Asok Nadhani-Accountancy-Ledger

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

Dr.	Sample of a Ledger						Cr.
Date	Particulars	J.F	Amount Rs.	Date	Particulars	J.F	Amount Rs.

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

-         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.

-         When the debit side sum exceeds the credit side sum, the account is said to have a debit balance.

-         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:

Date	Particular		L.F	Amount (Dr.)	Amount (Cr.)
31.03.2009	Depreciation A/c	Dr.		1,000
	To Machinery A/c				1,000
	(Depreciation of Machinery @ 10% on Rs.10,000)

It will be posted in the two Ledger A/c as follows:

Depreciation A/c

Dr.							Cr.
Date	Particulars	J.F.	Amount (Rs.)	Date	Particulars	J. F.	Amount (Rs.)
31.3.09	To Machinery A/c		1,000	31.3.09	By Balance C/d		1,000
			1,000				1,000

Machinery A/c

Dr.							Cr.
Date	Particulars	J.F.	Amount (Rs.)	Date	Particulars	J. F.	Amount (Rs.)
31.3.09	To Balance C/d		1,000	31.3.09	By Machinery A/c		1,000
			1,000				1,000

6.4 Closing of Accounts

At the year end, the Accounts are closed.

The steps of closing the Accounts are explained below:

-         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.

-         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.

Journal Entries in the books of Kumar
Date	Particulars		L.F.	Dr. Amount(Rs.)	Cr. Amount(Rs.)
2010 Jan.1	Cash Stock Machinery To Capital A/c (Cash, Machinery and Stock invested on start of new business)	Dr. Dr. Dr.		10,000 5,000 15,000	30,000
Jan.2	Purchase A/c	Dr.		17,000
	To Cash A/c To Pankaj (Purchase made on cash and credit from Pankaj)				12.000 5,000
Jan.3	Cash A/c Asit A/c To Sales A/c (sold goods on cash and credit)	Dr. Dr		15,000 8,000	23,000
Jan.3	Pankaj A/c To Purchase Return A/c (Purchased goods returned to pankaj)	Dr.		2,000	2,000
Jan.3	Sales Return A/c  To Asit A/c (Sold goods returned from Asit)	Dr.		1,000	1,000
Jan.5	Bank A/c	Dr.		5,000
	To Cash A/c (Cash deposited into bank)				5,000
Jan.6	Pankaj A/c	Dr.		2,500
	To Bank A/c (Cheque issues to Pankaj)				2,500
Jan.8	Bank A/c			4,000
	To Asit A/c (Cheque received from Asit)				4,000
Jan.11	Rent A/c	Dr.		1,000
	To Cash  A/c (Rent paid in cash)				1,000
Jan.12	Capital A/c To Cash A/c (Cash drawn for personal use.)	Dr.		1,000	1,000

Solution:

Cash Account

Dr.							Cr.
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
2010 Jan.1	To Capital A/c		10,000	2010 Jan.2	By Purchase A/c		12,000
Jan.3	To Sales A/c		15,000	Jan.5	By Bank A/c		5,000
				Jan.11	By Rent A/c		1,000
				Jan.12	By Capital A/c		1,000
				Jan.31	By Balance c/d		6,000
			25,000				25,000
Feb.1	To Balance b/d		6,000

Bank Account

Dr.							Cr.
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
2010 Jan.5	To Cash A/c		5,000	2010 Jan.6	By Pankaj A/c		2,500
Jan.8	To Asit A/c		4,000	Jan.31	By Balance c/d		6,500
			9,000				9,000
Feb.1	To Balance b/d		6,500

Capital Account

Dr.							Cr.
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
2010 Jan.12	To Cash A/c		1,000	2010 Jan.1	By Cash A/c		10,000
					By Stock A/c		5,000
Jan.31	To Balance c/d		29,000		By Machinery A/c		15,000
			30,000				30,000
				Feb.1	By Balance b/d		29,000

Stock Account

Dr.							Cr.
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
2010 Jan.1	To Capital A/c		5,000	2010 Jan.31	By Balance c/d		5,000
			5,000				5,000
Feb.1	To Balance b/d		5,000

Machinery Account

Dr.							Cr.
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
2010 Jan.1	To Capital A/c		15,000	2010 Jan.31	By Balance c/d		15,000
			15,000				15,000
Feb.1	To Balance b/d		15,000

Purchase Account

Dr.							Cr.
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
2010 Jan.2	To Cash A/c		12,000	2010 Jan.31	By Trading A/c		17,000
	To Pankaj A/c		5,000
			17,000				17,000

Sales Account

Dr.							Cr.
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
2010 Jan.31	To  Trading A/c		23,000	2010 Jan.3	By Cash A/c		15,000
					By Asit A/c		8,000
			23,000				23,000

Pankaj Account

Dr.							Cr.
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
2010 Jan.3	To Purchase Return A/c		2,000	2010 Jan.2	By Purchase A/c		5,000
Jan.6	To Bank A/c		2,500
Jan.31	To Balance c/d		500
			5,000				5,000
				Feb.1	By Balance b/d		500

Asit Account

Dr.							Cr.
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
2010 Jan.3	To Sales A/c		8,000	2010 Jan.3	By Sales Return A/c		1,000
				Jan.8	By Bank A/c		4,000
				Jan.31	By Balance c/d		3,000
			8,000				8,000
Feb.1	To Balance b/d		3,000

Sales Return Account

Dr.							Cr.
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
2010 Jan.3	To Asit A/c		1,000	2010 Jan.31	By Trading A/c		1,000
			1,000				1,000

Purchase Return Account

Dr.							Cr.
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
2010 Jan.31	To Trading A/c		2,000	2010 Jan.3	By Pankaj A/c		2,000
			2,000				2,000

Rent Account

Dr.							Cr.
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
2010 Jan.11	To Cash A/c		1,000	2010 Jan.31	By Balance c/d		1,000
			1,000				1,000
Feb.1	To Balance b/d		1,000

Example 2: Prepare Stationery Account for the year ended 31.12.2009 from the following details

Date		Particulars	Rs.
2009 Jan.	1	Opening balance	500
March	5	Purchase of stationery by cash	1,000
April	20	Purchase of stationery by cheque	1,500
Aug.	25	Purchase of stationery on credit from City Store	1,200
Dec.	31	Closing Balance	450

Solution:

Stationery Account

Dr.							Cr.
Date	Particulars	J.F	Rs.	Date	Particulars	J.F	Rs.
2008 Jan.1	To Balance b/d		500	2008 Dec.31	By Profit & Loss A/c		3,750
Mar.5	To Cash A/c		1,000		[Balancing Figure]
April 20	To Bank A/c		1,500	Dec.31	By Balance c/d		450
Aug.25	To City Store A/c		1,200
			4,200				4,200

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
Mar.5	To Cash A/c		1,000
April 20	To Bank A/c		1,500
Aug.25	To City Store A/c		1,200
Dec.31	By Profit & Loss A/c [Balancing Figure]			3,750
Dec.31	By Balance c/d			450
			4,200	4,200