LEDGER POSTING

When all the transactions of a given period have been journalized, the next thing is to classify them according to the accounts affected. All similar transactions must be brought together. For instance, all transactions relating to cash must be put in one place.
Definition:- The ledger is a book which contains a condensed and classified record of all the pecuniary transactions of the business generally brought, transferred or posted from the books of original entry.

Form of Ledger
Date Particulars J.F. Amount (To be debited) Date Particulars J.F. Amount (To be Credited)

A ledger account has a format which in its simplest form is known as the "T" Format as it looks like a large "T". Dr Account Head Debit Side Credit Side Cr

Method of Posting
Based on the Dual Entity Concept, we can say that every transaction has its effect on two elements. Each element or Ledger Account has its own place in the Ledger. Thus each transaction has its effect in two places in the ledger. In other terms, each transaction effects two ledger accounts. For the purpose of journalizing, we analyze the transaction and identify the two elements effected, which one is to be debited and which one is to be credited. Preparing the ledger implies posting the information to the two Ledger Accounts (elements/account heads) effected by the transaction. Ledger posting can be understood from the manner in which a journal entry is read.

Reading the Journal entry

Consider the following journal transaction and its journal entry June 15th: Bought Furniture for cash Rs. 12000
Journal in the books of M/s __ for the period from ____ to _____ 2,000.
Date June 15th Particulars Furniture a/c To Cash a/c Dr L/F Debit Amount Credit Amount (in Rs) (in Rs) 12,000 12,000

[ Being the amount paid towards Furniture purchased from M/s ____ vide bill no:___ dated:__ ]

The detail relating to each transaction (called a Journal entry) can be read in two different ways.
NORMAL ORDER Furniture a/c "Debtor (pronounced detor) To" Cash a/c. [Begin reading with the debited account] REVERSE ORDER Cash a/c "Credited By" Furniture a/c. [Begin reading with the credited account]

Order of Reading helps posting

The two accounts involved in the transaction are "Furniture a/c" and "Cash a/c". Thus, the information in the Journal entry is to be posted into these two accounts. There are two orders of reading, each of which can be related to one of the postings to be made. In the above example, to post the entry into "Furniture a/c", read the journal entry starting with "Furniture a/c", which is the normal order Furniture a/c debtor (read detor)To Cash a/c. The account other than the account being dealt with here is "Cash a/c" and it is prefixed by "To". This is written on the debit side of the Furniture a/c. To post the entry into "Cash a/c", read the journal entry starting with "Cash a/c", which is the reverse order Cash a/c credited "By Furniture a/c" The account other than the account being dealt with here is "Furniture a/c" and it is prefixed by "By". This is written on the credit side of the Cash a/c.

How the ledger accounts will look?

Dr Date Particulars J/F Cash a/c Amount (in Rs) Date Particulars By Furniture a/c J/F Cr Amount (in Rs) 12,000

Dr Date Particulars J/F

Furniture a/c Amount (in Rs) 12,000 Date Particulars J/F

Cr Amount (in Rs)

15/05/05 To Cash a/c

TRIAL BALANCE
 A trial balance is a statement prepared by taking out the debit and credit balances of all accounts appearing in the ledger.  After all transactions have been posted from the journal to the ledger, it is a good practice to prepare a trial balance. A trial balance is simply a listing of the ledger accounts along with their respective debit or credit balances. The trial balance is not a formal financial statement, but rather a self-check to determine that debits equal credits.  Proof of Accuracy If the debit and credit totals of the trial balance are equal and also correspond with the total of journal, we may be satisfied that the posting have been properly made and are arithmetically accurate.

Form of Trial Balance

Trial Balance of M/s _____ as on _____
Particulars Account Head 1 Account Head 2 Account Head 3 Total L/F Debit Amount (in Rs) xxxx Credit Amount (in Rs) xxxx

Methods of Preparing Trial Balance

Traditional Method: The traditional method considers the sub-totals of each ledger account. It is prepared by presenting the sub-totals relating to each ledger account in the relevant columns in the trial balance. Modern Method: The modern method considers only the balances of the ledger accounts. It is prepared by presenting the balance relating to each ledger account in the relevant column in the trial balance.

"Trial Balance" [Traditional Method] Trial Balance of M/s _____ as on _____ Particulars L/F Debit Amount (in Rs) Credit Amount (in Rs)

Cash a/c Capital a/c Furniture a/c Rent Paid a/c Bank a/c Goods/Stock a/c M/s Ramdas & Bros. a/c Machinery a/c Mr. Natekar a/c Wages Paid a/c Commission Received a/c Total

214,500 0 20,000 5,000 1,50,000 20,000 5,000 25,000 8,000 5,000 0

1,90,000 2,00,000 0 0 30,000 20,000 10,000 0 2,000 0 500

4,52,500

4,52,500

"Trial Balance" [Modern Method] Trial Balance of M/s _____ as on _____ Particulars Cash a/c Capital a/c Furniture a/c Rent Paid a/c Bank a/c Goods/Stock a/c M/s Ramdas & Bros. a/c Machinery a/c Mr. Natekar a/c Wages Paid a/c Commission Received a/c L/F Debit Amount (in Rs) 24,500 2,00,000 20,000 5,000 1,20,000 5,000 25,000 6,000 5,000 500 Credit Amount (in Rs)

Total

2,05,500

2,05,500

How to Prepare Trial Balance

Cash Land Trial Balance Cash 26300 Land 15000 A/R 3200 A/P Capital Stock 25000 2000 15000 4000 500 4800 5000 15000 33800 7500 26300 Accounts Payable Accounts Receivable 10000 35000 8000 3200 Capital Stock 19500 19500 44500 44500 4800
25000

25000 19500