LEDGER
When
transactions are transferred
into concerned account the system is
called ledger.
- To identify the amount of debtors
- To know the amount pay to supplier
- To know Good purchased during the period
- To know Amount of Revenue and
expenditure
Procedure of recording up the accounts is
known as Posting.
LEDGER
It is the book of final entry.
The information from the journal is transferred
to the ledger in the posting process.
Debits and credits in the journal remain exactly
the same when posted to the accounts in the
ledger.
A ledger is a summary of statement of all
transactions relating to an account personal,
real or nominal which have taken place during a
given period of time and shows their net effect.
Ledger Account------------??
All the transactions pertaining to an account are
collected at one place in the ledger. This helps
to get clear idea of an account at a glance. The
total sales, Total purchases, amount due from
customer, amount due to customers, cash
balance, bank balance can be ascertained at
any time from the ledgers. Ledgers help to
prepare the Trial Balance and the final accounts
Ledger Format
1.
T-Shaped Ledger Account
Traditional Approach
2.
Horizontal Ledger Account With Balance
Column
Mordern Approach
Ledger Format T-Shaped
Dr.
. A/c
Date Particulars J.F Amt. Date Particulars
To...............
xxxx
xxxx
By
J.F
Cr.
Amt
xxxx
xxxx
Balancing the ledger Account:
Difference of total Dr & total Cr is Balancing
Amount
If Total Dr > Total Cr, the balancing amount is
appear in Cr side representing By balance c/d,
called Debit balance.
If Total Cr > Total Dr, the balancing amount is
appear in Dr side representing To balance c/d,
called Credit balance.
Examples:
Amit invest Rs 20,000 in business
Date
Particulars
Cash A/c
L.F
Debit
20,000
Capital A/c
For Investing Cash in
Business
Credit
20,000
Purchase Machinery of Rs 12,000.
Date
Particulars
Machinery A/c
Cash A/c
For Purchase of Machinery
in Cash
L.F
Debit
12,000
Credit
12,000
Balancing the ledger Account:
Dr.
date Particulars J.
F
To Capital
Cash A/c
Amt
date Particulars
20,000
By Machinery
By balance
c/d
20,000
Cr.
J. Amt
F
12,000
8,000
20,000
Difference of total Dr & total Cr is Balancing Amount:
Here, Total Dr Total Cr = Balancing Amount
20,000 12,000 = 8,000
Also, Total Dr > Total Cr, the balancing amount is
appear in Cr side representing By balance c/d, called
Debit balance.
Balancing the ledger Account:
Dr.
date Particulars J.
F
To balance
c/d
Capital A/c
Amt
date Particulars
20,000
20,000
By Cash
Cr.
J. Amt
F
20,000
20,000
Difference of total Dr & total Cr is Balancing Amount:
Here,
Total Cr Total Dr = Balancing Amount
20,000 0 = 20,000
Also, Total Cr > Total Dr, the balancing amount is
appear in Dr side representing To balance c/d, called
Credit balance.
Horizontal Ledger Account With
Balance Column
Examples:
Amit invest Rs 20,000 in business
Date
Particulars
Cash A/c
L.F
Debit
20,000
Capital A/c
For Investing Cash in
Business
Credit
20,000
Purchase Machinery of Rs 12,000.
Date
Particulars
Machinery A/c
Cash A/c
For Purchase of Machinery
in Cash
L.F
Debit
12,000
Credit
12,000
Horizontal Ledger Account With
Balance Column
Cash A/c
Date Transaction
Debit
Opening Balance
Investing in Cash
Purchase of machinery
Credit Balance
0
20,000
20,000
12,000 8,000
ILLUSTRATIONS:
1: Amit A Lawyer opens the Legal Services firm by
investing Rs.20,000 cash into the business.
2: Amit purchases equipment from Computer Equipment
Ltd for Rs 9,000
3: Purchase of 1,500 of stationery supplies for use in the
business.
4: Rs1,000 in legal services were provided for cash.
5: Legal services of Rs.1,500 were provided on credit to
a client, Ravi.
6: Amit makes a 3,000 partial payment to Computer
Equipment Ltd.
7: Ravi pays Rs. 500 on account to Legal Services
8: Amit decides to take Rs.2,000 cash from the business
for his personal use.
9: Amit pays Rs. 400 salaries to legal assistant.
Mary Low
GENERAL JOURNAL
Description
Debit
Date
Journal Cash
1
Credit
20000.00
Capital
20000.00
Investing Cash in Business
Cash A/c
Date
Transaction
Debit
Credit
Opening Balance
Investing Cash in Busuness
Balance
0
20,000
20,000
Capital A/c
Date
Transaction
Debit
Credit
Opening Balance
Investing Cash in Busuness
Balance
0
20,000
-20,000
GENERAL JOURNAL
Description
Debit
Date
Computer Equipment A/c
Com. Equ. Ltd
Credit
9000.00
9000.00
Purchase of Equipment on Credit
Computer Equipment A/c
Date
Transaction
Debit
Credit
Opening Balance
Balance
0
Purchase Of Equipment on
Credit
9,000
9,000
Com. Equ. Ltd A/c
Date
Transaction
Debit
Credit
Opening Balance
Purchase Of Equipment on Credit
Balance
0
9,000
-9,000
GENERAL JOURNAL
Description
Debit
Date
Supplies A/c
Cash
Credit
1500.00
1500.00
Purchase Of Suplies in Cash
Supplies A/c
Date
Transaction
Debit
Credit
Opening Balance
Balance
0
Purchase Of Supplies in Cash
1,500
1,500
Cash A/c
Date
Transaction
Debit
Credit
Opening Balance
Investing Cash in Business
Purchase Of Supplies in Cash
Balance
0
20,000
20,000
1,500
18,500
GENERAL JOURNAL
Description
Debit
Date
Cash A/c
Credit
1000.00
Service Revenue A/c
1000.00
Legal Service revenue earned in cash
Cash A/c
Date
Transaction
Debit
Credit
Balance
Opening Balance
Investing in Cash
20,000
Purchase Of Supplies in Cash
Service Revenue earned in Cash 1,000
20,000
1,500
18,500
19,500
Service Revenue A/c
Date
Transaction
Debit
Credit
Opening Balance
Service Revenue earned in Cash
Balance
0
1,000
-1,000
GENERAL JOURNAL
Description
Debit
Date
Ravi A/c
Credit
2500.00
Service Revenue
2500.00
Legal Service Revenue earned in Credit
Ravi A/c
Date
Transaction
Debit
Credit
Balance
Opening Balance
Service Revenue earned in credit 1,500
1,500
Service Revenue A/c
Date
Transaction
Debit
Credit
Opening Balance
Balance
0
Service Revenue earned in Cash
1,000
-1,000
Service Revenue earned in credit
2,500
-3,500
GENERAL JOURNAL
Description
Debit
Date
Com.Equ. Ltd A/c
Cash A/c
Credit
3000.00
3000.00
Paid Cash to Computer Equipment Ltd.
Cash A/c
Date
Transaction
Debit
Credit Balance
Opening Balance
Investing in Cash
20,000
Purchase Of Supplies in Cash
Service Revenue earned in Cash
Paid cash to computer equipment ltd.
20,000
1,500 18,500
1,000
19,500
3,000 16,500
Com. Equ. Ltd A/c
Date
Transaction
Debit
Credit
Opening Balance
Purchase Of Equipment on Credit
Paid cash to computer equipment ltd.
Balance
9,000
3,000
-9,000
-6,000
GENERAL JOURNAL
Description
Date
Cash A/c
Debit
Credit
500.00
Rav i A/c
500.00
Cash Received from Ravi
Cash A/c
Date
Transaction
Debit
Credit Balance
Opening Balance
Investing in Cash
20,000
Purchase Of Supplies in Cash
Service Revenue earned in Cash
Paid cash to computer equipment ltd.
Cash received from ravi
20,000
1,500 18,500
1,000
19,500
3,000 16,500
500
17,000
Ravi A/c
Date
Transaction
Debit
Credit
Balance
Opening Balance
Service Revenue earned in credit 1,500
1,500
Cash Received from ravi
500
1,000
GENERAL JOURNAL
Description
Debit
Date
Drawing A/c
Cash A/c
Credit
2000.00
2000.00
Cash Drawing for personal use
Drawing A/c
Date
Transaction
Debit
Credit
Opening Balance
1
Balance
0
Cash Drawing for personal use
2,000
2,000
Cash A/c
Date
Transaction
Debit
Credit
Opening Balance
1
Investing in Cash
Purchase Of Supplies in Cash
Service Revenue earned in Cash
Paid cash to computer equipment ltd.
Cash received from ravi
Cash Drawing for personal use
Balance
0
20,000
20,000
1,500
1,000
18,500
19,500
3,000
500
16,500
17,000
2,000
Mary Low
15,000
GENERAL JOURNAL
Description
Date
Debit
Salary A/c
Cash A/c
Credit
400.00
400.00
Salary Paid to Legal assistant
Salary A/c
Date
Transaction
Debit
Credit
Opening Balance
Balance
0
Salary Paid to legal assistant
400
400
Cash A/c
Date
Transaction
Debit
Credit
Opening Balance
Balance
0
Investing in Cash
20,000
20,000
Purchase Of Supplies in Cash
Service Revenue earned in Cash
Paid cash to computer equipment ltd.
Cash received from ravi
Cash Drawing for personal use
2,000
15,000
Salary Paid to legal assistant
400
14,600
1,500
1,000
18,500
19,500
3,000
500
16,500
17,000
Mary Low
T-Ledger Account
Dr.
Date
Cr.
Cash A/c
Particulars
J.F
Amount
Date
Particulars
J.F
Amount
To Capital A/c
20,000
By Supplies A/c
1,500
To Service revenue
1,000
By A/P (Com. Equ.ltd)
3,000
To A/R (Ravi)
5,00
By Drawing
2,000
By Salary
400
By Balance c/d
14600
21,500
Balancing the ledger Account:
Difference of total Dr & total Cr is Balancing Amount
If Total Dr > Total Cr, the balancing amount is appear in Cr side
representing By balance c/d, called Debit balance.
If Total Cr > Total Dr, the balancing amount is appear in Dr side
representing To balance c/d, called Credit balance.
21,500
T-Ledger Account
Dr.
Cr.
Capital A/c
Date Particulars
To Balance c/d
J.F
Amount
20,000
Date Particulars
J.F
By Cash A/c
20,000
Balancing the ledger Account:
Difference of total Dr & total Cr is Balancing Amount
If Total Dr > Total Cr, the balancing amount is appear in Cr side
representing By balance c/d, called Debit balance.
If Total Cr > Total Dr, the balancing amount is appear in Dr side
representing To balance c/d, called Credit balance.
Amount
20,000
20,000
T-Ledger Account
Dr.
Cr.
Computer Equipment A/c
Date Particulars
To A/P (Comp.
Equip. ltd)
J.F
Amount
9,000
Date Particulars
J.F
By balance c/d
9,000
Balancing the ledger Account:
Difference of total Dr & total Cr is Balancing Amount
If Total Dr > Total Cr, the balancing amount is appear in Cr side
representing By balance c/d, called Debit balance.
If Total Cr > Total Dr, the balancing amount is appear in Dr side
representing To balance c/d, called Credit balance.
Amount
9,000
9,000
T-Ledger Account
Dr.
Cr.
A/P(Computer Equipment ltd) A/c
Date Particulars
J.F
Amount
To Cash
3,000
To Balance c/d
6,000
Date Particulars
J.F
By Computer
Equipment A/c
9,000
Balancing the ledger Account:
Difference of total Dr & total Cr is Balancing Amount
If Total Dr > Total Cr, the balancing amount is appear in Cr side
representing By balance c/d, called Debit balance.
If Total Cr > Total Dr, the balancing amount is appear in Dr side
representing To balance c/d, called Credit balance.
Amount
9,000
9,000
Some more Examples
Start a business with Rs. 5000 cash and a building
worth Rs. 10000
Purchase goods worth Rs. 2000, out of which 1200 on
credit from Ram
Purchase Machinery of Rs. 2500, Rs 500 paid in Cash
& remaining Through Bank Loan
Sold goods for Rs. 600, including Rs. 400 to Shyam
Received Rs. 380 from shyam in full settlement of his
account
Paid Rs. 100 for wages & salary Rs. 50
Paid Rs 1150 for Ram for his full claim
Withdraw Rs. 400 from his business, out of which 50%
is for personal purpose & remaining for business
promotion
Mary Low
Mr Ashok commenced business on 1st January, 1992 with a
capital of Rs.1,00,000 in cash. On the same date he opened the
bank account and deposited Rs.20,000. During the month of
January 1992 the following transactions
tookplace:
Rs.
Jan
1 Bought goods for cash
70,000
2 Sold good to Rahul & Co
38,000
15 Sold goods for cash
9,000
21 Rahul & co. paid by cheque
35,000
31 Paid rent by cash
2,000
Paid wages by cash
3,000
Withdrew cash personal use
5,000
Make journal entries for the transactions.
Prepare necessary ledger accounts
1)Mr.A deposited into bank Rs.50,000 to start a business
2) Paid rent for three months at Rs.2500 per month
3) Bought office equipment from B&Co. for Rs. 10000, paid to
them Rs.3000 and promised to pay the balance after two
months.
4) Rendered services to clients and received cash Rs. 5000
5) Purchase supplies for cash Rs. 400
6) Paid salaries to staff Rs. 5400
7) Bought furniture for Rs. 3200,paid to K&Co. Rs.1200 and
promised to pay balance after one month
8) Withdrew cash for personal use Rs. 3000
9) Billed to Nasir for services rendered Rs. 12500
10) Received from Nasir Rs.5000
INSTRUCTION
A: Prepare journal entries
B: Post to ledger accounts
(Considering All payments through Bank)
Prepare Jornal entries and make necessary ledger
accounts from the following transactions
1. Mr. Ahmed invested cash Rs. 125,000
2. Bought merchandise for cash Rs.20000
3. Paid rent for the month Rs.5000
4. Purchase office supplies for Rs.1500
5. Sold goods for cash Rs.5000
6. Purchase goods on credit from Nasir Ali Rs.10000
7. Paid salaries to office staff Rs. 12500
8. Paid to Nasir Ali Rs.3500
9. Sold goods on credit to Abid Rs.15000
10. Merchandise return to Nasir Ali Rs.250
11. Goods were returned by Abid Rs.750
12. Withdrew cash for personal use Rs.1000
13. Sold old machine at Rs 500
In July 2005, Nasir Jamal started business and
completed following transactions.
July 1 He deposited $ 165,000 cash in a business
July 2 Purchased equipment for $ 55,000 from ABC Co.
paid $20,000 and balance will be paid after three
month.
July 7 Paid rent for three months $ 1500
July 12 Purchase goods on credit from Khan & Co. $
1200
July 17 Paid salaries to staff $ 2500
July 20 Paid to Khan & Co.$ 700
July 23 Paid insurance $ 400
July 27 Nasir withdrew $ 1500 cash from the business
for personal use
Prepare journal entries and Ledger accounts.
. Khalid invested in business cash Rs.40000, office
equipment Rs.60,000
2. Purchase merchandise for cash Rs. 6000
3. Purchase goods on credit from Zahid Rs.10000
4. Sold merchandise on credit to Amir Rs.10000
5. Paid rent expense Rs.600
6. Sold merchandise for cash Rs. 3500
7. Earned commission Rs. 10000
8. Purchase supplies on credit from Aleem Rs. 800
9. Paid traveling expense Rs. 650
10. Sold merchandise to Mr. Kareem Rs. 4000 on
credit.
11. Khalid withdrew cash for personal use Rs. 3000
12. Rendered services to client and received
commission Rs. 2000
13. Paid insurance for the month Rs. 500
Prepare journal entries and Ledger accounts
