Accountancy · Chapter 13
Study notes aligned to the official NEB syllabus.
The term "ledger" is derived from the Dutch word "legger," which means "to lie." So, ledger refers to a book in which the various accounts are kept, or "lie."
i) To provide classified financial information: the ledger is a permanent book of record which contains a number of accounts on different subjects.
ii) To check arithmetical accuracy: the fundamental double entry principle provides that debit is always equal to credit, or vice versa.
iii) To help ascertain profit or loss: the ledger is a book of accounts relating to all the financial transactions of the business.
iv) To help reveal the financial position: the ledger also contains the accounts of the financial transactions relating to capital, and to all liabilities and assets of the business.
a) The ledger is the destination of all entries made in the journal or sub-journals.
b) When each account is periodically balanced, it reflects the net position of that account.
| Basis | Journal | Ledger |
|---|---|---|
| Stage | It is the book of prime (original) entry of business transactions. | It is recorded after the journal; it is the book of secondary entry. |
| Nature | It is the recording stage of a financial transaction. | It is the classifying stage of a financial transaction. |
| Final balance | The final position or balance of a particular account cannot be found in the journal. | The final position or balance of a particular account can be determined at a glance. |
| Folio reference | The page number of the ledger is entered in the journal's ledger folio (L.F.) column. | The page number of the journal is entered in the ledger's journal folio (J.F.) column. |
| Reliance | Normally, outsiders do not rely upon the journal. | Outsiders and tax authorities rely upon the ledger. |
Journal Entries
| Date | Particulars | Debit (Rs) | Credit (Rs) |
|---|---|---|---|
| Baishak 1 | Cash A/c Dr <br> To Capital A/c <br> (Being business started with cash) | 50,000 | 50,000 |
| Baishak 5 | Purchase A/c Dr <br> To Cash A/c <br> (Being goods purchased on cash) | 10,000 | 10,000 |
| Baishak 15 | Cash A/c Dr <br> To Sales A/c <br> (Being goods sold) | 20,000 | 20,000 |
| Baishak 25 | Salary A/c Dr <br> To Bank A/c <br> (Being salary paid through cheque) | 5,000 | 5,000 |
Dr. Cash Account Cr.
| Date | Particulars | Amount (Rs) | Date | Particulars | Amount (Rs) |
|---|---|---|---|---|---|
| Baishak 1 | To Capital A/c | 50,000 | Baishak 5 | By Purchase A/c | 10,000 |
| Baishak 15 | To Sales A/c | 20,000 | Baishak 30 | By Balance c/d | 60,000 |
| Total | 70,000 | Total | 70,000 | ||
| Baishak 31 | To Balance b/d | 60,000 |
Dr. Capital Account Cr.
| Date | Particulars | Amount (Rs) | Date | Particulars | Amount (Rs) |
|---|---|---|---|---|---|
| Baishak 30 | To Balance c/d | 50,000 | Baishak 1 | By Cash A/c | 50,000 |
| Total | 50,000 | Total | 50,000 | ||
| Baishak 31 | By Balance b/d | 50,000 |
Journal Entries
| Item | Particulars | Debit (Rs) | Credit (Rs) |
|---|---|---|---|
| a. | Computer A/c Dr <br> To Deep Traders A/c <br> (Being computer bought from Deep Traders) | 3,000 | 3,000 |
| b. | Cash A/c Dr <br> Discount A/c Dr <br> To Madhav's A/c <br> (Being cash received from Madhav in full settlement) | 4,800 <br> 200 | 5,000 |
| c. | Insurance A/c Dr <br> To Cash A/c <br> (Being insurance paid) | 2,000 | 2,000 |
| d. | Drawings A/c Dr <br> To Purchase A/c <br> (Being goods worth used by the proprietor for personal use) | 1,500 | 1,500 |
Madhav owed the business an opening debit balance of Rs. 7,000 (as given in the source), of which Rs. 5,000 was settled through transaction (b) above.
Dr. Madhav's Account Cr.
| Date | Particulars | Amount (Rs) | Date | Particulars | Amount (Rs) |
|---|---|---|---|---|---|
| a. | To Balance b/d | 7,000 | b. | By Cash A/c | 4,800 |
| b. | By Discount A/c | 200 | |||
| By Balance c/d | 2,000 | ||||
| Total | 7,000 | Total | 7,000 | ||
| To Balance b/d | 2,000 |
(The source's printed figures for this account were internally garbled, for example Rs. 1,800 instead of Rs. 4,800 and a credit total of Rs. 4,000 instead of Rs. 7,000; the account above is rebuilt from the journal entry, which is clearly stated, and the two sides now balance exactly.)