ledger account samir k mahajan. meaning of ledger account a ledger is a book which contains all the...

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

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.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 isknown 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 inthe particulars column.

vi. The page number of the Journal or Subsidiary Book from where that particular entry is transferred, is entered in theJournal 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 balanceii. 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:

8. Capital account 9. Liabilities account 10. Reserve fund account 11. Revenue and income account 12. Sales account 13. Purchase return or return outward account14. Creditors account 15. Interest on drawing account16. 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, 000Jan 3: Purchased goods from Navneet Rs 5000Jan 6: Paid to Navneet Rs 4900 Discount Allowed Rs 100Jan 9: Purchased Furniture Rs 2000

Jan 12: paid salaries Rs 1000Jan 15 : Rent received Rs 500Jan 18: Sold goods To Kartikeya Rs 4000

Date Particular L.F. Debit Amount (Rs)

Credit Amount (Rs)

2005Jan 1

Cash A/C Dr To Capital A/C (started business)

20000

5000

5000

2000

20000

5000

4900100

2000

Jan 3 Purchase 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

JournalExample 1 contd.

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.

Cash Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2005 Jan1 Jan 15

Feb 1

To Capital A/CTo Rent A/C

To Balance b/d

20000500

2005 Jan 6 Jan 9Jan 12Jan 31

By Navneet A/C By By Furniture A/C By Salaries A/C By Balance c/d

4900 2000

100012 600

20500 20500

12 600

Example 1 contd.

Ledger posting from Journal

Ledger

Capital Account Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2005 Jan 31 To Balanced c/d 20000

2005Jan1

Feb 1

By cash A/C

By Balance b/d

20000

20000 20000

20000

Example 1 contd.

Purchase Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2005 Jan 3

Feb 1

To Navneet’s A/C

To Balance b/d

50002005 Jan 31

By Balance c/d 5000

5000 5000

5000

Example 1 contd.

Navneet’s Account Dr Cr

Date Particulars J.F.

Amount (Rs)

Date Particulars J.F. Amount (Rs)

2005 Jan6 To Cash A/C

To Discount Received A/C 4900

100

2005 Jan 3

By Purchase A/C 5000

5000 5000

Example 1 contd.

Discount Received Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2005Jan 31 To Balance c/d 100

2005 Jan 6

Feb 1

By Navneet’s A/C

By Balance b/d

100

100 100

100

Example 1 contd.

Furniture Account Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2005 Jan 9

Feb 1

To Cash A/C

To Balance b/d

20002005 Jan 31

By balance c/d 2000

2000 2000

2000

Example 1 contd.

Salaries Account Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2005 Jan 12

Feb 31

To Cash A/C

To Balance b/d

10002005 Jan 31

By balance c/d 1000

1000 1000

1000

Example 1 contd.

Rent Account Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2005 Jan 31

To balance c/d 5002005 Jan 15

Feb 1

By Cash A/C

By Balance b/d

500

500 500

500

Example 1 contd.

Kartikeya’s Account Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2005 Jan 18

Feb 1

To Sales A/c

To Balance b/d

40002005Jan 31

By Balance c/d 4000

4000 4000

4000

Example 1 contd.

Sales Account Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2005 Jan 31

To Balance c/d 40002005 Jan 18

Feb 1

By Kartikeya’s A/C

By Balance b/d

4000

4000 4000

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. 1980Jan 1 : Cash in hand ------------- Rs 11200Jan.5 : Received from Akash ---- Rs 300Jan 7 : paid rent --------------------- Rs 30Jan 8 : sold goods ------------------ Rs 300Jan10 : Paid Sikha ----------------- Rs 700Jan 27: Purchased furniture ------- Rs 200Jan 31 : paid salaries ---------------------- Rs 100

Cash Book

Dr Receipts payments Cr

Date Particular R.N. L.F. Amount (Rs)

Date Particular V.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

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 11800

10,700

Example 2: solution: Ledger

Example 2 contd.

Ledger posting from debit side of cash book

Akash’ Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

1980Jan 31

To balance c/d 3001980Jan 5

Feb 1

By Cash A/C

By Balance b/d

300

300 300

300

Example 2 contd.

Ledger posting from credit side of cash book

Rent Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

1980Jan 7

Feb 1

To Cash

To Balance b/d

301980Jan 31

By Balance c/d 30

30 30

30

Example 2 contd.

Sales‘s Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

1980Jan 31

To balance c/d 3001980Jan 8

Feb 1

By Cash A/C

By Balance b/d

300

300 300

300

Example 2 contd.

Shikha’s Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

1980Jan 10

Feb 1

To Cash

To Balance b/d

7001980Jan 31

By Balance c/d 700

700 700

700

Example 2 contd.

Furniture Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

1980Jan 27

Feb 1

To Cash

To Balance b/d

2001980Jan 31

By Balance c/d 200

200 200

200

Example 2 contd.

Salaries Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

1980Jan 31

Feb 1

To Cash

To Balance b/d

1001980Jan 31

By Balance c/d 100

100 1200

100

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

PURCHASE BOOK/PURCHASE JOURNAL

Date Inward Invoice Number

Particulars Name of Suppliers

(Account to be credited)

L.F. Amount

Details (Rs) Total (Rs)

2006March 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

2500020000

45000 150

79350

Example 3: Solution

Example 3 contd.

Ledger Posting from Purchase book

Purchase Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2006March 30

April1

To Total amount as per purchase book

To Balance b/d

79350

2006March 30

By Balance c/d 79350

79350 79350

79350

Ledger

Example 3 contd.

Purohit Furnishers Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2006March 30

To Balance c/d 34200

2006March 1

April 1

By Purchase A/C

By Balance b/d

34200

34200 34200

34200

Example 3 contd.

M/S M S Roy and Co. Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2006March 30

To Balance c/d 45150

2006March 1

April 1

By Purchase A/C

By Balance b/d

45150

45150 45150

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 2006May 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)

SALES BOOK/SALES JOURNAL

Date Outward Invoice Number

Particulars Name of Suppliers

(Account to be debited )

L.F. Amount

Details (Rs) Total (Rs)

2006May 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

200 840 1040

1215

3001050

1350 135

2255

Example 4: Solution

Example 4 contd.

Ledger Posting from Sales book

Sales Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2006May 30

June 1

To Balance c/d

To Balance b/d

2255

2006May 30

By Total amount as per sales book

2255

2255 2255

2255

Ledger

Example 4 contd.

M/S Dewan Brothers Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2006May 4

June1

To Sales A/C

To Balance b/d

10402006May 30

By balance c/d

1040

1040 1040

1040

Example 4 contd.

Sikha Enterprise Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2006May 14

June 1

To Sales A/C

To Balance b/d

12152006May 30

By balance c/d

1215

1215 1215

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

Date Particular L.F. Debit Amount (Rs)

Credit Amount (Rs)

2014Jan 1

Cash A/C Dr To Sales A/CTo Kannan A/C To Commission A/C

(Received cash for sale, fromKannan and as commission))

17500 10000

50002500

Journal

Solution:

Example 5 contd.

Cash Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2003Jan 12

Feb 1

To Sales A/C To Kannan A/CTo Commission A/C

To Balance b/d

1000050002500

2003Jan31

By balance c/d

17500

17500 1040

17500

Ledger

Example 5 contd.

Sales Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2003Jan 12

Feb 1

To Sales c/d

To Balance b/d

100002003Jan31

By Cash A/C

10000

10000 10000

10000

Example 5 contd.

Kannan Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2003Jan 12

Feb 1

To Balance c/d

To Balance b/d

50002003Jan31

By Cash A/C

5000

5000 5000

17500

Example 5 contd.

Commission Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2003Jan 12

Feb 1

To Balance c/d

To Balance b/d

25002003Jan31

By Cash A/C

17500

2500 2500

2500

Ledger