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