Accounts Ledger is segregated Account of all transactions, related to a specific Account, posted from Journal Books.
For each item (or group of items of similar nature), a separate Account is opened in a book called “Ledger Book” or commonly known as “Ledger”. Entries are made into the Ledger accounts from the Journal books (Journal Proper & Subsidiary Journal Books)
Contents of Accounts Ledger Book
Every Ledger Account has two parts. The left side is known as debit side. The right side is known as credit side.
Each side of the account has columns for Date, Particulars, Journal Folio and Amount.
Accounts Ledger Book Index
The Ledger Book contains an Index (like a Telephone Index), of all ledger names opened in the Ledger Book, to quickly get to the respective page of the Ledger A/c, in the Ledger Book.
Accounts Ledger Book Posting
Ledger Posting is the process of transferring the entries recorded in Journal to the respective Ledger accounts in Ledger Book. Both the Debit and Credit entries are posted into the Ledger Account (the Index helps to open the page into the Ledger A/c). The details are posted Debit or Credit side of the ledger account, as the case may be.
- Date: Date of Transaction.
- Particulars: Details of Transaction. In case of Debit entry it starts with ‘To’ followed by the name of the other (Credit Ledger A/c) and written in left side. In case of Credit entry it starts with ‘By’ followed by the name if other (Debit Ledger A/c), and written in right side.
- Journal Folio : The reference of Journal Book (entry number / page number) is posted in the ledger Account. Simultaneously, the reference of Ledger (Page number) is also posted in the LF column of the Journal Book.
- Amount: The amount is posted in the respective Debit or Credit Column.
Ledger Accounts Balancing
To prepare Trial Balance & then Final Accounts (Profit & Loss Account & Balance Sheet), the balances of each ledger is computed. Balance of Ledger Account is computed as difference between the total Debit Side total & and Credit side total of an Account (including the Opening Balance, if any), whichever is more.
If the Debit side total is more, then the difference, which represents Debit Balance for the Ledger, is written in the Credit side, as balance C/d to make the totals of Debit & Credit equal. So, in Trial Balance, it is carried as Debit Balance.
Similarly, if the Credit side total is more, then the difference, which represents Credit Balance for the Ledger, is written in the Debit side, as balance C/d, to make the totals of Debit & Credit equal. So, in Trial Balance, it is carried as Credit Balance.
|01.04.21||To Balance b/f||500||05.02.21||By Cash||800|
|31.01.21||To Sales A/c||1,000||31.03.21||By Balance C/d||700|
Carrying of Ledger Balance in Trial Balance
The Balance of Ledger A/c would be carried in Trial Balance. The Balance of each account from the Trial Balance, is then carried in Trading Account, Profit & Loss Account, or in Balance Sheet, as the case may be.
Closing of Nominal Ledger Accounts : Finally, the Balances of Nominal Ledger Accounts are closed by transferring the Balance to Trading A/c or Profit & Loss A/c as the case may be.
Carrying of Balances: The Balances of Real & Personal Accounts (all ledger Accounts other than nominal accounts) are carried as ‘Balance c/d’. This Balance is brought forward in the ledger books of subsequent accounting period as Balance b/f and shown in respective Debit / Credit Column.
Modern Ledger Account Format
Now–days, with computerized system, there is no need to manually post to Ledger Account. The task of Posting is automatically done by computer and account wise segregated from Vouchers directly. The words ‘To’ or ‘By’ are not used in Ledger Accounts. Instead of having Debit details at Left part and Credit details at right part, all the entries are chronologically shown. The Debit and Credit amounts are shown in separate columns. This format provides more space for particulars column and shows all the entries in chronological order.
Ledger Account in modern Format
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