LEDGER

1. LEDGER INTRODUCTION Ledger is the principal or primary book of accounts. It is the most important book in accounting system. It contains all the accounts (assets, liabilities, capital, revenue, and expenses) to which the transactions recorded in the books of original entry are transferred (posted). In ledger the information is classified by nature and relevance. It may be maintained as bound book or loose leaf sheets or (in case of computerized accounting) in floppy diskettes. DEFINATION OF LEDGER “A ledger is the most important book of accounts and is the (final) destination of the entries made in the subsidiary books.” FEATURES OF LEDGER The main features of ledger may be stated as follows: 1.) It is the principal or primary book of accounts. 2.) The transactions are classified under appropriate heads , called accounts. 3.) The accounts contain the condensed record of all the related transactions. 4.) It is the basis of preparing the final accounts. Hence, it can not be avoided. NECSESSITY OF LEDGER Book-keeping as provider of information must enable us to find out readily and without trouble- how much is due to us by every customer and how much is payable by us to each of our supplier at a point of time; how much has been spent on a particular head of expenditure; how much has been earned from a particular source of income and so on.

2. LEDGER The process of recording information in ledger involves followingsteps :- • Transaction relating to one account, over a period, are identified from the journal in the chronological order. • Transactions, identified are recorded at one place called account. • This gives rise to summarized and classified information relating to each particular account at one place i.e. on one page. Ledger provides the following information (readily and at a glance) • Debtors and creditors :- Balance shown by each personal account, if debit tells us how much that person owes to the business; if credit, tells us how much we owe to that individual. • Purchases, sales, returns, etc. :- The value of total purchases made by business on cash and credit upto a particular date can be ascertained by finding the balance of purchases account. Similarly, value of sales, return inwards, return outwards etc., can also be found out only by balancing the particular account. • Expenses and incomes:- Each nominal account representing separate expenditure and income head is opened separately in the ledger. For example , salary, wages, rent, interest, dividend, etc.

3. LEDGER DIFFERENCE BETWEEN JOURNAL AND LEDGER :- JOURNAL :- 1.) It is a book of prime entry. 2.) As soon as the transaction originates, it is recorded in journal. 3.) Narration is written in the journal. LEDGER:- 1.) It is a book of final entry. 2.) Transactions are posted in the ledger after the same have been recorded in the journal. 3.) Narration is not required.

4. LEDGER INTER RELATIONSHIP BETWEEN JOURNAL AND LEDGER 1.) Recording process:- The recording process in journal is known as journalisation and in ledger, it is known as posting. 2.) Inter-dependence:- Ledger records follow the journal records. Journal does not require ledger. CLASSIFICATION OF LEDGER In a ledger, accounts should be allotted pages in some sequence i.e. order. The accounts may be arranged alphabetically or on the basis of type of account i.e. first, personal accounts, followed by real accounts and last, nominal accounts. The ledger may be sub-divided into following parts:- • Debtors Ledger • Creditors Ledger • General Ledger or Main Ledger

5. LEDGER ADVANTAGES OF LEDGER 1.) It helps in preparing ‘Balance sheet’ to ascertain the financial position of business. 2.) The ledger accounts help in preparing ‘ Trading and Profit & loss Account’ to know the trading result. FORMATING OF LEDGER ACCOUNT

6. LEDGER MECHANICS OF POSTING ‘ DEBIT ACCOUNT’ STEPS:- 1.) With the help of an index, open that page on which the concerned account appears. 2.)Enter the date of the transaction in the ‘Date Colulmn’ pm the debit side. 3.) Record the name of the account credited in the journal, in the ‘particulars column’ on the debit side as “ to… (name of the accounted credited)….” 4.) Record the page number of the journal in the ‘Folio Column’ on the debit side and in the journal, write the number of the ledger on which a particular account appears in the Ledger folio column’ 5.) Enter the relevant amount in the ‘Amount column’ on the debit side.

7. LEDGER ‘CREDIT ACCOUNT’ STEPS:- 1.) With the help of an index, open that page on which the concerned account appears. 2.) Enter the date of the transaction in the ‘ Date column’ on th credit side. 3.) Record the name of the account debited in the journal, in the ‘particulars column’ on the credit side as “ by ….. (name of the account is debited)….’‘ 4.) Record the page number of the journal in the ‘folio column’ on the credit side and in journal, write the page number of the ledger on which a particular account appears in the ‘Ledger folio column’. 5.) Enter the relevant amount in the ‘Amount Column’ on the credit side.

8. LEDGER POSTING OF COMPOUND ENTRY:- Compound entry means one combined entry for different transactions of similar nature on the same date. The posting of compound entry is done in the same way as explained earlier. For examples- 1.) March 1 Business commenced with cash Rs. 40,000 and own equipments. The entry will be:-

9. LEDGER ONE EXAMPLE QUESTION OF LEDGER:- Cash in hand 30000, furniture 10000, amount due from Pramod rs. 35000, amount due from Subodh rs.24000, salaries outstanding rs. 13000, loan from sunny rs.11000, due to mamta rs. 9000 April 2 purchased goods from mamta 15000 April 3 sold goods to Pramod 12000 April 10 cash received from subodh 13700 Discount allowed to him 300 April 15 repaid the loan to sunny April 18 furniture costing rs. 6000 sold for 5500 April 24 cash sales 4500 April 28 cash purchases 10000 April 30 settled mamta’s account after receiving 5% discount.

10. LEDGERJOURNAL DATE PARTICULAR L.F. DEBIT CREDIT AMOUNT AMOUNT 2006 April 1 cash a/c Dr. 30000 furniture a/c Dr. 10000 pramod Dr. 35000 subodh Dr. 24000 To salaries o/s a/c 13000 To sunny’s loan a/c 11000 To mamta 9000 To capital a/c 66000 (being the opening entry passed)

11. LEDGERJOURNAL DATE PARTICULAR L.F DEBIT CREDIT AMOUNT AMOUNT 2006 April2 Purchases a/c Dr. 15000 To mamta 15000 (being goods purchased oncredit) April 3 pramod Dr. 12000 To sales a/c 12000 (being goods sold on credit) April 10 cash a/c Dr. 13700 dis. a/c Dr. 300 To subodh 14000 (being cash received & dis. Allowed) April 15 sunny’s loam a/c Dr. 11000 to cash a/c 11000 (being loan repaid in cash)

12. LEDGERJOURNAL DATE PARTICULAR L.F. DEBIT CREDIT AMOUNT AMOUNT 2006 April18 cash a/c Dr. 5500 loss on sale of furniture a/c Dr. 500 To furniture a/c 6000 (being furniture sold at a loss) April 24 cash a/c Dr. 4500 To sales a/c 4500 (being goods sold on cash) April 28 purchases a/c 10000 to cash a/c (being purchased in cash) 10000 April 30 Mamta Dr. 24000 To cash a/c 22800 To dis. Received a/c 1200 (being paid in settlement of a/c & dis received)

13. LEDGER CASH ACCOUNT FURNITURE ACCOUNT

14. LEDGER PRAMOD SUBODH

15. LEDGER SALARIES OUTSTANDING ACCOUNT SUNNY’S LOAN ACCOUNT

16. LEDGER MAMTA CAPITAL ACCOUNT

17. LEDGER PURCHASES ACCOUNT SALES ACCOUNT

18. LEDGER DISCOUNT ALLOWED ACCOUNT LOSS ON SALE OF FURNITURE ACCOUNT

19. LEDGER DISCOUNT RECEIVED ACCOUNT FINISH FROM:- TANUJA & ALKA ROLL NO. 341 & 307