.
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Date
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Particulars
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J.F
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Amount
Rs.
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Date
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Particulars
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J.F
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Amount
Rs.
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The Ledger Book contains an Index (like a Telephone
Index), or ledger names in alphabetical order to quickly get to the Ledger A/c
Page in the Ledger Book.
6.2 Posting
Posting is the process of
transferring the entries recorded in journal to the respective Ledger accounts
in Ledger Book. Both the Debit and
Credit entries are posted into the Ledger Account (the Index helps to open the
page into the Ledger A/c).
Date: Date of Transaction.
Particulars: In case of Debit entry it starts with ‘To’ followed by the name of the
other (Credit Ledger A/c) and written in left side. In case of Credit entry it
starts with ‘By’ followed by the name if other (Debit Ledger A/c), and written
in right side.
Amount: The amount is posted in Amount Column.
6.3
Balancing of Accounts
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All Account in the ledger is balanced to find out
the net effect (balance) of the entries on the Accounts. Balance is the
difference between the total Debit Side and credit side of an Account.
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When the debit side sum exceeds the credit side sum,
the account is said to have a debit balance.
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When the credit side sum exceeds the debit side sum,
the account is said to have credit balance.
-
The balance is written to Trial Balance.
Example:
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Date
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Particular
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L.F
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Amount
(Dr.)
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Amount
(Cr.)
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31.03.2009
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Depreciation
A/c
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Dr.
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1,000
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To Machinery A/c
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1,000
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(Depreciation
of Machinery @ 10% on Rs.10,000)
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It will be posted in the two Ledger A/c as
follows:
Depreciation
A/c
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Dr.
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Cr.
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Date
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Particulars
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J.F.
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Amount (Rs.)
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Date
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Particulars
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J.
F.
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Amount (Rs.)
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31.3.09
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To Machinery A/c
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1,000
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31.3.09
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By Balance C/d
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1,000
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1,000
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1,000
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Machinery
A/c
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Dr.
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Cr.
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Date
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Particulars
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J.F.
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Amount (Rs.)
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Date
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Particulars
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J.
F.
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Amount (Rs.)
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31.3.09
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To Balance C/d
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1,000
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31.3.09
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By Machinery A/c
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1,000
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1,000
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1,000
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6.4 Closing of Accounts
At the year end, the
Accounts are closed.
The steps of closing the
Accounts are explained below:
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Personal and Real
Account: The Balance of Personal or Real Accounts are carried down and written
as Opening Balance in the Books of next year In case of Debit balance, in the
particulars column in the credit side the words ‘By Balance c/d’ or ‘c/f’ are
recorded. In case of Credit balance, in the debit side in particulars column
the ‘To Balance c/d’ or ‘c/f’ are recorded. The same balance is written ‘balance
brought down’ or ‘balance brought forward’ on the opposite after totaling.
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Nominal Account: Balances of
Nominal Accounts are transferred in Trading A/c or P/L A/c (as the case may
be), and not carried down. These are closed by writing an entry like. ‘To
Trading A/c’ or ‘To P & L A/c’.
Example: Post the journal
in the appropriate ledgers and write the closing entries.
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Journal Entries in the
books of Kumar
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Date
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Particulars
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L.F.
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Dr.
Amount(Rs.)
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Cr.
Amount(Rs.)
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2010
Jan.1
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Cash
Stock
Machinery
To Capital A/c
(Cash, Machinery and Stock invested on start of new business)
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Dr.
Dr.
Dr.
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10,000
5,000
15,000
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30,000
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Jan.2
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Purchase A/c
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Dr.
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17,000
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To Cash A/c
To Pankaj
(Purchase made on cash and credit from Pankaj)
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12.000
5,000
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Jan.3
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Cash A/c
Asit A/c
To Sales A/c
(sold goods on cash and
credit)
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Dr.
Dr
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15,000
8,000
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23,000
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Jan.3
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Pankaj A/c
To Purchase Return A/c
(Purchased goods returned
to pankaj)
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Dr.
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2,000
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2,000
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Jan.3
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Sales Return A/c
To
Asit A/c
(Sold goods returned from
Asit)
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Dr.
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1,000
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1,000
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Jan.5
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Bank A/c
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Dr.
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5,000
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To Cash A/c
(Cash deposited into bank)
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5,000
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Jan.6
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Pankaj A/c
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Dr.
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2,500
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To Bank A/c
(Cheque issues to Pankaj)
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2,500
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Jan.8
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Bank A/c
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4,000
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To Asit A/c
(Cheque received from
Asit)
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4,000
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Jan.11
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Rent A/c
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Dr.
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1,000
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To Cash
A/c
(Rent paid in cash)
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1,000
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Jan.12
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Capital A/c
To Cash A/c
(Cash drawn for personal
use.)
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Dr.
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1,000
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1,000
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Solution:
Cash
Account
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Dr.
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Cr.
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Date
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Particulars
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J.F
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Rs.
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Date
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Particulars
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J.F
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Rs.
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2010
Jan.1
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To Capital A/c
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10,000
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2010
Jan.2
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By Purchase A/c
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12,000
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Jan.3
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To Sales A/c
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15,000
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Jan.5
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By Bank A/c
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5,000
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Jan.11
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By Rent A/c
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1,000
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Jan.12
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By Capital A/c
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1,000
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Jan.31
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By Balance c/d
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6,000
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25,000
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25,000
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Feb.1
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To Balance b/d
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6,000
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Bank
Account
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Dr.
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Cr.
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Date
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Particulars
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J.F
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Rs.
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Date
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Particulars
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J.F
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Rs.
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2010
Jan.5
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To Cash A/c
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5,000
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2010
Jan.6
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By Pankaj A/c
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2,500
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Jan.8
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To Asit A/c
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4,000
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Jan.31
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By Balance c/d
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6,500
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9,000
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9,000
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Feb.1
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To Balance b/d
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6,500
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Capital
Account
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Dr.
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Cr.
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Date
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Particulars
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J.F
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Rs.
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Date
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Particulars
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J.F
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Rs.
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2010
Jan.12
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To Cash A/c
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1,000
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2010
Jan.1
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By Cash A/c
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10,000
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By Stock A/c
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5,000
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Jan.31
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To Balance c/d
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29,000
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By Machinery A/c
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15,000
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30,000
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30,000
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Feb.1
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By Balance b/d
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29,000
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Stock
Account
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Dr.
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Cr.
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Date
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Particulars
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J.F
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Rs.
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Date
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Particulars
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J.F
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Rs.
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2010
Jan.1
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To Capital A/c
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5,000
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2010
Jan.31
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By Balance c/d
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5,000
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5,000
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5,000
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Feb.1
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To Balance b/d
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5,000
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Machinery
Account
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Dr.
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Cr.
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Date
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Particulars
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J.F
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Rs.
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Date
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Particulars
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J.F
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Rs.
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2010
Jan.1
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To Capital A/c
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15,000
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2010
Jan.31
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By Balance c/d
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15,000
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15,000
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15,000
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Feb.1
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To Balance b/d
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15,000
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Purchase
Account
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Dr.
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Cr.
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Date
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Particulars
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J.F
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Rs.
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Date
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Particulars
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J.F
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Rs.
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2010
Jan.2
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To Cash A/c
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12,000
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2010
Jan.31
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By Trading A/c
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17,000
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To Pankaj A/c
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5,000
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17,000
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17,000
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Sales
Account
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Dr.
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Cr.
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Date
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Particulars
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J.F
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Rs.
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Date
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Particulars
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J.F
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Rs.
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2010
Jan.31
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To Trading A/c
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23,000
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2010
Jan.3
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By Cash A/c
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15,000
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By Asit A/c
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8,000
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23,000
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23,000
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Pankaj
Account
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Dr.
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Cr.
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Date
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Particulars
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J.F
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Rs.
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Date
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Particulars
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J.F
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Rs.
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2010
Jan.3
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To Purchase Return A/c
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2,000
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2010
Jan.2
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By Purchase A/c
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5,000
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Jan.6
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To Bank A/c
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2,500
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Jan.31
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To Balance c/d
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500
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5,000
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5,000
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Feb.1
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By Balance b/d
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500
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Asit
Account
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Dr.
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Cr.
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Date
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Particulars
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J.F
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Rs.
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Date
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Particulars
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J.F
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Rs.
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2010
Jan.3
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To Sales A/c
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8,000
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2010
Jan.3
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By Sales Return A/c
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1,000
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Jan.8
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By Bank A/c
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4,000
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Jan.31
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By Balance c/d
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3,000
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8,000
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8,000
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Feb.1
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To Balance b/d
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3,000
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Sales
Return Account
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Dr.
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Cr.
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Date
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Particulars
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J.F
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Rs.
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Date
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Particulars
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J.F
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Rs.
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2010
Jan.3
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To Asit A/c
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1,000
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2010
Jan.31
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By Trading A/c
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1,000
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1,000
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1,000
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Purchase
Return Account
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Dr.
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Cr.
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Date
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Particulars
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J.F
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Rs.
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Date
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Particulars
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J.F
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Rs.
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2010
Jan.31
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To Trading A/c
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2,000
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2010
Jan.3
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By Pankaj A/c
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2,000
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2,000
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2,000
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Rent Account
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Dr.
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Cr.
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Date
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Particulars
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J.F
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Rs.
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Date
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Particulars
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J.F
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Rs.
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2010
Jan.11
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To Cash A/c
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1,000
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2010
Jan.31
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By Balance c/d
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1,000
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1,000
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1,000
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Feb.1
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To Balance b/d
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1,000
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Example 2: Prepare
Stationery Account for the year ended 31.12.2009 from the following details
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Date
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Particulars
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Rs.
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2009
Jan.
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1
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Opening balance
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500
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March
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5
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Purchase of stationery by
cash
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1,000
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April
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20
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Purchase of stationery by
cheque
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1,500
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Aug.
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25
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Purchase of stationery on
credit from City Store
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1,200
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Dec.
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31
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Closing Balance
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450
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Solution:
Stationery Account
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Dr.
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Cr.
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|||||
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Date
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Particulars
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J.F
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Rs.
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Date
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Particulars
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J.F
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Rs.
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2008
Jan.1
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To Balance b/d
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500
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2008
Dec.31
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By Profit & Loss A/c
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3,750
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Mar.5
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To Cash A/c
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1,000
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[Balancing Figure]
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April 20
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To Bank A/c
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1,500
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Dec.31
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By Balance c/d
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450
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Aug.25
|
To City Store A/c
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1,200
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4,200
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4,200
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The balancing figure
denotes the stationery used during the year and it is transferred to Profit
& Loss Account.
6.5 Modern Format of Ledger Account
Now-a-days
(normally in computerized Account), there are two columns of Debit and Credit
Account. Other columns are common for both Debit and Credit entries. It provides more space for particulars column
and shows all the entries in chronological order. In such format, the
Stationery Account as shown above will look as follows
Stationery Account
|
Date
|
Particulars
|
Doc. Ref. No.
|
Dr.
Rs.
|
Cr.
Rs.
|
|
2009
Jan.1
|
To Balance b/d
|
|
500
|
|
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Mar.5
|
To Cash A/c
|
|
1,000
|
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April 20
|
To Bank A/c
|
|
1,500
|
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Aug.25
|
To City Store A/c
|
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1,200
|
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Dec.31
|
By Profit & Loss A/c [Balancing Figure]
|
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3,750
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Dec.31
|
By Balance c/d
|
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450
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4,200
|
4,200
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