What are Ledger Account Definition, Format, Types, and Example ?

• A ledger is a collection of accounts
• A ledger is prepared for a fixed period, usually a month
• A ledger is prepared in continuation, viz, month after month.

HOW TO DO POSTING IN LEDGERS

1.First of all we make a journal entries of the transaction.

2.From journal entries we do the posting in the respective ledgers accounts

3.Beginning from the very first entry, we have to see that whose ledger is being prepared, is debited or credited.

4.If the particular ledger account is debited in the journal entry, than we will post it to the debit side of ledger a/c.

POINT TO BE NOTED

1. if the particular ledger account is credited in the journal entry, than we will post it to the credit of ledger a/c. Basically it all depends upon the whether the particular ledger which we are preparing is being debited or credited in the journal entries.

2.If the particular ledger is being debited in the journal entry, than we will post the entry to the debit side of that particular ledger.

Important  Points regarding Ledgers

1.Whenever we post any entry to the debit side of ledger we prefix TO.

2.Whenever we post any entry to the credit side of ledger we prefix BY.

3.The balancing figures of Personal a/c can ONLY be either To bal c/c or By bal c/d.

4.The balancing figures of Real a/c can be ONLY By bal c/d.

• The nominal a/c are never balanced.
• They are transferred to P/L a/c, except trading A/’s accounts, these are:

Purchase a/c, Sales a/c, Purchase return a/c, Sales return a/c and Stock a/c  and all direct expenses– these accounts are transferred to TRADING A/C.

The rest of the Nominal accounts are transferred to P/L account respectively.

• The balancing figure of nominal account which are transferred to Trading a/c can either be To Trading a/c or By Trading a/c.
• The balancing figure of nominal account which are transferred to P/L a/c can either be To P/L a/c or By P/L a/c.
• Balancing a ledger is an important step in preparing a ledger.
• The left hand side of a ledger is a “debit” side and the right hand side of a ledger is a “credit” side
• Now first of all we sum up the debit side and than the credit side.
• The bigger amount of the two sides is
• Now we have to record these infinite transactions in the books of accounts, since these transactions are infinite, unlimited and different in nature we face difficulties in recording them.
• Before recording these transactions we have to understand them, since their number is very large (infinite/unlimited), we face difficulties in their recording.
• Is than written on both the sides as totals of both the sides.

• DEBIT AND CREDIT BALANCE OF LEDGER

•  
  • The deficiency in either side is the balancing figure of the ledger.
  • The balancing figure is thus written according to the points mentioned in the earlier points.
  • If the debit side total is bigger than the credit side total than it is called a DEBIT BALANCE.
  • If the credit side total is bigger than the credit side total than it is called a CREDIT BALANCE.
  • If both the credit side total and the debit side total is equal by themselves than the ledger is not balanced as it is already balanced and there is NO balancing figure.

Format of ledger

Personal A/c 

In personal A/c either have debit balance or credit balance

Case 1: Credit balance ledger

Example Debit balance ledger

Real A/c Ledger

Note : Real A/c always have debit balance

Nominal A/c

either have debit side or credit side balance .If its debit side balance its an expense or loss or it its a credit side balance its a Income or gain.

Trading a/c on ledger

• Purchase A/c
• Sales
• Sales Return
• Purchase Return
• Wages , octroi, factory expenses etc( all direct expenses)

EXAMPLES OF LEDGERS

First of all we have to make journal entry then posting for respected journal entry to ledger.

1. Started Business with Cash Rs. 100000

Cash A/c Dr 100000

To Capital A/c       100000

(being business stared)

2. Purchase goods of X Rs. 10,000

Purchase A/c 10,000

     To X                10,000

3. Purchase Goods for cash Rs.7000

Purchase A/c    7,000

   To cash A/c         7,000

(being goods purchase for cash)

4. Sold goods for cash Rs 6000.

Cash A/c Dr.   6,000

    To sales A/c         6,000.

(being goods sold)

5. Paid Rent by cash Rs 6000

Rent A/c Dr. 6000

    To cash A/c 6000

(being rent paid)

Posting in ledger from Journal entries

Capital A/c

CASH A/c

Purchase A/c

X

sales A/c

Rent A/c

Trial Balance

After preparation of ledger Trial balance is created to check the mathematical accuracy .

A trial balance is just prepared to check the Mathematical accuracy of the books of Accounts.

The balancing figures from the respective Ledgers accounts is posted to the trial balance And if the trial balance’s debit and the credit Sides are equal, than the mathematical accuracy Is proved and if the debit and the credit sides Totals do not match than it means that some Errors have been created.

Trial balance

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