DIVISIONAL ACCOUNTANT
ELEMENTARY BOOK-KEEPING
CHAPTER - 1
Journal (Part – II)
Ledger – Format – Posting- Balancing etc.,
Ledger – A ledger is a book or collection of accounts in which account transaction
are recorded it is the principal book of an accounting system. The ledger account
will have two sides debit sides and credit sides. Each account has an opening or
carry forward balance and would record each transaction as either a debit or credit
in separate columns, and the ending or closing balance.
Dr. Format – Ledger Accounts Cr.
Date. Particulars J.F Amount Date. Particulars. J.F Amount
Classification Of Ledger Accounts.
All ledger accounts are put into 5 categories:
(1) Assets
(2) Liabilities
(3) Capital
(4) Revenue
(5) Expenses
These accounts are grouped into permanent accounts and temporary
accounts.
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(a) Permanent Accounts
All assets, liabilities and capital accounts are permanent accounts. These
accounts are balanced and carried forward to the next accounting period.
All permanent account will appear in the balance sheet.
(b) Temporary Accounts
Accounts of revenue and expenses are temporary accounts. All temporary
accounts are closed at the end of the accounting period by transfer to
Trading and profit and loss account.
Posting
The process of transferring the entries recorded in the journal into
appropriate accounts in the ledger is called posting. A journal entry consists of
two parts, debit aspect and credit aspect. The debit aspect goes to the debit side
of an account in the ledger and credit aspect goes to credit side of another
account in the ledger.
Steps in posting
(A) Posting the debit aspect of a journal entry:
1) Take the debit aspect of a journal entry.
2) Record on the debit side of the account
3) Enter the date in the date column
4) In the particular’s column, write the name of other aspect appearing in the
second line of journal entry.
5) The page number of the journal may be entered in the J.F column and the
page number of ledger account may in turn, be entered in the L.F column of the
journal.
6) Record the debit amount in the debit amount column
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B) Posting The Credit Aspect of Journal Entry
1) Taking the credit aspect of the same journal entry.
2) Post it to the credit of that account opened for crediting it.
3) The page number in the appropriate column and the credit amount in
amount column.
Balancing of An Account
Balancing of account is the process of ascertaining the difference between the total
of the debit side and credit side of the account and inserting the difference on the
side where the amount is less in order to make the total of the account equal.
Accounts in the ledger are periodically balanced, generally it is done at the end of
the accounting year. The word balance carried down (C/d) are written against the
amount of difference between the two sides. The amount of balance is brought
down (b/d) to the next accounting year.
In case the debit side exceeds the credit side, the difference is written on the credit
side of the accounts as ‘by balance c/d’. In such a case the account is said to have
debit balance which means that the debit side is more.
If the credit side exceeds the debit side, the difference is written on the debit side as
‘To balance c/d’. In such a case the account is said to have credit balances which
implies that the credit side of account is more.
Trial Balance
The statement prepared with the balances of ledger accounts to test their
arithmetical accuracy is called a trial balance.
A trial balance is a list of credit entries and debit entries that businesses use to
internally audit their double entry accounting systems. The goal is to confirm
that the sum of all debits equals the sum of all credits and identify whether any
entries have been recorded in the wrong account. If total of the debit balance is
equal to the total of credit balances., It is presumed that there is no mistake in
posting and balancing.
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Eg: Prepare ledger accounts and also prepare a trial balance.
Journal
Date. Particulars L.F Amount Dr. Amount Cr.
1. Cash a/c Dr. 12000
To capital 12000
(Started business with cash)
2. Purchases a/c Dr. 6000
To cash 6000
(Goods bought for cash)
3. Furniture a/c Dr. 2000
To cash 2000
(Purchased furniture for cash)
4. Cash a/c Dr. 8000
To sales 8000
(Sold goods for cash)
5. Bank a/c Dr. 5000
To cash 5000
(Opened bank account)
6. Purchases a/c Dr. 4000
To Bank 4000
(Purchased goods and paid through bank)
7. Cash a/c Dr. 3000
To sales 3000
(Cash sales made)
8. Bank a/c Dr. 2000
To cash 2000
(Paid into bank)
9. Salary a/c Dr. 400
To bank 400
(Salary paid by cheque)
10. Cash a/c Dr. 200
To commission 200
(Commission received)
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Solution :
Ledger
Dr. Cash Account Cr.
Date. Particulars Amount Date Particulars Amount
2 Purchases a/c 6,000
1 Capital a/c 12,000
3 Furniture a/c 2,000
4 Sales a/c 8,000
5 Bank a/c 5,000
7 Sales a/c 3,000
8 Bank a/c 2,000
10 Commission 200
Balanced c/d 8,200
23,200 23,200
Balance b/d 8,200
Dr. Capital Account Cr.
Date Amount
Particulars Date Particulars Amount
.
Balance c/d 12,000 1 Cash a/c 12,000
12,000 12,000
Balance b/d 12,000
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Dr. Purchases Account Cr.
Date. Particulars Amount Date Particulars Amount
2 Cash a/c 6,000
Balance c/d 10,000
6 Bank a/c 4,000
10,000 10,000
Balance b/d 10,000
Dr. Furniture Account Cr.
Date. Particulars Amount Date Particulars Amount
3 Cash a/c 2,000 Balance c/d 2,000
2,000 2,000
Balance b/d 2,000
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Dr. Sales Account Cr.
Date. Particulars Amount Date Particulars Amount
4 Cash a/c 8,000
Balance c/d 11,000
7 Cash a/c 3,000
11,000 11,000
Balance b/d 11,000
Dr. Bank Account Cr.
Date. Particulars Amount Date Particulars Amount
5 Cash a/c 5,000 6 Purchases a/c 4,000
8 Cash a/c 2,000 9 Salary a/c 400
Balance c/d 2,600
7,000 7,000
Balance b/d 2,600
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Dr. Salary Account Cr.
Date. Particulars Amount Date Particulars Amount
9 Bank a/c 400 Balance c/d 400
400 400
Balance b/d 400
Dr Commission Account Cr.
Date. Particulars Amount Date Particulars Amount
Balance c/d 10 Cash a/c 200
200
200 200
Balance b/d 200
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Trial Balance as on
Particulars L.F Dr. ₹ Cr. ₹
Capital 12,000
Cash 8,200
Purchases 10,000
Furniture 2,000
Sales 11,000
Cash at Bank 2,600
Salary 400
Commission 200
TOTAL 23,200 23,200
Preparation of Trial balance
Trial balance is a statement prepared with the balances or total of debits and credits of
all the accounts in the ledger to test the arithmetical accuracy of the ledger accounts . If
the total of the debit and credit amount column of Trial Balance are equal, it is assumed
that the posting to the ledger in terms of debit and credit amounts is accurate.
Methods Of Preparing Trial Balance
There are mainly two methods of preparing Trial Balance. They are.;
1. Balance method
2. Total method
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Balance Method -: This is the most commonly used method of preparing trial balance.
The debit balance amounts are shown in the debit amount column and the credit balance
amounts are shown in the credit amount column. The total of both the debit and credit
balance columns must be equal. Any difference is due to any error or errors to be located
and rectified.
Total Method-:
Under this method the total of the debit side and the total of the credit side of all accounts
are written separately in the two amount columns of the trial balance. This method of
preparation of trial balance is not very popular.
Single Column Cash Book and Double Column Cash Book
I) Single column cash book
A Cash book which contains only one column for amount on both side is called
single column cash book or simple cash book. All cash receipts are entered on the debit
side and all cash payments are recorded on the credit side.
Eg: Record the following transactions in a single column cash book.
2021 January
1. Started business with cash 10,000/-
2. Purchased furniture for cash 1500/-
3. Purchased goods for cash 6000/-
6. Sold goods for cash 3200/-
11.Opened a bank account 3000/-
14.Cash sales 4100/-
18. Paid for stationary 250/-
21. Paid rent 300/-
26. Received commission 400/-
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28. Paid to Prakash 600/-
29. Received from Suku 1200/-
30. Paid salary 450/-
30. Received cash for goods sold 500/-
31. The cheque of 500/- deposited into bank
Solution
Cash book (Single Column)
Dr. Cr.
Receipts Payments
Date. Particulars L.F Amount Date. Particulars L.F Amount
Jan 1 Capital 10,000 Jan2. Furniture 1500
6. Sales 3200 3. Purchases 6000
14. Sales 4100 11. Bank 3000
26. Commission 400 18. Stationary 250
29. Suku 1200 21. Rent 300
30. Sales 500 28. Prakash 600
30. Salary 450
31. Bank 500
Balance c/d 6800
(19400- 12600 =
6800)
19400 19400
Feb. Balance b/d 6800
Note: In single column cash book, as no separate column is provided for bank.
II) Double column cash book
The cash book having two columns of amount on each side is called double column
cash book’: The double column cash book helps in getting information about the
positions of the bank account at any time. All payments in to the bank are recorded in the
bank column on the debit side and all payments through or withdrawals from the bank
are recorded in the bank column on the credit side.
There are certain transactions which come both on the debit side and credit side of the
cash book. This so because one aspect of the transactions affect the cash balance and
the other aspect affects the bank balance.
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Contra Entry
The entries that affect the debit and credit sides of the cash book are
called contra entries. The transactions that lead to contra entries are -:
1. Deposit of cash and cheque in to the bank
2. Withdrawal of cash from bank for business use.
Contra entry represents deposits or withdrawals of Cash from bank or vice- versa.
The purpose of contra entry is to indicate the transactions that affect both cash and
bank balances. This entry does not affect the financial positions of a business. A
contra entry is recorded in both sides of double column cash book in cash and bank
column and is denoted by ‘C’ in the L.F Column.
Prepare double column Cash Book:
1. Balance of cash 1100/-
Bank over draft 3100/-
2. Cash sales 4200/-
4. Cash purchase 3100/-
7. Paid to Kurian by cheque 2000/-
8. Withdraw from bank 300 /-
12. Personal drawings from bank 700/-
14. Paid carriage by cheque 300/-
17. Received cheque from Swathi 2800/-
21. Paid electric charges 75/-
24. Cheque received from Tom 1500/-
26. Withdraw from bank for office 400/-
28. The cheque from Tom returned dishonored 1500/-
(Mismatched Signature)
29. Paid in to bank 2450/-
30. Bank charges debited in pass book 30/-
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Solution
Double Column Cash Book
Receipts Payments
Date. Particulars L.F Cash Bank Date. Particulars L Cash Bank
.
F
2023 2023
March Balance b/d 1100 March Balance b/d 3100
1. 1.
2. Sales 4200 4. Purchases 3100
8. Bank C 300 7. Kurian 2000
8. Cash C 300
17. Swathi 2800 12. Drawings 700
14. Carriage 300
24. Tom 1500 21. Electric charges 75
26. Cash C 400
26. Bank C 400
28. Tom 1500
29. Cash C 2450
29. Bank C 2450
30. Bank charges 30
30. Balance C/d 2425 Balance c/d 1220
6000 8330 6000 8330
April1. Balance b/d 375 April 1. Balance b/d 1580
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Journal vs Ledger
Books of original entry (Journal) Ledger
Books of original entry is the book Ledger is the book to which entries
in which transactions are recorded in the books of original entry are
Originally or for the first time. It is Transferred to posted. It is a book
book of first entry or prime entry of second entry
In its transactions are recorded in In its transactions are recorded in
chronological order an analytical order.
It gives supporting evidence to the It gives correct information about
entries in the ledger accounts each item or person which leads to
the preparation of Trial balance.
Balancing is not done in the books All ledger accounts are balanced
of original entry
The process of recording in it is Process of recording in it is called
called journalizing posting
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