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

    with only credit postings i.e. 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

    with only debit postings i.e. 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
  Total   2,14,500   Total   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 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
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   sub-total   1,90,000
        25/06/_5 By Balance c/d 24,500
  Total   2,14,500   Total   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

Capital 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 b/d
By Cash a/c
By Bank a/c
By Bank a/c



4,90,000
10,000
1,50,000
40,000
  sub-total   0   sub-total   6,90,000
31/12/_5 To Balance c/d   6,90,000
  Total   6,90,000   Total   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 b/d 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
  Total   2,00,000   Total   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 sometimes 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 M/s __ 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 b/d 2,00,000 24/06/_5 By Bank a/c 1,50,000
  sub-total   2,00,000   sub-total   1,50,000
        25/06/_5 By Balance c/d 50,000
  Total   2,00,000   Total   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 b/d
To Cash a/c

28,000
1,50,000
       
  sub-total   1,78,000   sub-total   0
        25/06/_5 By Balance c/d 1,78,000
  Total   1,78,000   Total   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
    ⇒ Transferring 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 ways

Consider the transaction - Paid Cash into Bank 1.50,000
Jun 18th Bank a/c
To Cash a/c
Dr
1,50,000
1,50,000
    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. `