Accounting and Indian Taxation: 10 Ledger Posting

LEARNING OBJECTIVES

To prepare the direct ledger postings

To understand the concepts of posting and balancing of accounts

To realize the distinctions between journal and ledger

LEDGER

Classification or grouping that takes in the form of 'Accounts' in a separate book is known as 'Ledger'.

A summary statement of all the transactions relating to a person, asset, expenses or income which have taken place during a given period of time and shows their net effect.

The object of preparing ledger is to ascertain the closing balance in an account as on a given date.

The ledger postings may be done weekly / fortnightly (once in fifteen days) / monthly / quarterly as per the requirements of the concern.

LEDGER - PROFORMA

TIT BITS

While preparing ledger postings, J.F Column (Journal Folio Column) can be used to enter the page number from which the particular transaction has been transferred.

This facilitates easy reference in the future.

LET US TAKE A REVIEW OF A JOURNAL ENTRY AND ITS EFFECT ON THE LEDGER ACCOUNT

APRIL 16TH, 2012: CASH RECEIVED FROM MR. ARUL MOZHI RS. 5,000/-

APRIL 17TH, 2012: CASH DEPOSITED INTO ICICI BANK RS.6,600/-

APRIL 18TH, 2011 : GOODS SOLD ON CREDIT TO MRS. CHITHRA RS. 8,000/-

APRIL 18TH, 2012 : GOODS SOLD ON CASH BASIS TO MRS. CHITHRA RS. 8,000/-

APRIL 20TH, 2012 : GOODS PURCHASED FROM MS.JANAKI RS.80,000/-

APRIL 20TH, 2012 : GOODS PURCHASED RS.55,000/-

APRIL 25TH, 2012 : GOODS WORTH RS.5,000 WERE TAKEN BY OWNER FOR USE IN HIS HOUSE.

APRIL 25TH, 2012 : INTEREST PAID TO MS.ANJALI RS.9,000/-

WHAT IS 'OPENING BALANCE' IN LEDGERS?

The closing balance of the ledger accounts in the last financial period will become the opening balance of the current financial period.

All ledgers need not compulsorily have an opening balance.

Only Balance Sheet items are carried forward to next financial period, except that none of the items will have opening balance in the next financial period.

EXCEPTION 'OPENING BALANCES' NEVER ARISES IN ---

WHAT IS 'OPENING BALANCE' IN LEDGERS?

We have borrowed a sum of Rs.50,000/- from Ms. Jency on 17/08/2012 and repaid the amount in various installments during the accounting period to settle her loan account . So Ms. Jency's Loan Account will have no closing balance at the end of the financial period i.e. 31/03/2013.

So there will be no opening balance in Ms. Jency's Account during the beginning of the next financial period on April 1st, 2013.

In other words matter of that Ms. Jency gets over in the same financial year when it arises. So no opening balance for next financial period.

1) EXAMPLE FOR OPENING BALANCE:-

For example, we have borrowed a sum of Rs.50,000/- from Ms. Jency on 17/08/2012 .We have not repaid the amount during the accounting period. So Ms. Jency's Loan Account will have a closing balance amounting to Rs.50,000/- at the end of the financial period i.e. 31/03/2013.

So there will be an opening balance of Rs.50,000/- in Ms. Jency's Account during the beginning of the next financial period on April 1st, 2013.

2) EXAMPLE FOR OPENING BALANCE:-

On 26/08/2012 a machinery worth Rs.5,00,000/- was bought for cash. As it was employed in use, its earning capacity has decreased by Rs.50,000/- at the end of the first year.