LEDGER

JOURNAL-LEDGER Journal is a book of records where daily monetary transactions of a business is posted. Though it brings all the transactions together, it creates confusion between small and important expenses. Thus, a ledger was introduced, where all the transactions are recorded under the individual accounts.

Thus, a group of accounts is known as ledger. WHAT IS A LEDGER: A ledger account can be defined as a summary statement of all the transactions relating to a person, asset, expense or income which have taken place during a given period of time and shows their net effect. Thus, a group of accounts is known as ledger.

LEDGER: IN A NUTSHELL Ledger contains same information as journal. It summarizes the transactions relating to person, asset, expense or income. It is a book of accounts as it helps in achieving the objective of accounts. It’s easier to understand and maintain than journal.

A ledger should answer: What are the total sales to an individual customer? What are the total purchases from an individual supplier? How much amount is owed by debtors? How much amount is owed to debtors? What is the amount of profit or loss made during a particular period? What is the financial position of the firm on a particular date?

TYPES OF LEDGER: GENERAL LEDGER SUBSIDIARY LEDGER A collection of group of accounts that supports the value items shown in the major financial statements SUBSIDIARY LEDGER Subset of general ledger

FORMAT OF LEDGER: Dr. Cr. DATE PARTICU-LARS F. AMOUNT To Name Of Credit Account Rs. By Name Of Debit Account

ITEMS IN LEDGER: Each account in the ledger is divided into two equal parts by a vertical line. The left hand side is known as debit (Dr.) side. The right hand side is known as credit (Cr.) side. The two sides are further divided into four columns, date, particulars, folio and amount. ‘F’ is the folio page number of the journal or subsidiary book.

LEDGER POSTING OF JOURNAL: Every transaction is initially recorded in journal as journal entry. From the journal, it’s transferred to the respective accounts in the ledger. This process of transferring from the journal to ledger is known as posting. Lets see how do we post an entry from journal to ledger:

Now, lets see how the posting on ledger takes place: Journal entry: 2010, April 1. Goods sold for cash Rs. 2,500 Dr. Cr. 2010 April 1 Cash Account Dr. To Sales Account Rs. 2,500 Now, lets see how the posting on ledger takes place:

CASH ACCOUNT SALES ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 APRIL 1 To Sales Account Rs. 2,500 SALES ACCOUNT DATE PARTICU-LARS F. AMOUNT Rs. 2010 April 1 By Cash Account 2,500

Now lets see how the posting in ledger takes place: Now lets see how the compound journal entry works: Ledger posting of compound journal entry is: 2010, April 30 paid for: Charity- Rs. 101 Salaries- Rs. 2,000 Stationery- Rs. 199 Dr. Cr. 2010 April 30 Charity Account Dr. Salaries Account Dr. Stationery Account Dr. To Cash Account (Being amount paid for charity, salaries and stationery) Rs. 101 2,000 199 2,300 Now lets see how the posting in ledger takes place:

CHARITY ACCOUNT SALARIES ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 APRIL 30 To Cash Account Rs. 101 SALARIES ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 APRIL 30 To Cash Account Rs. 2,000

STATIONERY ACCOUNT CASH ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 APRIL 1 To Sales Account Rs. 2,500 CASH ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 APRIL 1 To Sales Account Rs. 2,500

EXAMPLE: Question: Post the following transactions in the ledger of Imran: 2010 Rs. Jan. 1 Started business with cash 45,000 Jan. 2 Paid into bank 25,000 Jan. 2 Goods purchased for cash 15, 000 Jan. 3 Purchase of Furniture and payment by cheque 5,000 Jan. 5 Sold goods for cash 8,500 Jan. 8 Sold goods to Arvind Walia 4,000 Jan. 10 Good purchased from Amrit Lal 7,000 Jan. 12 Goods returned to Amrit Lal 1,000 Jan. 15 Goods returned to Arvind Walia 200

Jan. 18 Cash received from Arvind Walia Rs. 3,760 and discount allowed to him 40 Jan. 21 Withdrew from bank for private use 1,000 Withdrew from bank for use in the business 5,000 Jan. 25 Paid telephone rent for one year 400 Jan. 28 Cash paid to Amrit Lal in full settlement of his account 5,940 Jan. 30 Paid for: Stationery 200 Rent 1,000 Salaries to staff 2,500

CASH ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN. 1 5 18 21 31 To Capital A/c To Sales A/c To Arvind Walia To Bank A/c To Balance b/d Rs. 45,000 8,500 3,760 5,000 62,260 12,220 2 25 28 30 By Bank A/c By Purchase A/c By Telephone rent A/c By Amrit Lal By Stationery A/c By Rent A/c By Salaries A/c By Balances c/d 25,000 15,000 400 5,940 200 1,000 2,500

CAPITAL ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 30 To Balance c/d 45,000 1 DEC.1 By Cash A/c By Balance b/d

BANK ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 1 31 To Cash A/c To Balance b/d Rs. 25,000 14,000 3 21 30 By Furniture A/c By Drawings A/c By Cash A/c By Balance c/d 5,000 45,000

PURCHASES ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 2 10 31 To Cash A/c To Amrit Lal To Balance b/d Rs. 15,000 7,000 22,000 14,000 30 By Balance c/d

FURNITURE ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 3 31 To Bank A/c To Balance b/d Rs. 5,000 30 By Balance c/d

SALES ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 30 31 To Balance c/d To Balance b/d Rs. 12,500 14,000 5 8 By Cash A/c By Arvind Walia 8,500 4,000

ARVIND WALIA DATE PARTICU-LARS F. AMOUNT 2010 JAN 8 To Sales A/c Rs. 4,000 22,000 15 18 By Returns Inwards By Cash A/c By Discount A/c 200 3,760 40

AMRIT LAL DATE PARTICU-LARS F. AMOUNT 2010 JAN 12 28 To Returns Outwards To Cash A/c To Discount A/c Rs. 1,000 5,940 60 7,000 10 By Purchase A/c

RETURNS INWARDS ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 15 31 To Arvind Walia To Balance b/d Rs. 200 30 By Balance c/d

RETURNS OUTWARDS ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 30 To Balance c/d Rs. 1,000 12 31 By Amrit Lal To Balance b/d

DISCOUNT ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 18 10 To Arvind Walia To Amrit Lal Rs. 40 20 60 28 31 By Amrit Lal By Balance b/d

DRAWINGS ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 21 31 To Bank A/c To Balance b/d Rs. 1,000 30 By Balance c/d

TELEPHONE RENT ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 25 10 31 To Cash A/c To Amrit Lal To Balance b/d Rs. 15,000 7,000 22,000 14,000 30 By Balance c/d

SALARY ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 30 31 To Cash A/c To Balance b/d Rs. 200 By Balance c/d

RENT ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 30 31 To Cash A/c To Balance b/d Rs. 1,000 By Balance c/d

SALARIES ACCOUNT DATE PARTICU-LARS F. AMOUNT 2010 JAN 30 31 To Cash A/c To Balance b/d Rs. 2,500 By Balance c/d

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