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

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What are ledger and its example in accounting

  • 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

What are ledger and its example in accounting

Personal A/c 

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

Case 1: Credit balance ledger

DateParticularAmountDateParticularAmount
XxxTo —-5XxxBy —-10
To bal. c/d5
1010
By Bal C/d5

Example Debit balance ledger

DateParticularAmountDateParticularAmount
XxxTo —-10XxxTo —-5
By bal. c/d5
1010
By bal. B/d5
Real A/c Ledger

Note : Real A/c always have debit balance

DateParticularAmountDateParticularAmount
XxxTo —-10XxxBy —-5
By Bal c/d A/c5
1010
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.

DateParticularAmountDateParticularAmount
XxxTo —-5XxxBy —-10
To P/L a/c5
1010
DateParticularAmountDateParticularAmount
XxxTo —-5XxxBy —-10
To P/L a/c5
1010
Trading a/c on ledger
  • Purchase A/c
  • Sales
  • Sales Return
  • Purchase Return
  • Wages , octroi, factory expenses etc( all direct expenses)
DateParticularAmountDateParticularAmount
XxxTo —-10XxxBy —-5
By Trading A/c5
1010

what are ledger and its example in accounting

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)

 

  1. 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

what are ledger and its example in accounting

Capital A/c

ParticularAmountParticularAmount
To Cash100,000
By Bal. C/d100,000
100,000100,000

CASH A/c

ParticularAmountParticularAmount
To Capital A/c100,000By purchases a/c7,000
To sales 6,000By rent A/c6000
By Bal. C/d93,000
106000106000

Purchase A/c

ParticularAmountParticularAmount
To cash A/c7,000
To X 10,000
By trading A/c17,000
17,00017,000

 

X

ParticularAmountParticularAmount
By purchases A/c10,000
To Bal. c/d 10,000
10,00010,000

sales A/c

ParticularAmountParticularAmount
By cash A/c6,000
To trading A/c6,000
60006000

Rent A/c

ParticularAmountParticularAmount
To Cash A/c6000
To Trading A/c6,000
60006000
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

ParticularAmountAmount
Capital A/c100000
Cash A/c93,000
Purchase A/c17,000
Sales A/c6,000
X10,000
Rent A/c6000
116,000116,000
Difference between journal and ledger in Accounting

The journal and ledger both play an important role in the accounting process. The business transactions are primarily recorded in the journal and thereafter posted into the ledger under respective heads. While many financial transactions are posted in both the journal and ledger, there are significant differences in the purpose and function of each of these accounting books.
what are ledger and its example in accounting

Welcome to your ledger


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