20Oct, 2020
What are Ledger Account Definition, Format, Types, and Example ?

What is the meaning of Ledger accounts ?

what is ledger account with example

Ledger accounting definition


A ledger account contains a record of business transactions. It is a separate record within the general ledger that is assigned to a specific asset, liability, equity item, revenue type, or expense type

  • A ledger is a collection of accounts
  • We prepared a ledger 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.

Important point while preparing Ledger

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.
  • We transferred them 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 a nominal account which is transferred to Trading a/c can either be To Trading a/c or By Trading a/c.
  • The balancing figure of a nominal account which is 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 we sum up the debit side and then 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 then written on both the sides as totals of both the sides.

DEBIT AND CREDIT BALANCE OF LEDGER

  • The deficiency on 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, then 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, then we do not balance the ledger as it is already balanced and there is NO balancing figure.

 

What is format of Ledger ?

 

Format of ledger

Ledger account format

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   
  10  10
    By Bal C/d5

Example Debit balance ledger

DateParticularAmountDateParticularAmount
XxxTo —-10XxxTo —-5
    By bal. c/d5
  10  10
 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
  10  10
      
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   
  10  10
      
DateParticularAmountDateParticularAmount
XxxTo —-5XxxBy —-10
 To P/L a/c5   
  10  10
      
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
  10  10
      

 

How to prepare ledger from journal entry .

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
 100,000 100,000

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
 106000 106000

Purchase A/c

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

X

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

sales A/c

ParticularAmountParticularAmount
  By cash A/c6,000
To trading A/c6,000  
 6000 6000

Rent A/c

ParticularAmountParticularAmount
To Cash A/c6000  
  To Trading A/c6,000
 6000 6000
Trial Balance

After preparation of the ledger, trial balance checks 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/c 100000
Cash A/c93,000 
Purchase A/c17,000 
Sales A/c 6,000
X 10,000
Rent A/c6000 
 116,000116,000
 

The journal and ledger both play an important role in the accounting process. It primarily recorded the business transactions in the journal and thereafter, posted into the ledger under respective heads. While it posted many financial transactions 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

Difference between Journal and Ledger in Accounting

Journal

Ledger

It relates to the book of accounts that record every business transaction in chronological order.

It relates to the book of accounts, which contains the entries classified based on affected account types, after being first posted into a general journal and then finally making its way into a general ledger.

It is the initial point of entry of any kind of business transaction to make it to the company’s book of accounts.

It is the assisted point of entry in accountancy for recording a transaction after it enters the accounting system through a general journal.

We recorded every entry based on chronological order.

We recorded every entry based on affected account types.

It supports the concept of duality, i.e., every transaction reported under the double-entry accounting practice.

It also supports the view of duality, i.e., every  transaction recorded under the double entry accounting system.

               

Welcome to your Ledger



Welcome to your ledger