LEDGER

When

transactions are transferred

into concerned account the system is
called ledger.

- To identify the amount of debtors

- To know the amount pay to supplier
- To know Good purchased during the period
- To know Amount of Revenue and
expenditure
Procedure of recording up the accounts is
known as Posting.

LEDGER

It is the book of final entry.

The information from the journal is transferred
to the ledger in the posting process.
Debits and credits in the journal remain exactly
the same when posted to the accounts in the
ledger.
A ledger is a summary of statement of all
transactions relating to an account personal,
real or nominal which have taken place during a
given period of time and shows their net effect.

Ledger Account------------??

All the transactions pertaining to an account are

collected at one place in the ledger. This helps
to get clear idea of an account at a glance. The
total sales, Total purchases, amount due from
customer, amount due to customers, cash
balance, bank balance can be ascertained at
any time from the ledgers. Ledgers help to
prepare the Trial Balance and the final accounts

Ledger Format
1.

T-Shaped Ledger Account

Traditional Approach

2.

Horizontal Ledger Account With Balance

Column
Mordern Approach

Ledger Format T-Shaped

Dr.
. A/c
Date Particulars J.F Amt. Date Particulars
To...............

xxxx

xxxx

By

J.F

Cr.
Amt
xxxx

xxxx

Balancing the ledger Account:

Difference of total Dr & total Cr is Balancing
Amount
If Total Dr > Total Cr, the balancing amount is
appear in Cr side representing By balance c/d,
called Debit balance.
If Total Cr > Total Dr, the balancing amount is
appear in Dr side representing To balance c/d,
called Credit balance.

Examples:
Amit invest Rs 20,000 in business
Date

Particulars
Cash A/c

L.F

Debit
20,000

Capital A/c
For Investing Cash in
Business

Credit
20,000

Purchase Machinery of Rs 12,000.

Date

Particulars
Machinery A/c

Cash A/c
For Purchase of Machinery
in Cash

L.F

Debit
12,000

Credit

12,000

Balancing the ledger Account:

Dr.
date Particulars J.
F
To Capital

Cash A/c
Amt
date Particulars
20,000

By Machinery
By balance
c/d

20,000

Cr.
J. Amt
F
12,000
8,000
20,000

Difference of total Dr & total Cr is Balancing Amount:

Here, Total Dr Total Cr = Balancing Amount
20,000 12,000 = 8,000
Also, Total Dr > Total Cr, the balancing amount is
appear in Cr side representing By balance c/d, called
Debit balance.

Balancing the ledger Account:

Dr.
date Particulars J.
F
To balance
c/d

Capital A/c
Amt
date Particulars
20,000

20,000

By Cash

Cr.
J. Amt
F
20,000

20,000

Difference of total Dr & total Cr is Balancing Amount:

Here,
Total Cr Total Dr = Balancing Amount
20,000 0 = 20,000
Also, Total Cr > Total Dr, the balancing amount is
appear in Dr side representing To balance c/d, called
Credit balance.

Horizontal Ledger Account With

Balance Column

Examples:
Amit invest Rs 20,000 in business
Date

Particulars
Cash A/c

L.F

Debit
20,000

Capital A/c
For Investing Cash in
Business

Credit
20,000

Purchase Machinery of Rs 12,000.

Date

Particulars
Machinery A/c

Cash A/c
For Purchase of Machinery
in Cash

L.F

Debit
12,000

Credit

12,000

Horizontal Ledger Account With

Balance Column
Cash A/c
Date Transaction

Debit

Opening Balance
Investing in Cash
Purchase of machinery

Credit Balance
0

20,000

20,000
12,000 8,000

ILLUSTRATIONS:
1: Amit A Lawyer opens the Legal Services firm by
investing Rs.20,000 cash into the business.
2: Amit purchases equipment from Computer Equipment
Ltd for Rs 9,000
3: Purchase of 1,500 of stationery supplies for use in the
business.
4: Rs1,000 in legal services were provided for cash.
5: Legal services of Rs.1,500 were provided on credit to
a client, Ravi.
6: Amit makes a 3,000 partial payment to Computer
Equipment Ltd.
7: Ravi pays Rs. 500 on account to Legal Services
8: Amit decides to take Rs.2,000 cash from the business
for his personal use.
9: Amit pays Rs. 400 salaries to legal assistant.
Mary Low

GENERAL JOURNAL
Description
Debit

Date
Journal Cash
1

Credit

20000.00
Capital

20000.00

Investing Cash in Business

Cash A/c

Date

Transaction

Debit

Credit

Opening Balance
Investing Cash in Busuness

Balance

0
20,000

20,000

Capital A/c

Date

Transaction

Debit

Credit

Opening Balance
Investing Cash in Busuness

Balance
0

20,000

-20,000

GENERAL JOURNAL
Description
Debit

Date

Computer Equipment A/c

Com. Equ. Ltd

Credit

9000.00
9000.00

Purchase of Equipment on Credit

Computer Equipment A/c

Date

Transaction

Debit

Credit

Opening Balance

Balance
0

Purchase Of Equipment on
Credit

9,000

9,000

Com. Equ. Ltd A/c

Date

Transaction

Debit

Credit

Opening Balance
Purchase Of Equipment on Credit

Balance
0

9,000

-9,000

GENERAL JOURNAL
Description
Debit

Date

Supplies A/c
Cash

Credit

1500.00
1500.00

Purchase Of Suplies in Cash

Supplies A/c

Date

Transaction

Debit

Credit

Opening Balance

Balance
0

Purchase Of Supplies in Cash

1,500

1,500

Cash A/c

Date

Transaction

Debit

Credit

Opening Balance
Investing Cash in Business
Purchase Of Supplies in Cash

Balance
0

20,000

20,000
1,500

18,500

GENERAL JOURNAL
Description
Debit

Date
Cash A/c

Credit

1000.00
Service Revenue A/c

1000.00

Legal Service revenue earned in cash

Cash A/c

Date

Transaction

Debit

Credit

Balance

Opening Balance

Investing in Cash

20,000

Purchase Of Supplies in Cash

Service Revenue earned in Cash 1,000

20,000
1,500

18,500
19,500

Service Revenue A/c

Date

Transaction

Debit

Credit

Opening Balance
Service Revenue earned in Cash

Balance
0

1,000

-1,000

GENERAL JOURNAL
Description
Debit

Date
Ravi A/c

Credit

2500.00
Service Revenue

2500.00

Legal Service Revenue earned in Credit

Ravi A/c

Date

Transaction

Debit

Credit

Balance

Opening Balance

Service Revenue earned in credit 1,500

1,500

Service Revenue A/c

Date

Transaction

Debit

Credit

Opening Balance

Balance
0

Service Revenue earned in Cash

1,000

-1,000

Service Revenue earned in credit

2,500

-3,500

GENERAL JOURNAL
Description
Debit

Date

Com.Equ. Ltd A/c

Cash A/c

Credit

3000.00
3000.00

Paid Cash to Computer Equipment Ltd.

Cash A/c

Date

Transaction

Debit

Credit Balance

Opening Balance

Investing in Cash

20,000

Purchase Of Supplies in Cash

Service Revenue earned in Cash

Paid cash to computer equipment ltd.

20,000

1,500 18,500
1,000

19,500
3,000 16,500

Com. Equ. Ltd A/c

Date

Transaction

Debit

Credit

Opening Balance

Purchase Of Equipment on Credit

Paid cash to computer equipment ltd.

Balance

9,000
3,000

-9,000
-6,000

GENERAL JOURNAL
Description

Date
Cash A/c

Debit

Credit

500.00
Rav i A/c

500.00

Cash Received from Ravi

Cash A/c

Date

Transaction

Debit

Credit Balance

Opening Balance

Investing in Cash

20,000

Purchase Of Supplies in Cash

Service Revenue earned in Cash

Paid cash to computer equipment ltd.

Cash received from ravi

20,000
1,500 18,500

1,000

19,500

3,000 16,500
500

17,000

Ravi A/c

Date

Transaction

Debit

Credit

Balance

Opening Balance

Service Revenue earned in credit 1,500

1,500

Cash Received from ravi

500

1,000

GENERAL JOURNAL
Description
Debit

Date

Drawing A/c
Cash A/c

Credit

2000.00
2000.00

Cash Drawing for personal use

Drawing A/c

Date

Transaction

Debit

Credit

Opening Balance
1

Balance
0

Cash Drawing for personal use

2,000

2,000

Cash A/c

Date

Transaction

Debit

Credit

Opening Balance
1

Investing in Cash

Purchase Of Supplies in Cash

Service Revenue earned in Cash

Paid cash to computer equipment ltd.

Cash received from ravi

Cash Drawing for personal use

Balance
0

20,000

20,000
1,500

1,000

18,500

19,500
3,000

500

16,500
17,000

2,000

Mary Low
15,000

GENERAL JOURNAL
Description

Date

Debit

Salary A/c
Cash A/c

Credit

400.00
400.00

Salary Paid to Legal assistant

Salary A/c

Date

Transaction

Debit

Credit

Opening Balance

Balance
0

Salary Paid to legal assistant

400

400

Cash A/c

Date

Transaction

Debit

Credit

Opening Balance

Balance
0

Investing in Cash

20,000

20,000

Purchase Of Supplies in Cash

Service Revenue earned in Cash

Paid cash to computer equipment ltd.

Cash received from ravi

Cash Drawing for personal use

2,000

15,000

Salary Paid to legal assistant

400

14,600

1,500
1,000

18,500
19,500

3,000
500

16,500
17,000
Mary Low

T-Ledger Account
Dr.
Date

Cr.

Cash A/c
Particulars

J.F

Amount

Date

Particulars

J.F

Amount

To Capital A/c

20,000

By Supplies A/c

1,500

To Service revenue

1,000

By A/P (Com. Equ.ltd)

3,000

To A/R (Ravi)

5,00

By Drawing

2,000

By Salary

400

By Balance c/d

14600

21,500

Balancing the ledger Account:

Difference of total Dr & total Cr is Balancing Amount
If Total Dr > Total Cr, the balancing amount is appear in Cr side
representing By balance c/d, called Debit balance.
If Total Cr > Total Dr, the balancing amount is appear in Dr side
representing To balance c/d, called Credit balance.

21,500

T-Ledger Account
Dr.

Cr.

Capital A/c

Date Particulars
To Balance c/d

J.F

Amount
20,000

Date Particulars

J.F

By Cash A/c

20,000

Balancing the ledger Account:

Difference of total Dr & total Cr is Balancing Amount
If Total Dr > Total Cr, the balancing amount is appear in Cr side
representing By balance c/d, called Debit balance.
If Total Cr > Total Dr, the balancing amount is appear in Dr side
representing To balance c/d, called Credit balance.

Amount
20,000

20,000

T-Ledger Account
Dr.

Cr.

Computer Equipment A/c

Date Particulars
To A/P (Comp.
Equip. ltd)

J.F

Amount
9,000

Date Particulars

J.F

By balance c/d

9,000

Balancing the ledger Account:

Difference of total Dr & total Cr is Balancing Amount
If Total Dr > Total Cr, the balancing amount is appear in Cr side
representing By balance c/d, called Debit balance.
If Total Cr > Total Dr, the balancing amount is appear in Dr side
representing To balance c/d, called Credit balance.

Amount
9,000

9,000

T-Ledger Account
Dr.

Cr.

A/P(Computer Equipment ltd) A/c

Date Particulars

J.F

Amount

To Cash

3,000

To Balance c/d

6,000

Date Particulars

J.F

By Computer
Equipment A/c

9,000

Balancing the ledger Account:

Difference of total Dr & total Cr is Balancing Amount
If Total Dr > Total Cr, the balancing amount is appear in Cr side
representing By balance c/d, called Debit balance.
If Total Cr > Total Dr, the balancing amount is appear in Dr side
representing To balance c/d, called Credit balance.

Amount
9,000

9,000

Some more Examples

Start a business with Rs. 5000 cash and a building
worth Rs. 10000
Purchase goods worth Rs. 2000, out of which 1200 on
credit from Ram
Purchase Machinery of Rs. 2500, Rs 500 paid in Cash
& remaining Through Bank Loan
Sold goods for Rs. 600, including Rs. 400 to Shyam
Received Rs. 380 from shyam in full settlement of his
account
Paid Rs. 100 for wages & salary Rs. 50
Paid Rs 1150 for Ram for his full claim
Withdraw Rs. 400 from his business, out of which 50%
is for personal purpose & remaining for business
promotion
Mary Low

Mr Ashok commenced business on 1st January, 1992 with a

capital of Rs.1,00,000 in cash. On the same date he opened the
bank account and deposited Rs.20,000. During the month of
January 1992 the following transactions
tookplace:
Rs.
Jan
1 Bought goods for cash
70,000

2 Sold good to Rahul & Co

38,000

15 Sold goods for cash

9,000

21 Rahul & co. paid by cheque

35,000

31 Paid rent by cash

2,000

Paid wages by cash

3,000

Withdrew cash personal use

5,000
Make journal entries for the transactions.
Prepare necessary ledger accounts

1)Mr.A deposited into bank Rs.50,000 to start a business

2) Paid rent for three months at Rs.2500 per month
3) Bought office equipment from B&Co. for Rs. 10000, paid to
them Rs.3000 and promised to pay the balance after two
months.
4) Rendered services to clients and received cash Rs. 5000
5) Purchase supplies for cash Rs. 400
6) Paid salaries to staff Rs. 5400
7) Bought furniture for Rs. 3200,paid to K&Co. Rs.1200 and
promised to pay balance after one month
8) Withdrew cash for personal use Rs. 3000
9) Billed to Nasir for services rendered Rs. 12500
10) Received from Nasir Rs.5000
INSTRUCTION
A: Prepare journal entries
B: Post to ledger accounts
(Considering All payments through Bank)

Prepare Jornal entries and make necessary ledger

accounts from the following transactions
1. Mr. Ahmed invested cash Rs. 125,000
2. Bought merchandise for cash Rs.20000
3. Paid rent for the month Rs.5000
4. Purchase office supplies for Rs.1500
5. Sold goods for cash Rs.5000
6. Purchase goods on credit from Nasir Ali Rs.10000
7. Paid salaries to office staff Rs. 12500
8. Paid to Nasir Ali Rs.3500
9. Sold goods on credit to Abid Rs.15000
10. Merchandise return to Nasir Ali Rs.250
11. Goods were returned by Abid Rs.750
12. Withdrew cash for personal use Rs.1000
13. Sold old machine at Rs 500

In July 2005, Nasir Jamal started business and

completed following transactions.
July 1 He deposited $ 165,000 cash in a business
July 2 Purchased equipment for $ 55,000 from ABC Co.
paid $20,000 and balance will be paid after three
month.
July 7 Paid rent for three months $ 1500
July 12 Purchase goods on credit from Khan & Co. $
1200
July 17 Paid salaries to staff $ 2500
July 20 Paid to Khan & Co.$ 700
July 23 Paid insurance $ 400
July 27 Nasir withdrew $ 1500 cash from the business
for personal use
Prepare journal entries and Ledger accounts.

. Khalid invested in business cash Rs.40000, office

equipment Rs.60,000
2. Purchase merchandise for cash Rs. 6000
3. Purchase goods on credit from Zahid Rs.10000
4. Sold merchandise on credit to Amir Rs.10000
5. Paid rent expense Rs.600
6. Sold merchandise for cash Rs. 3500
7. Earned commission Rs. 10000
8. Purchase supplies on credit from Aleem Rs. 800
9. Paid traveling expense Rs. 650
10. Sold merchandise to Mr. Kareem Rs. 4000 on
credit.
11. Khalid withdrew cash for personal use Rs. 3000
12. Rendered services to client and received
commission Rs. 2000
13. Paid insurance for the month Rs. 500
Prepare journal entries and Ledger accounts