Ledger

In the Journal all the business transactions are recorded in chronological order as and when they
occurred. The transactions relating to a particular account are recorded at different places in the Journal,
therefore, it fails to consolidate the similar transactions at one place. In order to get clear picture, the
entries recorded in the Journal have to be processed further. All the transactions which are similar must be
brought together. Thus, to have consolidated view of similar transactions, different account are prepared
in the ledger.
A ‘ledger’ is a book, which contains all the accounts in a summarized and classified form. A
ledger account may be defined as a summary statement of all the transactions relating to a person, asset,
expenses or income which have taken place during the given period and shows their net effect. In other
words, it is a statement which contains all the transactions, relating to a particular account for a particular
time and in which the transactions are neatly arranged into debits and credits. The ledger is also known as
book of secondary entries or book of final entry. It also referred as principle book. It provides complete
information about all accounts in one book.
Definitions:-“The book which contains a classified and a permanent record of all the transactions of a
business is called the Ledger” - L.C. Cropper
“Ledger is a book of accounts which contains in a suitably classified form, the final and
permanent record of trader`s transactions” - V.G. Vickery
The ledger is said to be a base for preparation of Trail Balance. A ledger account is in English
alphabet ‘T’ shape. The left hand side is known as debit side and the word “Dr.” is recorded to denote
debit side. On the other hand the right hand side is known as credit side and word side “Cr.” Is recorded
to denote credit side. The name of the account is to be written in the middle of the account. The following
is the form of Ledger account:
Dr. Cr.
Amount Amount
Date Particulars J.F. no Date Particulars J.F. no
Rs. Rs.

The first column of the debit side is meant for recording the date of the transactions. Particulars
of the account which is credited in the Journal entries to be recorded in the second column called
Particulars. The third column contains the page number of the Journal in which the entry was made. The
last column “Amount” is meant for recording the amount of the transactions. Similarly, “Date” is
recorded in first column of credit side, Credit side Second column is meant for recording the particulars
of the account debited in the Journal entry. In the third column page number of the Journal in which the
entry was made and the forth column is meant for recording the amount. While recording Particulars on
the debit side the infinitive “To” is added whereas preposition “By” is added on the credit side Particulars
column.
Distinction between Journal and Ledger:-
Journal Ledger
1. Transactions are to be recorded first in this 1. Transactions that are recorded in Journal are
book. transferred to Ledger.
2. It is known as book of original entry as well as 2. It is known as book of secondary entry but it
book of prime entry. is a principle book.
 3. Transactions are recorded in chronological 3. Transactions relating to particular account are
order (chronological record). recorded at one place (analysis record)
4. The process of recording the transactions is 4. The process of transactions Journal entry to
called ----- ledger is called “Posting”
5. The final position of an account cannot be 5. The final position of a particular account can
found. be calculated as balance C/D.
6. Preparation of Trail Balance with Journal is 6. The balance of Ledger account will be the
not positive. base for preparation of Trail Balance.
7. The unit of classification in the Journal is the 7. The unit of classification of date within the
transaction. ledger is an account.
Posting:-
After the recording the business transactions and events in the Journal as Journal entries in the
chronological order thus will be transferred to respective account. The process of transferring the Journal
entry recorded in the Journal into respective ledger account is known as Posting. Posting may be done
periodically i.e., weekly, fortnightly or on monthly as per the convenience of the business man. The main
object of posting is to make classified and summarized record of various transactions during a specified
period on a particular account. Net effect of the account can be found at a glance.
Procedure of Posting:-
1. Open the account for items transactions (items of Journal entry) with their respective names. The
name of the account will be recorded at the middle of the account in bold letters.
Note: If account is repeated, in such a case, the account is to be opened only once and all the
transactions relating to that account will be recorded in that account. No need to open the separate
account for repeated accounts with the same title.
2. The debit aspect of the journal entry is posted to the debit side of the account. Record the name of
the account of the credit aspect (opposite aspect) of the journal entry in the particulars column. But
recorded the amount of the debit aspect in the amount column.
3. The credit aspect of the journal entry is posted to the credit side of the account. Record the name of
the account of debit aspect (opposite aspect) of the journal entry in Particulars column. However, the
amount of the credit aspect will be recorded in the account column.
4. On the debit side, begin with infinitive “To” and on the credit side with preposition “By”.
5. Narration given under the journal entry is need not be posted in the ledger account.
6. In the case of the compound entry, the opposite aspect name will be recorded in the particulars
column but the amount of respective account will be recorded in the amount column. However, all
the names of opposite accounts will be recorded in the particulars of other account.
Balancing of Account:-After opening of various accounts in the ledger and posting the Journal entry the
next and most important step is balancing the account, Balancing means equalization of both the sides of
the account. The act of finding the balance of an account at the end of period (monthly, quarterly or years)
is called balancing of the account. In other words, the process of arriving the next amount i.e., difference
between debit side and credit side is called balancing. In order to equalize both the sides of the ledger
account the following important steps are to be followed.
1. Find out the totals of both the sides of the respective account.
2. Ascertain the total of the higher side and record the same as the total of lower side.
3. The difference between higher side and lower side, will be recorded as balance C/D on lower side
to equalize both the sides.
4. When the total of debit side is greater than the credit side, the difference will be recorded on the
credit as “By balance C/D” (where C/D=Carried Down).
5. When the total of credit side is more than the debit side, the difference will be recorded on the
debit side as “To Balance C/D”.
 6. The balance C/D of the current period will be carried forward to the next period. In other words,
the Carried Down balance of an account will become balance B/D.
a. If balance C/D is recorded on the debit side of an account, the balance B/D will be
recorded on the opposite (credit) side of the account as “By Balance B/D”.
b. Similarly, it if balance C/D is recorded on the credit side of an account, the balance B/D
will be recorded on the opposite side (debit side) of the account as “To Balance B/D”.
7. When the total of both the sides of an account are equal, in such a case, that account shows ‘no’
balance i.e., there is no balance old and balance B/D. Such accounts are closed.
8. All personal accounts as well as Real accounts are balanced and the balances carried to Trail
Balance.
9. All nominal accounts are not to be balanced. However, these are to be totaled and transferred to
either trading account or P&C account at the end of the account period. As fictitious in nature
these accounts are not to bed brought forward.
10. If the total of debit side is higher, than credit side, an account is said to be have a debit balance.
Similarly, an account is said to have credit balance if the total of credit side is more than the debit
side.
Example 1: exercise problem of journal
Example 2: from the following transactions prepare Mr. Suresh Account.
2015, May 1. Opening credit balance of Mr. Suresh Rs.12,500.
4. Goods sold to Mr. Suresh Rs.4,000.
6. Goods purchased from Suresh Rs.3,000.
9. Draft ----- to Suresh Rs.5,000.
16. Goods returned to Suresh Rs1,000.
22. Goods purchased from Suresh Rs.2,000.
27. Sold goods to Suresh Rs.2,500.
31. A bill drawn by Suresh for the account due.
Exercise: 1. From the following transactions, prepare Sri Ram`s account.
2013, February 1. Sri /ram account showed a debit balance of Rs.12,000.
5. Goods sold to Sri Ram Rs.2,400.
8. Goods purchased from Rs.1,700.
10. Cash received from Sri Ram Rs.3,000.
11. Cash sales to Sri Ram Rs.5,000.
16. Goods returned to Sri Ram Rs.500.
20. A bank draft received for the due.