Ledger Account Other Aspects

Ledger a/c - presence of postings

You may come across ledger accounts with

  • Postings on both the sides of the ledger account
    Cash a/c
    Dr Cr
    Date Particulars J/F Amount Date Particulars J/F Amount
    01/06/__
    03/06/__
    To Balance b/d
    To Bank a/c

    28,000
    24,000
    02/06/__
    02/06/__
    03/06/__
    By Wages a/c
    By Rent a/c
    By Furniture a/c


    20,000
    4,000
    10,000

    Sub Total

    52,000

    Sub Total

    34,000
  • Postings only on the credit side, thereby having a debit side sub-total of zero.

    Commission Received a/c
    Dr Cr
    Date Particulars J/F Amount Date Particulars J/F Amount
    01/06/__
    03/06/__
    04/06/__
    By Cash a/c
    By Cash a/c
    By Bank a/c


    1,500
    500
    1,500

    Sub Total

    0

    Sub Total

    3,500
  • Postings only on the debit side, thereby having a credit side sub-total of zero.

    Miscellaneous Expenses a/c
    Dr Cr
    Date Particulars J/F Amount Date Particulars J/F Amount
    01/06/__
    02/06/__
    02/06/__
    03/06/__
    To Cash a/c
    To Cash a/c
    To Bank a/c
    To Cash a/c



    450
    73
    1,200
    245

    Sub Total

    1,968

    Sub Total

    0
  • No postings at all. This is a theoretical possibility.

Interpreting - Balance c/d, c/f, b/d, b/f

Cash a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
15/06/_5
19/06/_5
24/06/_5
24/06/_5
To Capital a/c
To Goods/Stock a/c
To Mr. Natekar a/c
To Commission Received a/c



2,00,000
12,000
2,000
500
17/06/_5
17/06/_5
18/06/_5
18/06/_5
21/06/_5
25/06/_5
By Furniture a/c
By Rent Paid a/c
By Bank a/c
By Goods/Stock a/c
By Wages Paid a/c
By Balance c/d





20,000
5,000
1,50,000
10,000
5,000
24,500
tl 2,14,500 tl 2,14,500
25/06/_5 To Balance b/d 24,500

Balance c/d or c/f

The term Balance c/d or c/f appears

  • Just before the total at the end
  • On the side having the shorter/lesser total
  • On the side opposite to the side having the greater total
  • On the side opposite to the side having the posting "Balance b/d" or b/f towards the end.

Balance b/d or b/f

The term Balance b/d(f) appears

  • Just after the total at the end
  • On the side having the greater total
  • On the side opposite to the side having the shorter/lesser total
  • On the side opposite to the side having the posting "Balance c/d" or c/f towards the end.

Ledger a/c balance - Is it a debit balance or a credit balance

Debit Balance

Cash a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
15/06/_5
19/06/_5
24/06/_5
24/06/_5
To Capital a/c
To Goods/Stock a/c
To Mr. Natekar a/c
To Commission Received



2,00,000
12,000
2,000
500
17/06/_5
17/06/_5
18/06/_5
18/06/_5
21/06/_5
By Furniture a/c
By Rent Paid a/c
By Bank a/c
By Goods/Stock a/c
By Wages Paid a/c




20,000
5,000
1,50,000
10,000
5,000

Sub Total

2,14,500

25/06/_5
Sub Total
By Balance c/d

1,90,000
24,500
tl 2,14,500 tl 2,14,500
25/06/_5 To Balance b/d 24,500

We say that the ledger account has a debit balance

  • If the debit side sub-total is greater than the credit side sub-total.
  • If the posting "To Balance b/d (or b/f)" appears just after the total towards the end.
  • If the posting "By Balance c/d (or c/f)" appears just before the total towards the end.

Credit Balance

Cash a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
01/06/_5
04/08/_5
10/10/_5
08/12/_5
By Balance a/c
By Cash a/c
By Bank a/c
By Bank a/c



4,90,000
10,000
1,50,000
40,000

31/12/_5
Sub Total
To Balance c/d

0
6,90,000

Sub Total

6,90,000
tl 6,90,000 tl 6,90,000
01/01/_6 By Balance b/d 6,90,000

We say that the ledger account has a credit balance

  • If the credit side sub-total is greater than the debit side sub-total.
  • If the posting "By Balance b/d (or b/f)" appears just after the total towards the end.
  • If the posting "To Balance c/d (or c/f)" appears just before the total towards the end.

Zero/Nil Balance

We say that the ledger account has a Nil balance

  • If the credit side sub-total and the debit side sub-total are equal.
Cash a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
24/06/_5 To Balance a/c 2,00,000 24/06/_5
25/06/_5
By Bank a/c
By Furniture a/c

1,50,000
50,000

Sub Total

2,00,000

Sub Total

2,00,000
tl 2,00,000 tl 2,00,000
For Ledger accounts with a Zero/Nil balance, we do not see the posting "Balance c/d" or "Balance b/d" as there is no balance to be carried forward at the end of the period and to be brought forward at the beginning of the next period.

Ledger without the Journal !!

No Journal ⇒ No Ledger

We at times prepare the Ledger accounts directly. Because we prepare them directly, it does not mean that the ledger accounts exist without the Journal.

After getting well accustomed with the accounting process, we will be able to orally think of the journal entry and thereby be in a position to post the information into the ledger without preparing the journal.

The ledger postings follow the journal recordings i.e. the ledger gets its contents from the journal. Thus we say, No Journal, No Ledger.

Every Ledger posting should have a Journal Support

Every ledger posting can be interpreted to be able to identify the journal entry that is the basis for the ledger posting.

Even the postings "Balance b/d" and "Balance c/d" have journal support. They are supported by the Opening Entry and the Closing Entry respectively (We will deal with them in detail later on).

Transferring balance from one Ledger a/c to another

We do not generally use the wordings, transferring from one ledger account to another. But we can interpret an accounting transaction as a transfer transaction. This is a simple idea that would enable you to derive journal entries easily.

What happens when we transfer the balance in a ledger account to another ledger account?

Assume Cash a/c to be have a debit balance of 2,00,000.

Consider the transaction - Paid Cash into Bank 1,50,000

Journal in the books of __ for the period from __ to __
Date V/R
No.
Particulars L/F Amount
(Dr)
Amount
(Cr)
Jun 18th Bank a/c
To Cash a/c
Dr


1,50,000
1,50,000
[For the amount of cash paid into bank]

General Ledger
[Books of Mr. Ibrahim]

Cash a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
24/06/_5 To Balance a/c 2,00,000 24/06/_5 By Bank a/c 1,50,000

Sub Total

2,00,000

25/06/_5
Sub Total
By Balance c/d

1,50,000
50,000
tl 2,00,000 tl 2,00,000
25/06/_5 To Balance b/d 50,000
Bank a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
24/06/_5
24/06/_5
To Balance a/c
To Cash a/c

28,000
1,50,000

Sub Total

1,78,000

25/06/_5
Sub Total
By Balance c/d

0
1,78,000
tl 1,78,000 tl 1,78,000
25/06/_5 To Balance b/d 1,78,000

Transfer of an amount of 1,50,000 from the Cash a/c to Bank a/c

⇒ Transfer of a debit balance of 1,50,000 from Cash a/c to Bank a/c.

Transfer of Debit Balance

When we transfer a debit balance from one account to a second/another account, we

  • Debit the Second account and
  • Credit the First account.

Transferring a debit balance from Cash a/c to Bank a/c will result in Cash a/c being credited and the Bank a/c being debited

Transfer of Credit Balance

When we transfer a credit balance from one account to second/another account, we

  • Credit the Second account and
  • Debit the First account.

Transferring a credit balance from Capital a/c to Rao's a/c will result in Capital a/c being debited and the Rao's a/c being credited

A transaction can be interpreted either way

Consider the transaction - Paid Cash into Bank 1,50,000

June 18th Bank a/c
To Cash a/c
Dr


1,50,000
1,50,000

This transaction can be interpreted as a transfer of debit balance or transfer of credit balance.

  • Transfer of a debit balance from Cash a/c to Bank a/c

    • Debit the Second account - Bank a/c
    • Credit the First account - Cash a/c
  • Transfer of a credit balance from Bank a/c to Cash a/c

    • Credit the Second account - Cash a/c
    • Debit the First account - Bank a/c

This idea is to enable us to learn different types of interpretations which would be helpful in problem solving.

Varied information

In the course of learning, we present the ledger accounts with only some of the columns, or with some information shortened, based on the information available and the information needed to be presented.

Skipping use of a/c

For paucity of space we may eliminate using a/c at the end of each posting. It is obvious that each posting relates to another ledger account or account head and as such using a/c does not provide any other additional information or serve any other purpose.

Cash a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
15/06/_5
19/06/_5
24/06/_5
24/06/_5
To Capital
To Goods/Stock
To Mr. Natekar
To Commission Received



2,00,000
12,000
2,000
500
17/06/_5
17/06/_5
18/06/_5
18/06/_5
21/06/_5
25/06/_5
By Furniture
By Rent Paid
By Bank
By Goods/Stock
By Wages Paid
By Balance c/d





20,000
5,000
1,50,000
10,000
5,000
24,500
tl 2,14,500 tl 2,14,500
25/06/_5 To Balance b/d 24,500

Eliminating a/c would make each posting look like general information rather than pure accounting information.

By Rent Paid sounds familiar to all while By Rent Paid a/c sounds familiar only to an accountant.

Skipping To/By

Cash a/c
Dr Cr
Date Particulars J/F Amount Date Particulars J/F Amount
15/06/_5
19/06/_5
24/06/_5
24/06/_5
Capital a/c
Goods/Stock a/c
Mr. Natekar a/c
Commission Received a/c



2,00,000
12,000
2,000
500
17/06/_5
17/06/_5
18/06/_5
18/06/_5
21/06/_5
25/06/_5
Furniture a/c
Rent Paid a/c
Bank a/c
Goods/Stock a/c
Wages Paid a/c
Balance c/d





20,000
5,000
1,50,000
10,000
5,000
24,500
tl 2,14,500 tl 2,14,500
25/06/_5 Balance b/d 24,500

At an advanced stage of learning accounting, use of the prefixes To and By are sometimes skipped.

Without the J/F (Journal Folio) Column

Cash a/c
Dr Cr
Date Particulars Amount Date Particulars Amount
15/06/_5
19/06/_5
24/06/_5
24/06/_5
To Capital a/c
To Goods/Stock a/c
To Mr. Natekar a/c
To Commission Received a/c
2,00,000
12,000
2,000
500
17/06/_5
17/06/_5
18/06/_5
18/06/_5
21/06/_5
25/06/_5
By Furniture a/c
By Rent Paid a/c
By Bank a/c
By Goods/Stock a/c
By Wages Paid a/c
By Balance c/d
20,000
5,000
1,50,000
10,000
5,000
24,500
tl 2,14,500 tl 2,14,500
25/06/_5 To Balance b/d 24,500

Information in the J/F column serves a purpose only in manual accounting in practice.

Without the Date Column

Cash a/c
Dr Cr
Particulars Amount Particulars Amount
To Capital a/c
To Goods/Stock a/c
To Mr. Natekar a/c
To Commission Received a/c
2,00,000
12,000
2,000
500
By Furniture a/c
By Rent Paid a/c
By Bank a/c
By Goods/Stock a/c
By Wages Paid a/c
By Balance c/d
20,000
5,000
1,50,000
10,000
5,000
24,500
tl 2,14,500 tl 2,14,500
To Balance b/d 24,500

Where the information relating to transaction dates is not available or where all the transactions pertain to the same date and the information in the date column serves no additional purpose, we avoid showing the date column.

Only Account Heads

Cash a/c
Dr Cr
Particulars Amount Particulars Amount
To Capital
To Goods/Stock
To Mr. Natekar
To Commission Received



By Furniture
By Rent Paid
By Bank
By Goods/Stock
By Wages Paid




This is a rare occurrence which may be come across in situations where only the information relating to which accounts have to be credited and which debited is required to be presented.

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