journal ledger and trial balance

Journal and ledger posting

Some unusual transactions and their journal entries

June 1, 2004 – Anju contributed capital Rs. 50,000 Manju contributed capital Rs. 70,000

Anju Manju

50000

70000Capital

17. June 1, 2004 – Anju contributed capital Rs. 50,000 Manju contributed capital Rs. 70,000

Journal

Jualy 1, 2004 – Ajay contributed capital – Cash Rs. 90,000, Furniture Rs. 20,000

Vijay contributed capital – Cash Rs. 50,000 Stock Rs. 70,000

Ajay

cash Furniture

Vijay

Journal

July 1, 2004 – Ajay contributed capital – Cash Rs. 90,000, Furniture Rs. 20,000 Vijay contributed capital – Cash Rs. 50,000, Stock Rs. 70,000

July 13, 2003 – Received cash Rs.24,700 from

Shanthi in full settlement of her account of Rs.25,000.

July 13, 2003 – Received cash Rs.24,700 from Shanthi in full settlement of her account of Rs.25,000.

20. July 14, 2003 – Paid cash to Thenmozhi s.14,500, in full settlement of her account of Rs.15,000.

21. Jamuna who owed us Rs.10,000 is declared insolvent and 25% in a rupee is received from her on 15th July, 2003.

Insolvent: Unable to meet debts or discharge liabilities

What is bad debts?The term bad debts usually refers to accounts receivable (or trade accounts receivable) that will not be collected. However, bad debts can also refer to notes receivable that will not be collected.The bad debts associated with accounts receivable is reported on the income statement as Bad Debts Expense or Uncollectible Accounts Expense.

Journal

21. Jamuna who owed us Rs.10,000 is declared insolvent and 25% in a rupee is received from her on 15th July, 2003.

Received cash for a Bad debt written off last year Rs.7,500 on 18th January, 2004.

Insolvent Solvent

Journal

Received cash for a Bad debt written off last year Rs.7,500 on 18th January, 2004.

Ledger posting

• A Ledger is a book which contains all the accounts which are first entered in journal.

• According to L.C. Cropper, ‘the book which contains a classified and permanent record of all the transactions of a business is called the Ledger’.

• It’s a permanent record of transactions that can not changed.

Ledger

Name of The Account

Dr. Cr.

Format of Ledger

Date Particulars JF Amount

AED

Date Particulars JF Amount

AED

YearMonthDate

Accounts name YearMonthDate

Accounts name

• i. Each ledger account is divided into two parts. The left hand side is known as the debit side and the right hand side is known as the credit side. The words ‘Dr.’ and ‘Cr.’ are used to denote Debit and Credit.

• ii. The name of the account is mentioned in the top (middle) of the account.

• iii. The date of the transaction is recorded in the date column.

• iv. The word ‘To’ is used before the accounts which appear on the debit side of an account in the particulars column. Similarly, the word ‘By’ is used before the accounts which appear on the credit side of an account in the particulars column.

• v. The name of the other account which is affected by the transaction is written either in the debit side or credit side in the particulars column.

• vi. The page number of the Journal or Subsidiary Book from where that particular entry is transferred, is entered in the Journal Folio (J.F) column.

• vii. The amount pertaining to this account is entered in the amount column.

Explanation:

The process of transferring the entries recorded in the journal or subsidiary books to the respective accounts opened in the ledger is called Posting.

Posting

I. Procedure of posting for an Account which has been debited in the journal entry.

Step 1 →Locate in the ledger, the account to be debited and enter the date of the transaction in the date column on the debit side.

Step 2 →Record the name of the account credited in the Journal in the particulars column on the debit side as “To..... (name of the account credited)”.

Step 3 →Record the page number of the Journal in the J.F column on the debit side and in the Journal, write the page number of the ledger on which a particular account appears in the L.F. column.

Step 4 →Enter the relevant amount in the amount column on the debit side.

Procedure of posting

II. Procedure of posting for an Account which has been credited in the journal entry.

Step 1 →Locate in the ledger the account to be credited and enter the date of the transaction in the date column on the credit side.

Step 2 → Record the name of the account debited in the Journal in the particulars column on the credit side as “By...... (name of the account debited)”

Step 3 → Record the page number of the Journal in the J.F column on the credit side and in the Journal, write the page number of the ledger on which a particular account appears in the L.F. column.

Step 4 → Enter the relevant amount in the amount column on the credit side.

Procedure of posting

Example of Ledger and Posting

JournalMr. Ram started business with cash Rs.5,00,000 on 1st June

2003.

Write the journal of this transaction

JournalMr. Ram started business with cash Rs.5,00,000 on 1st June

2003.

Try to find how many accounts involved in the journal

Cash Account Ram,s Capital Account

For ledger posting draw 2 Ledgers

Cash Account

Ram,s Capital Account

Name of AccountDr.

Cr. Date Particulars JF Amount

AED

Date Particulars JF Amount

AED

YearMonthDate

Accounts name YearMonthDate

Accounts name

Name of AccountDr.

Cr. Date Particulars JF Amount

AED

Date Particulars JF Amount

AEDYearMonthDate

Accounts name YearMonthDate

Accounts name

Write the name of Accounts at the top of each ledger.

Cash Account

Ram,s Capital Account

Cash AccountDr.

Cr. Date Particulars JF Amount

AED

Date Particulars JF Amount

AED

YearMonthDate

Accounts name YearMonthDate

Accounts name

Ram’s Capital AccountDr.

Cr. Date Particulars JF Amount

AED

Date Particulars JF Amount

AEDYearMonthDate

Accounts name YearMonthDate

Accounts name

Input the dates

Cash AccountDr.

Cr. Date Particulars JF Amount

AED

Date Particulars JF Amount

AED

2003June 1

Accounts name YearMonthDate

Accounts name

Start Debit side with “To”

Start “Credit side with “By”

Cash AccountDr.

Cr. Date Particulars JF Amount

AED

Date Particulars JF Amount

AED

2003June 1

To Rams Account

YearMonthDate

Accounts name

Insert the amount

Cash AccountDr.

Cr. Date Particulars JF Amount

AED

Date Particulars JF Amount

AED

2003June 1

To Rams Account

500,000 YearMonthDate

Accounts name

Sum up debit and credit side

Cash AccountDr.

Cr. Date Particulars JF Amount

AED

Date Particulars JF Amount

AED

2003June 1

To Rams Account

500,000

500,000

YearMonthDate

Accounts name

Adjust debit credit with

Balance Carried Down orBalance C/d

Cash AccountDr.

Cr. Date Particulars JF Amount

AED

Date Particulars JF Amount

AED

2003June 1

To Rams Account

500,000

500,000

2003June 30 Balance c/d 500,000

500,000

Carry forward the adjusted balance

Balance Brought Down orBalance b/d

Cash AccountDr.

Cr. Date Particulars JF Amount

AED

Date Particulars JF Amount

AED

2003June 1

July 1

To Rams Account

Balance b/d

500,000

500,000

500,000

2003June 30 Balance c/d 500,000

500,000

Rams Capital AccountDr.

Cr. Date Particulars JF Amount

AED

Date Particulars JF Amount

AED

2003

June 30 Balance c/d 500,000

500,000

2003June 1

July 1

By Cash A/c

Balance b/d

500,000

500,000

500,000

Journalise the following transactions in the books of Amar and post them in the Ledger:-

2004March1 Bought goods for cash Rs. 25,0002 Sold goods for cash Rs. 50,0003 Bought goods for credit from Gopi Rs.19,0005 Sold goods on credit to Robert Rs.8,0007 Received from Robert Rs. 6,0009 Paid to Gopi Rs.5,00020 Bought furniture for cash Rs. 7,000

Illustration 3.

Journal of Amar

There are six accounts involved: • Cash, • Purchases, • Sales, • Furniture, • Gopi & • Robert,

so six accounts are to be opened in the ledger.

Cash Account

In the Books of Amar

Purchases Account

Sales Account

Furniture Account

Gopi Account

Robert Account

The following are the advantages of ledger:i. Complete information at a glance:

All the transactions pertaining to an account are collected at one place in the ledger. By looking at the balance of that account, one can understand the collective effect of all such transactions at a glance.

ii. Arithmetical AccuracyWith the help of ledger balances, Trial balance can be prepared to

know the arithmetical accuracy of accounts.iii. Result of Business Operations

It facilitates the preparation of final accounts for ascertaining the operating result and the financial position of the business concern.

iv. Accounting informationThe data supplied by various ledger accounts are summarized,

analyzed and interpreted for obtaining various accounting information.

ADVANTAGES OF LEDGER

Compound or Combined Journal Entry is one where more than one transactions are recorded by passing only one journal entry instead of passing several journal entries.

Since every debit must have the corresponding equal amount of credit, special care must be taken in posting the compound journal entry, where there may be only one debit aspect but many corresponding credit aspects of equal value or vise versa.

The posting of such transactions is done in the same way as already explained.

Posting of Compound Journal Entries

Journal

Illustration 3 : Jan. 12, 2003, Cash sales Rs.10,000, Cash received from

Kannan Rs.5,000 and commission earned Rs.2,500.