A ledger is a record of all transactions organized by account. It has debit and credit sides where transactions are recorded according to date. The difference between the totals indicates the balance - a debit balance means the debit side is higher, while a credit balance means the credit side is higher. Balances are carried forward to the next period to become opening balances. The ledger provides a complete and accurate record of all transactions for each account.

1. Understanding Ledger

2. What is a Ledger?
It is a book (or record) for collecting historical transaction
data from a journal and organizing entries by account.

3. The Accounting Cycle

4. Format of Ledger
Nameof TheAccountDr. Cr.
Date Particulars JF Amount
AED
Date Particulars JF Amount
AED
Year
Month
Date
Accounts name Year
Month
Date
Account
s name

5. Characteristics
 It has two identical sides - left hand side (debit side) and right hand side
(credit side).
 Debit aspect of all the transactions are recorded on the debit side and credit
aspects of all the transactions are recorded on credit side according to date.
 The difference of the totals of the two sides represents balance. The excess of
debit side over credit side indicates debit balance, while excess of credit side
over debit side indicates the credit balance. If the two sides are equal, there
will be no balance.
 Generally the balance is drawn at the year end and recorded on the lesser
side to make the two sides equal. This balance is know as closing balance.
 The closing balance of the current year becomes the opening balance of the
next year.

6. i. Completeinformation at aglance:
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
suchtransactions at aglance.
ii. ArithmeticalAccuracy
With the help of ledger balances, Trial balance can be prepared to know the
arithmetical accuracy ofaccounts.
iii. Resultof BusinessOperations
It facilitates the preparation of final accounts for ascertaining the operating result
and the financial position of the business concern.
iv. Accountinginformation
The data supplied by various ledger accounts are summarized, analyzed and
interpreted for obtaining various accountinginformation.
Advantages

7. Steps for Ledger Entry

8. Journal
Mr. Ramstarted businesswith cash
Rs.5,00,000on 1st June2003.

9. Tryto find how manyaccounts
involved in thejournal
CashAccount
Ram'sCapital
Account

10. For ledger posting draw 2
Ledgers
CashAccount
Ram'sCapital
Account

11. Name of Account
Dr. Cr.
Date Particulars JF Amount
AED
Date Particulars JF Amount
AED
Year
Month
Date
Accounts name Year
Month
Date
Account
s name
NameofAccount
Dr. Cr.
Date Particulars JF Amount
AED
Date Particulars JF Amount
AED
Year
Month
Date
Accounts name Year
Month
Date
Account
s name

12. Write the name of Accounts atthe
top of eachledger.
CashAccount
Ram'sCapital
Account

13. CashAccount
Dr. Cr.
Date Particulars JF Amount
AED
Date Particulars JF Amount
AED
Year
Month
Date
Accounts name Year
Month
Date
Account
s name
Ram’sCapital Account
Dr. Cr.
Date Particulars JF Amount
AED
Date Particulars JF Amount
AED
Year
Month
Date
Accounts name Year
Month
Date
Account
s name

14. Input the dates

15. CashAccount
Dr. Cr.
Date Particulars JF Amount
AED
Date Particulars JF Amount
AED
2003
June 1
Accounts name Year
Month
Date
Account
s name

16. Start Debit side with “To”
Start “Credit side with “By”

17. CashAccount
Dr. Cr.
Date Particulars JF Amount
AED
Date Particulars J
F
Amount
AED
2003
June 1
ToRam's
Account
Year
Month
Date
Accounts
s name

18. Insert the amount

19. CashAccount
Dr. Cr.
Date Particulars JF Amount
AED
Date Particulars JF Amount
AED
2003
June 1
ToRam’s
Account
500,000 Year
Month
Date
Accounts
name

20. Sumup debit and credit side

21. CashAccount
Dr. Cr.
Date Particulars JF Amount
AED
Date Particulars JF Amount
AED
2003
June 1
ToRams
Accoun
t
500,000 Year
Month
Date
Account
s name
500,000

22. Adjust debit creditwith
BalanceCarriedDownor
BalanceC/d

23. CashAccount
Dr. Cr.
Date Particulars JF Amount
AED
Date Particulars JF Amount
AED
2003
June 1
ToRams
Accoun
t
500,000 2003
June30 Balancec/d 500,000
500,000 500,000

24. Carry forward the adjustedbalance
BalanceBroughtDownor
Balanceb/d

25. CashAccount
Dr. Cr.
Date Particulars JF Amount
AED
Date Particulars JF Amount
AED
2003
June 1
July 1
ToRams
Accoun
t
Balanceb/d
500,000 2003
June30 Balancec/d 500,000
500,000 500,000
500,000

26. Ram'sCapitalAccount
Dr. Cr.
Date Particulars JF Amount
AED
Date Particulars JF Amount
AED
2003
June30 Balancec/d 500,000
2003
June1
July 1
ByCashA/c
Balanceb/d
500,000
500,000
500,000
500,000

27. Rules for C/F or B/D
C/F B/D
• The phrase "Balance c/d" or
"Balance c/f" is written immediately
after the sub-total.
• It is written on the side with the
lesser total.
• It is prefixed by "To" or "By"
depending on which side it is being
written.
• The phrase "Balance b/d" or
"Balance b/f" is written immediately
after the total.
• It is written on the side with the
greater total.
• It is prefixed by "To" or "By"
depending on which side it is being
written.

28. Example

29. July 1st : Ramu started business with a capital of 75,000
1st : Purchased goods from Manu on credit 25,000
2nd : Sold goods to Sonu 20,000
3rd : Purchased goods from Meenu 15,000
4th : Sold goods to Tanu for cash 16,000
5th : Goods retuned to Manu 2,000
6th : Bought furniture for 15,000
7th : Bought goods from Zenu 12,000
8th : Cash paid to Manu 10,000
9th : Sold goods to Jane 13,500
10th : Goods returned from Sonu 3,000
11th : Cash received from Jane 5,500
12th : Goods taken by Ramu for domestic use 3,000
13th : Returned Goods to Zenu 1,000
14th : Cash received from Sonu 12,000
15th : Bought machinery for 18,000
16th : Sold part of the furniture for 1,000
17th : Cash paid for the purchase of bicycle for Ramu's son 1,500
19th : Cash sales 15,000
20th : Cash purchases 13,500

33. General Ledger Entry

39. Example 2

40. Ledger Entries – Example 2

43. Example 3

44. Ledger Entries – Example 3