Maharashtra Board Class 11 Book Keeping and Accountancy Chapter 4 Ledger PDF Download

Ledger

Contents

4.1 Meaning, Definition and Importance of Ledger

4.2 Specimen of Ledger

4.3 Posting of entries from Journal/Subsidiary Books to Ledger

4.4 Balancing of Ledger Accounts

4.5 Preparation of Trial Balance

Competency Statements

Students are able to post recording from Books of original entries to Ledger.

Students learn the balancing of various ledger accounts.

Students are able to prepare Trial Balance.

Introduction

In the process of accounting, all the business transactions are recorded in chronological order in Journal. These business transactions are recorded in proper books of accounts. The books of accounts can be grouped as follows:

Books of Accounts have two main categories. Journal or Subsidiary Books are Books of Original/Primary entry. Ledger is Book of Final/Secondary entry.

We are aware that all types of business transactions are recorded in Journal. For example, transactions related to assets, liabilities, expenses, income, cash or credit etc.

At the end of the particular period if we want to know what is the total amount spent on particular type of expense, or what is the amount payable to particular person/party? These types of questions cannot be answered easily through Journal. So to overcome these limitations of Journal we need Ledger. A Ledger is called as the main Book of Accounts. Once the transactions are recorded in Journal or Subsidiary books the next stage is the transfer of those transactions in their respective accounts opened in the Ledger.

4.1 Meaning and Importance of Ledger

Meaning and Definitions

Ledger is the Principal Book of accounts. It is also called as book of final entry. It is summarised record which contains all the accounts. For example: Assets A/c, Liabilities A/c, Capital A/c, Revenue A/c, Expenses A/c.

The word 'LEDGER' is derived from Latin word 'Ledger' which means 'to contain'. As the ledger is the collection of all the accounts so 'it contains' and hence the name signifies.

"A Ledger Account may be defined as a summary statement of all the transactions relating to persons, assets, expenses or incomes which have taken place during a given period to time and shows their net effect".- S. P. Jain, K. L. Narang –Advanced Accountancy

"Main record of the accounts of a business, traditionally, a ledger was a large book with separate pages for each account. In modern systems ledger may consist of separate cards or computer records'- Oxford Dictionary

"A Ledger containing accounts in which all the transactions of a business enterprises or other accounting units are classified either in detail or in summary form"- E. L. Kohler- A Dictionary for Accountants

Importance of Ledger

It is the summarised record of all the transactions in form of Asset A/c, Liabilities A/c, Expenses A/c, Income A/c etc.

The ultimate object of Book-Keeping is to ascertain with the least trouble, what is the amount owed to the supplier, what is the amount receivable from the customer and so on. In the process of posting information collected is condensed in form of Debtors A/c, Creditors A/c to get the ready results.

It is necessary for preparation of Trial Balance.

The financial position of the business can be easily known with the help of various types of Assets A/c and Liabilities A/c.

It is possible to prepare various types of income statement on the basis of balances shown by different ledger Accounts.

Ledger can be used as a control tool as it shows accounts of various expenses with the balance.

On the basis of the results shown in the Ledger it is useful for the management to forecast or plan the future plan of action.

Contents of Ledger

Ledger is a bound book which contains several pages. Each page of a ledger is serially numbered. For each account separate page is allotted. The page number of the ledger is called as Ledger Folio (L.F.). Each ledger account is divided into two sides. The left side is known as debit side and the right side is known as credit side. This is indicated by writing the abbreviations 'Dr.' on the left side top corner and 'Cr.' on the right side top corner.

Every Ledger has an index. Index is prepared in the alphabetical order. The page number on which a particular account appears is shown against the name of the account shown in index. This facilitates quick reference.

Both the sides of the ledger have four columns. These columns are:

1) Date: In this column the date of the transaction is written. The year, month and date should be clearly mentioned.

2) Particulars: In this column, the name of the account in which the corresponding credit or debit is found under double entry principle will be mentioned. The posting on the debit side begins with 'To' and on the credit side with 'By'.

3) Journal Folio (J.F.): Folio means page number. In Journal Folio (J.F.) column, page number of journal from where we have transferred the entry into Ledger is to be written.

4) Amount: In the column, the amount for which an account is debited or credited is entered.

Teacher's Note

Ledger is like a bank passbook. Just as your bank passbook shows all your money in and out, the ledger shows all money in and out of a business account.

Exam Trick

Remember: Ledger = Final Account Book. Journal = First entry book. Ledger = Grouping of similar transactions. Like Aadhaar card stores all your information in one place, ledger stores all similar business information together.

Points to Remember

Ledger is the principal book of accounts.

It shows all accounts separately - assets, liabilities, income, and expenses.

Each account has two sides - debit side and credit side.

Every account starts fresh each month/year.

Trial Balance is made from ledger balances to check accuracy.

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