Everything about Ledger Accounts - Meaning Definition Importance format posting of entries balancing
Introduction to ledger account:
Maintain accounts of business is need some accounts formats methods knowledge. Accounts has a process, that all the transactions were records in proper order in the books. Thus, in the process we first prepare Journal, after journal we have to prepare ledger accounts, now what is ledger account?Meaning of ledger account: Ledger Account is basically a summary of record which contains all the heads of accounts. For example, if we have a cash sales we will prepare cash account and sales account separately just for a total summary of sales and Cash account of the year.
Definition of ledger account: ledger is classified summary of recorded transactions account. Ledger is the principal book of accounts. It is also called as books of final entry.
Importance of Ledger account:
1. Helps businessman to know about specific account transaction.
For example: If a customer buys goods on credit basis and pays in end of month, the businessman can check the total amount of buy customer made.
2. Without ledger account accounting process is not possible.
3. It is necessary for preparation of trial balance.
4. Most important that financial position of business can be ascertain by accounts.
5. On the basis of financial reports of accounts a proper Decision can be taken.
6. Every business have to make ledger account whether small or big.
7. A full summarised reports of all the transactions.
8. Tracking on creditors and debtors balance.
Ledger Format:
Date | Particulars | J.F | Amt | Date | Particulars | J.F | Amt |
Explanation of ledger format:
Ledger Format have 2 sides one is debit side and Credit side, the format is shown as 'T' format.
1. Date: Date of transaction accours dd/mm/yyyy
2. Particulars: In particulars the name of accounts in which the corresponding debit or credit is mentioned. The posting of entry is show below, the debit side is written as 'To' and credit side as 'By' after witting this write the name of account.
3. Journal Folio (JF): Journal Folio means journal page number of the account.
4. Amount: Amount is last column in which debit or credit amount is entered.
Posting of Entries in Ledger Account
Posting of Entries in Ledger Account are form various sources;
1 - Journal Book
2 - Subsidiary Book
3 - Direct entry
How to Post entries in Ledger account?
Posting account in Ledger have different ways, first by preparing journal entry and second by identifying the accounts.
1 - By Journal Entry
Pass the Journal Entry of transaction, take the debit side account first and make account of it, post the corresponding account In the ledger in debit side. For credit side do the same, make the ledger account of credit side one and post the corresponding debit side in credit of ledger account.
This might be not properly understandable, for that you can refer thus rule of ledger posting:
"Same account, Same Side, Opposite name and same amount"
For example: A purchased goods from B
The journal would be In the books of A,
Purchase A/c Debit To B's A/c
Now,
In ledger Account first we take debit side
So, make ledger of Purchase Account According to rule, Same account means in purchase account, Same Side means debit side, Opposite name means B's the credit side and same amount means the debit side amount.
2 - There an another way also which you have a proper knowledge of accounts heads. In this method identifying the account Asset Liability Expenses or Income for the Business.
Let see deeply,
Asset have debit balance - so, if asset is debited then it will increase and if assets is credited then it will decrease.
Now, we have income and income have credit balance - so if the income is credited it will increase and debited it will decrease.
Balancing of Ledge Accounts
Accounts open may have debit or credit balance or may be nil. Balancing is based on different accounts.
In personal account: if debit side total is more than the credit side it indicates a debit balance. If credit balance total is more then credit balance.
In Real account: Real account will always shows a debit balance.
In Nominal account: Nominal account may have a debit balance or credit balance at the end of year the balances of all nominal account are transferred to Trading or Profit & Loss Account.
Journalise the following transactions and prepare cash account only
Prepare Aparna's account in the books of Suparna.
Journalise the following transactions; post them into Ledger for February 2019
