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 thetransactions recorded in the books of original entry are transferred.

Ledger is also called the ‘Book of Final Entry’ or ‘Book of Secondary Entry’, becausethe transactions are finally incorporated in the Ledger.

MEANING OF LEDGER ACCOUNT contd.

Ledger accounts are classified into :

Asset AccountLiabilities AccountCapital AccountRevenue AccountExpenses 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 CreditAccount in Journal )

Year Month Date

By(Name of DebitAccount in Journal)

EXPLANATION: LEDGER ACCOUNT

i. Each ledger account is divided into two parts. The left hand side is known as the debit sideand the right hand side is known as the credit side. The words ‘Dr.’ and ‘Cr.’ are used todenote 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 inthe particulars column.

vi. Similarly, the word ‘By’ is used before the accounts which appear on the credit side of anaccount in the particulars column.

EXPLANATION: LEDGER ACCOUNT contd.

vi. The name of the other account which is affected by the transaction is writteneither in the debit side or credit side inthe particulars column.

vii. The page number of the Journal or Subsidiary Book from where that particularentry is transferred, is entered in theJournal Folio (J.F) column.

viii. 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 thedate column on the credit side as ‘By ….. (the name of the account to be debited).

Step 2 Record the name of the account credited in the Journal in the particulars column on thedebit 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 theJournal, 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

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 inthe lighter (smaller total) side, so that the grand totals of the two sides become equal.

Balancing an Account contd.

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 thecredit total.

i. Debit Balance :The excess of debit total over the credit total is called the debit balance

i. Credit Balance :The excess of credit total over the debit total is called the credit balance.

ii. Nil Balance :When the total of debits and credits are equal, it is closed by merely writing thetotal on both the sides

Balancing an Account contd.

Debit Balance: Following ledger accounts have debit balance:

1. All assets account such as; cash, building, and furniture2. All expenses and loss account i.e. wages, salaries, bad debts, discount

allowed3. Purchase account4. Sales return or return inward account5. Drawing account6. Debtors account7. Discount Allowed

Balancing an Account contd.

Credit Balance: Following ledger accounts have credit balance:

1. Capital account2. Liabilities account3. Reserve fund account4. Revenue and income account5. Sales account6. Purchase return or return outward account7. Creditors account8. Interest on drawing account9. 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

490020001000

12 600

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

4900100

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 500

2005 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 4000

2005 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 Sunny ----------------- 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)

1980Jan 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 Sunny

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 300

1980Jan 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 300

1980Jan 8

Feb 1

By Cash A/C

By Balance b/d

300

300 300

300

Example 2 contd.

Sunny’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 book2006:March1 Purchases from Purohit Furnishers, Gandhi Nagar (Invoice no. 516)

20 Chairs @ Rs 1500 each2 Tables @ Rs 4000 eachLess trade discount @ 10%

March7 Bought M/S Roy and Co. , Ahmedabad (Invoice number 700)20 Stools @Rs. 1250each10 collapsible chairs @Rs. 2000 eachDelivery 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)

2006March1

March 7

516

700

Purohit Furnishers, Gandhinagar20 Chairs @ Rs 1500 each2 Tables @ Rs 4000 each

Less: trade discount @ 10%

M/S Roy and Co. , Ahmedabad20 Stools @Rs. 1250each

10 collapsible chairs@Rs.2000 each

Add: Delivery and cartage Rs. 150

Purchase A/C Dr

300008000

34200

45150

380003800

2500020000

45000150

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 , Ahmedabad2006May 4 sold M/S Dewan Brothers , Ahmedabad (Invoice no. 175)

10 dozens pencils @Rs 20 per dozen14 dozens rubbers @ Rs 60 per dozen

May 14 Sold to Sun Enterprise, Gandhi Nagar (invoice no. 200)5 dozens of gum bottles @ Rs 5 per bottle70 dozens rulers @ Rs 15 per dozenLess: 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 OutwardInvoice 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 , Ahmedabad10 dozens pencils @Rs 20 per dozen14 dozens rubbers @ Rs 60 per dozen

Sun Enterprise, Gandhi Nagar5 dozens of gum bottles @ Rs 5 per bottle

70 dozens rulers @ Rs 15 per dozen

Less: 10% trade discount

Sales A/C Cr

200840 1040

1215

3001050

1350135

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 To Balance c/d

2255

2006May 30

June 1

By Total amount as per sales book

By Balance b/d

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.

Sun 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))

1750010000

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 To Balance c/d 5000

2003Jan31

Feb 1

By Cash A/C

By Balance b/d

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 To Balance c/d 2500

2003Jan31 By Cash A/C

By Balance b/dFeb 1

17500

2500 2500

2500

Ledger

Example 6.

Posting from the Petty Cash Book

Example 6: Mr Mohit, the pettycahier of M/s Samaira Tradersreceived Rupees 2,000 on May01, 2010 from the Head Cashier.For the month, details of pettyexpenses are listed here under:

Petty Cash Book contd.

Samir K Mahajan

Date2010 May

Details AmountRs.

0203040506080810121314161919202223282930

Auto fareCourier servicesPostal stampsErasers/Sharpeners/Pencils/PadsSpeed post chargesTaxi fare (Rs.105 + Rs.90)RefreshmentsAuto fare Registered postal chargesTelegramCartageComputer stationeryBus fareSTD call chargesOffice sanitation including disinfectant (Rs. 36 + Rs. 24)RefreshmentPhoto stating chargesCourier servicesUnloading chargesBus fare

5540

10522598

1958560423425

1652487604547404015

Books of Samira Traders Petty Cash Book

Amount Received

C.B.F.N

Date Particular VN

Amount Paid

Analysis of Payment

Rs. 2010May

Rs. Postage Telephone and Telegram

Conveyance

Stationary

Miscellaneous

2000 01 Cash Received

0203040506080810121314161919

Auto fareCourier servicesPostal stampsErasers/Sharpeners/Pencils/PadsSpeed post chargesTaxi fare (Rs.105 + Rs.90)RefreshmentsAuto fare Registered postal chargesTelegramCartageComputer stationeryBus fareSTD call charges

5540

10522598

1958560423425

1652487

40105

98

4234

87

55

195

60

24

225

165

85

25

Petty Cash Book contd.

Samir K Mahajan

Analysis Petty Cash Book contd.

Amount Received

C.B.F.N

Date Particular VN

Amount Paid

Analysis of Payment

Rs. 2010May

Rs. Postage Telephone and Telegram

Conveyance

Stationary

Miscellaneous

20

2223282930

Office sanitation including disinfectant (Rs. 36 + Rs. 24)RefreshmentPhoto stating chargesCourier servicesUnloading chargesBus fare

604547404015

40

15

604547

40

31 Balance c/d1487513

325 121 364 390 302

2000 2000

5131487

June

0101

Balance b/dCash Received

Petty Cash Book contd.

Samir K Mahajan

Books of Samira Traders Journal

Date Particular L.F. Debit Amount (Rs)

Credit Amount (Rs)

2010May 01

Petty cash A/c Dr.To Cash A/c(Cash paid to petty cashier)

2,0002,000

May 31 Postage A/c Dr.Telephone & Telegram A/c Dr.Conveyance A/c Dr.Stationary A/c Dr.Miscellaneous expenses A/c Dr.To Petty cash A/c(Petty expenses posted to petty cash account)

325121349390302

1,487

Samir K Mahajan

Example: 6 contd.

Petty Cash Book contd.

Samir K Mahajan

Books of Samaria TradersPetty Cash Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2010May 01

June 01

To Cash A/c

To Balance b/dTo Cash

2000 2010May 31

May 31

By Sundries as petty cash book

By Balance c/d

1,487

513

2000 2000

5131487

Petty Cash Book contd.

Samir K Mahajan

Books of Samaria TradersPostage Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2010May 01

June 01

To Petty Cash

To Balance b/d

325 May 31 By Balance c/d 325

325 325

325

Petty Cash Book contd.

Samir K Mahajan

Books of Samaria TradersTelephone and Telephone Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2010May 01

June 01

To Petty Cash

To Balance b/d

121 May 31 By Balance c/d 121

121 121

121

Petty Cash Book contd.

Samir K Mahajan

Books of Samaria TradersConveyance Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2010May 01

June 01

To Petty Cash

To Balance b/d

349 May 31 By Balance c/d 349

349 349

349

Petty Cash Book contd.

Samir K Mahajan

Books of Samaria TradersStationary Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2010May 01

June 01

To Petty Cash

To Balance b/d

390 May 31 By Balance c/d 390

390 390

390

Petty Cash Book contd.

Samir K Mahajan

Books of Samaria TradersMiscellaneous Expenses Account

Dr Cr

Date Particulars J.F. Amount (Rs)

Date Particulars J.F. Amount (Rs)

2010May 01

June 01

To Petty Cash

To Balance b/d

302 May 31 By Balance c/d 302

302 302

302