LEDGER Balances

8/6/2019 LEDGER Balances

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LEDGERLEDGERLedgerLedger isis bookbook ofof FinalFinal entryentry..

ItIt isis aa bookbook whichwhich containscontains variousvarious

accountsaccounts..

ItIt isis aa set/groupset/group ofof accountsaccounts..

ItIt containscontains allall thethe accountsaccounts ofofbusinessbusiness enterpriseenterprise whetherwhether Real,Real,

NominalNominal oror PersonalPersonal..


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OnceOnce thethe transactionstransactions areare recordedrecorded inin

thethe bookbook ofof ORIGINALORIGINAL ENTRYENTRY-- thetheJournalJournal-- theythey areare POSTED POSTED toto thethe debitdebit

oror creditcredit sideside ofof thethe respectiverespective accountsaccounts

affected,affected, inin thethe LEDGERLEDGER..

TheThe Process Process ofof recordingrecording thethe

transactionstransactions inin thethe ledgerledger isis termedtermed asas

POSTINGPOSTING..


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JOURNAL VS LEDGERJOURNAL VS LEDGER

PointsPoints JournalJournal LedgerLedger

NatureNature Book Book ofof PrimePrime

entryentry

BookBook ofof finalfinal

entryentry

StyleStyle ChronologicalChronological

orderorder

AnalyticalAnalytical

orderorder

ProcessProcess RecordingRecording isisknownknown asas

JournalizingJournalizing..

RecordingRecordingherehere isis knownknown

asas PostingPosting..


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JOURNAL VS LEDGERJOURNAL VS LEDGER

PointsPoints JournalJournal LedgerLedger

ObjectiveObjective FinalFinal accountsaccountscannotcannot bebe

preparedprepared fromfrom

thisthis alonealone..

FinalFinal accountsaccountsmaymay bebe

compiledcompiled withwith

thisthis..


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IfIf youyou areare facedfaced withwith QuestionsQuestions likelike::

HowHow muchmuch aa particularparticular customercustomer owesowes you?you? WhatWhat isis thethe amountamount payablepayable byby youyou toto anyany oneone ofof

youryour suppliers?suppliers?

WhatWhat isis thethe amountamount ofof goodsgoods purchasedpurchased byby youyouduringduring specifiedspecified period?period?

HowHow muchmuch salessales youyou havehave made?made?

WhatWhat hashas beenbeen youryour expenditureexpenditure on,on, say,say, labour?labour?


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HowHow muchmuch aa particularparticular customercustomer owesowes you?you?

TurnTurn toto youryour LEDGERLEDGER && findfind outout thethe balancebalance

inin youryour CUSTOMERsCUSTOMERs A/CA/C..

WhatWhat isis thethe amountamount payablepayable byby youyou toto anyany

oneone ofof youryour supplierssuppliers??

FindFind outout thethe Balance Balance ofof your your SUPPLIERsSUPPLIERs

A/CA/C..


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WhatWhat isis thethe amountamount ofof goodsgoods purchasedpurchased byby

youyou duringduring specifiedspecified periodperiod??

FindFind outout thethe balancebalance ofof PURCHASESPURCHASES A/CA/C..

HowHow muchmuch salessales youyou havehave made?made?

FindFind outout thethe balancebalance ofof youryour SALESSALES A/CA/C..


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UTILITY OF LEDGERUTILITY OF LEDGER

ItIt providesprovides completecomplete informationinformation aboutabout allall

accountsaccounts inin oneone bookbook..

ItIt facilitatesfacilitates thethe preparationpreparation ofof finalfinal accountsaccounts..

ItIt enablesenables toto ascertainascertain whatwhat areare thethe mainmain itemsitemsofof revenuesrevenues andand expensesexpenses..


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FORMAT OF LEDGERFORMAT OF LEDGER

DateDate ParticPartic--

ularsulars

AmtAmt

Rs.Rs.

DateDate ParticulParticul

arsars

AmtAmt

Rs.Rs.


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Use of the words To and ByUse of the words To and By

ItIt isis customarycustomary toto useuse wordswords ToTo andand ByBy

whilewhile makingmaking postingposting inin thethe LedgerLedger..

TheThe wordword ToTo isis usedused withwith thethe accountsaccountswhichwhich appearappear onon thethe debitdebit sideside ofof aa LedgerLedger

accountaccount..

TheThe wordword ByBy isis usedused withwith thethe accountsaccounts

whichwhich appearappear onon thethe creditcredit sideside ofof aa ledgerledger

accountaccount..


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Balancing of AccountsBalancing of Accounts

TheThe techniquetechnique ofof findingfinding outout thethe netnet balancebalance

ofof anan account,account, afterafter consideringconsidering thethe totalstotals ofof

bothboth debitsdebits andand creditscredits appearingappearing inin thethe

accountaccount isis knownknown asas BALANCINGBALANCING THETHE

ACCOUNTACCOUNT..


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CONTRA ENTRYCONTRA ENTRY AnAn accountingaccounting transactiontransaction involvesinvolves twotwo accountsaccounts

andand therethere maymay bebe aa transactiontransaction wherewhere bothboth CashCashAccountAccount andand BankBank AccountAccount areare involvedinvolved..

InIn thethe ledger,ledger, therethere areare nono separateseparate CashCash AccountAccountandand BankBank Account,Account, therefore,therefore, inin suchsuch cases,cases, thethetransactiontransaction willwill bebe recordedrecorded onon bothboth sidessides ofof thethecashcash BookBook..

SuchSuch anan accountingaccounting entryentry whichwhich isis recordedrecorded ononbothboth thethe debitdebit andand creditcredit sideside ofof thethe cashcash bookbook isisknownknown asas aa CONTRACONTRA ENTRYENTRY..


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AN EXAMPLEAN EXAMPLE

IfIf cashcash isis withdrawnwithdrawn fromfrom thethe bank,bank, thethe twotwoaccountsaccounts involvedinvolved areare thethe CashCash AccountAccount andandthethe BankBank AccountAccount..

InIn thethe CashCash Book,Book, onon thethe debitdebit side,side, thetheamountamount willwill bebe putput inin cashcash columncolumn againstagainstthethe wordswords ToTo BankBank whilewhile onon thethe creditcredit

sideside ofof thethe CashCash Book,Book, thethe amountamount willwill bebewrittenwritten inin thethe bankbank columncolumn againstagainst thethewordswords ByBy CashCash..


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Special Points regarding ChequesSpecial Points regarding Cheques

ReceiptReceipt ofof ChequesCheques

AA ChequeCheque maymay bebe receivedreceived byby thethe businessbusinessandand sentsent toto thethe BankBank thethe samesame dayday forfor

collectioncollection..ForFor example,example, onon MarchMarch 1010,, aa chequecheque isisreceivedreceived fromfrom AA forfor RsRs.. 1010,,000000 andand isis sentsent totothethe BankBank forfor collectioncollection onon thethe samesame day,day, thetheentryentry willwill bebe::

BankBank A/cA/c..DrDr..1010,,000000

ToTo AA 1010,,000000


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InIn case,case, aa chequecheque receivedreceived fromfrom aa partyparty isis

sentsent toto thethe BankBank atat aa laterlater date,date, itit willwill bebe

betterbetter toto taketake thethe chequecheque asas receiptreceipt ofof cashcash

whenwhen itit isis receivedreceived andand depositdeposit ofof cashcash inin thethe

bankbank whenwhen thethe chequecheque isis sentsent forfor collectioncollection

toto thethe BankBank..

ForFor example,example, onon MarchMarch 1010,, aa chequecheque isis

receivedreceived fromfrom AA forfor RsRs.. 1010,,000000 andand isis sentsent toto

thethe bankbank forfor collectioncollection onon MarchMarch 1414..

CashCash a/ca/c..DrDr1010,,000000

ToTo AA 1010,,000000BankBank a/ca/cDrDr 1010,,000000

ToTo cashcash a/ca/c 1010,,000000


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EndorsementEndorsement ofof chequescheques receivedreceived

IfIf onon MarchMarch 1010,, aa chequecheque ofof RsRs.. 1010,,000000

waswas receivedreceived fromfrom AA andand itit waswas

endorsedendorsed onon MarchMarch 1414 inin favourfavour ofof B,B, aa

creditorcreditor ofof business,business, thethe entriesentries wilwil bebe

asas followsfollows::

CashCash a/ca/cDrDr.. 1010,,000000

ToTo AA 1010,,000000

BsBs A/cA/c..DrDr 1010,,000000

ToTo cashcash a/ca/c 1010,,000000


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DISHONOUR OF CHEQUESDISHONOUR OF CHEQUES

TheThe termterm dishonourdishonour ofof chequecheque meansmeansnonnon--paymentpayment ofof thethe chequecheque byby thethedraweedrawee bankbank onon itit beingbeing presentedpresented forfor

paymentpayment.. IfIf aa chequecheque receivedreceived fromfrom AA forfor RsRs..

1010,,000000 onon MarchMarch 1010,, isis dishonoureddishonoured bybythethe BankersBankers onon presentationpresentation onon MarchMarch

1414,, entriesentries willwill bebe::


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WhenWhen aa chequecheque isis receivedreceived fromfrom aa customercustomer

andand endorsedendorsed inin favourfavour ofof aa creditorcreditor isis

dishonoured,dishonoured, thethe entriesentries inin thethe cashcash bookbook willwillbebe::

OnOn receiptreceipt ofof chequecheque::

CashCash A/cA/cDrDr..

ToTo CustomerCustomer

OnOn endorsementendorsement ofof chequecheque::

CreditorCreditor....DrDr..

ToTo CashCash

OnOn dishonourdishonour ofof thethe chequecheque::

CustomerCustomerDrDr..

ToTo CreditorCreditor


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EXAMPLEEXAMPLE

DuringDuring thethe currentcurrent financialfinancial year,year, BadBad

debtsdebts writtenwritten offoff amountedamounted toto RsRs.. 22,,000000 andand

thethe totaltotal debtorsdebtors onon 3131stst ofof MarchMarch werewere RsRs..

22,,0000,,000000.. AA provisionprovision ofof 55%% onon bookbook debtsdebts isis

toto bebe mademade.. TheThe creditcredit balancebalance ofof RsRs.. 99,,000000

isis inin thethe ProvisionsProvisions forfor BadBad andand doubtfuldoubtful

debtsdebts..


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Provision of DepreciationProvision of Depreciation

Provision of Income TaxProvision of Income Tax

Provisions of DividendProvisions of Dividend


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RETAINED EARNINGSRETAINED EARNINGS

TheThe amountamount ofof profitprofit leftleft afterafter

deductiondeduction ofof incomeincome taxtax andand dividenddividend

isis retainedretained inin thethe businessbusiness forfor useuse inin thethesubsequentsubsequent accountingaccounting yearsyears.. TheThe

retainedretained earningearning isis carriedcarried forwardforward asas

partpart ofof ownersowners equityequity inin thethe BalanceBalancesheetsheet..


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RESERVESRESERVES

AA reservereserve isis anan appropriationappropriation ofof

profitsprofits forfor aa specificspecific purposepurpose oror

forfor retainingretaining aa partpart ofof thethe profitprofit

inin thethe businessbusiness forfor generalgeneral useuse..


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JOURNAL ENTRIESJOURNAL ENTRIES

PaidPaid IncomeIncome taxtax RsRs.. 11,,900900..

PaidPaid InsuranceInsurance premiumpremium byby chequecheque RsRs.. 350350..

IncurredIncurred advertisingadvertising RsRs.. 250250,, paidpaid cashcash RsRs.. 100100

andand stationerystationery givengiven forfor balancebalance.. (Owner(Owner inin thethebusinessbusiness ofof stationerystationery manufacturing)manufacturing)

InstalledInstalled aa smallsmall printingprinting machinemachine atat aa costcost ofof RsRs..

99,,500500,, paidpaid byby chequecheque..

AmountAmount duedue toto landlordlandlord asas RentRent forfor JanuaryJanuary RsRs..

150150..


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Procedure of balancing a ledgerProcedure of balancing a ledger

accountaccount

STEPSTEP 11:: MakeMake aa totaltotal ofof bothboth

thethe Debit Debit amountamount columncolumn andand

CreditCredit amountamount columncolumn

separatelyseparately andand ascertainascertain thethe

differencedifference betweenbetween thethe twotwototalstotals..


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StepStep 22:: IfIf thethe debitdebit sideside totaltotal

exceedexceed thethe creditcredit sideside totaltotal,, putput

suchsuch differencedifference (called(called debitdebit

balancebalance)) onon thethe creditcredit sideside inin

thethe creditcredit amountamount column,column,WriteWrite thethe datedate onon whichwhich

balancingbalancing isis donedone inin thethe DateDate

columncolumn andand thethe wordswords ByBy

Balance Balance c/dc/d inin ParticularsParticulars

columncolumn..


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STEPSTEP 33:: MakeMake aa totaltotal ofof bothboththethe Debit Debit amountamount columncolumn andand

thethe CreditCredit amountamount columncolumn andand

putput thethe totaltotal onon bothboth thethe sidessides

andand drawdraw aa doubledouble lineline

immediatelyimmediately beneathbeneath thethe totalstotals..


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StepStep 44:: EnterEnter thethe datedate ofof

beginningbeginning ofof nextnext periodperiod ininDateDate columncolumn andand bringbring downdown

thethe debitdebit balancebalance onon thethe debitdebit

sideside alongalong withwith thethe wordswords ToToBalanceBalance b/db/d inin ParticularsParticulars

columncolumn andand thethe creditcredit balancebalanceonon thethe creditcredit sideside alongalong withwith thethe

wordswords ByBy BalanceBalance b/db/d inin

ParticularsParticulars columncolumn..


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EXAMPLEEXAMPLE

OnOn 11..44..20082008,, Ram,Ram, aa customercustomer paidpaid cashcash RsRs..

980980.. JournaliseJournalise andand postpost itit intointo thethe ledgerledger..

CashCash A/cA/cDrDr.. 980980

ToTo RamRam 980980


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PROBLEMPROBLEM

TheThe followingfollowing datadata isis givengiven byby MrMr.. Sen,Sen, thethe

ownerowner of,of, withwith aa requestrequest toto compilecompile onlyonly twotwo

personalpersonal accountsaccounts ofof MrMr.. HariHari singhsingh andand

MrMr.. RamRam singh,singh, inin hishis ledgerledger forfor thethe monthmonth

ofof April,April, 20082008..

11 MrMr SenSen owesowes MrMr.. RamRam RsRs.. 1515,,000000.. MrMr..

HariHari owesowes MrMr.. SenSen RsRs.. 2020,,000000

44 MrMr.. RamRam soldsold goodsgoods worthworth RsRs.. 6060,,000000 @@

1010%% tradetrade discountdiscount toto MrMr.. SenSen..


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55 Mr. Sen sold to Mr Hari goods priced atMr. Sen sold to Mr Hari goods priced at

Rs. 30,000.Rs. 30,000.

1717 Record a purchase of Rs. 25,000 netRecord a purchase of Rs. 25,000 netfrom Ram, which were sold to Hari at afrom Ram, which were sold to Hari at a

profit of Rs. 15,000.profit of Rs. 15,000.

1818 Mr Sen rejected 10% of Mr RamsMr Sen rejected 10% of Mr Rams

goods of 4goods of 4thth April.April.


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44.. HeHe soldsold goodsgoods toto RamRam RsRs.. 22,,000000..55.. HeHe furtherfurther purchasedpurchased goodsgoods fromfrom SohanSohan

RsRs.. 22,,000000..

66.. HeHe paidpaid cashcash toto sohansohan RsRs.. 11,,000000..

77.. HeHe furtherfurther soldsold goodsgoods toto RamRam RsRs.. 22,,000000..

88.. PaidPaid SalariesSalaries RsRs.. 1010,,000000..

99.. PaidPaid RentRent RsRs.. 55,,000000..

LEDGER Balances

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