Business Studies
Topic The Ledger
Table Of Contents
- Meaning Of The Ledger
- Ruling And Items In The Ledger
Ledger Meaning
In bookkeeping, the ledger and the special journals are the key books. Their importance can be seen in the functions they perform. Whereas the journals are the books where entries are first made before they are posted to other books of account, the ledger is the book where all other entries found in the subsidiary books are recorded. For example, all the items in the cash book, purchases and sales journals, returns inwards and outwards journals, journal proper and the petty cash book are posted to the ledger to maintain the double entry principle.
Ruling And Items In The Ledger
The ruling os the ledger is exactly the same as that of the cash book, hence it is said that the cash book is a ledger as far as cash account is concerned.
The items which are found in the ledger are date, particulars, journal folio (JF) and amount.
A double line is drawn at the middle of the page which demarcates the debit sides from the credit side. The particulars columns are used to describe the subsidiary book from where entries are made. Amount column is where the value of the transactions is recorded.
“JF” refers to Journal folio. The folio column is used to indicate the page of the subsidiary book from where the transaction is posted. In bookkeeping, folio means page. It is called folio because one page in bookkeeping may comprise of two ordinary pages. If Mr Victor pays the company N500 for the debt he owes, this amount is recorded first in the cash book and subsequently in the ledger. Between the particulars column and the amount the abbreviation “CB” will be written in the folio column to show that this entry is posted from the Cash Book.
There are certain rules that the students must bear in mind, indeed they should memorize, when posting items from the subsidiary books to the ledger. If these rules are borne in mind, posting entries to the ledger becomes very easy.
Rules For Posting Transactions To The Ledger
There are certain rules that guide the posting of items from the subsidiary books to the ledger.
1. Cash Book: All the items on the debit side of the cash book are posted to the credit side of the ledger, while all the items on the credit side of the cash book are posted to the debit side of the ledger. The principles of double entry states that, for every debit entry, there must be a corresponding credit entry and for every credit entry that must be a corresponding debit entry.
Posting The Cash Book To The Ledger
While posting the cash book to the ledger, it is an important note that “contra” entries are not posted to the ledger. For example, the amounts paid into and withdrawn from bank on 20th January have taken their double entry, in the same cash book. The mark “C” shows that the opposite side of the posting will be seen in the same book which is this cash book. Don’t forget that we had stated that cash book functions both as subsidiary book concerning items under the “particular” column and as ledger concerning cash account or bank account.
2. Purchases Journal: All the separate individual purchases are posted in the ledger to the credit of the accounts of the customers from whom the purchases are made while the total purchases for the month is posted to the debit of purchases account in the ledger. That is debit total purchases for the month and credit personal accounts.
Posting To The Ledger
While posting the purchases journal to the ledger, the discount which appears on the journal is not transferred to the ledger.
Sales Journal: All the separate individual sales are posted to the debit of the account of the customers to whom the sales are made while the total sales for the month is posted to the credit side of the sales account in the ledger.
Return Inwards Journal: All the separate and individual entries in the return inwards book are posted to the credit of the ledger accounts of those from whom goods are returned. These are people to whom goods had been sold. Then the total returns for the period is posted to the debit side of returns inwards accounts in the ledger.
Return Outwards Journal: The rule for posting Returns Outwards Journal is opposite of that for posting of Returns Inwards Journal. That is, all separate and individual entries in the Returns Outwards Journal are posted to the debit of the ledger accounts of those to whom the goods are returned. The total returns for the month is posted to the credit side of the Returns Outwards account in the ledger.
Journal Proper: Post to the debit side of the ledger all the items that appear on the debit side of the journal proper and post to the credit side of the ledger all the items that appear on the credit side of the journal proper. The posting rule as it applies to the journal proper should be carefully noted and distinguished from the rule for the posting of transactions from other journals.