Ledger:

Rules for Posting from Journal

into Ledger
(With Illustrations)
Journal is just a chronological record of all business transactions. But,
if we want to know the net effect of various transactions affecting an
item, we need to go through the whole journal. It takes time. You know
that time is money in business.

Therefore, to overcome this difficulty, we maintain another book

called ‘Ledger.’

Ledger is a book which contains, in a summarized and classified form,

a complete record of all transactions. Since it contains complete
information about various transactions, it is called the ‘Principal
Book’. Final accounts of a business are prepared on the basis of ledger.

The proper form of each account maintained in ledger is

given as follows:

You will notice that both sides of ledger account have four columns,
namely, date, particular, folio and amount.
Rules for Posting into Ledger:
Posting into ledger is made from journal entries passed in the journal.
It is important to mention that every journal entry will have to be
posted into all accounts which have been debited and credited in the
journal entry. Going back to Illustration I, for goods purchased for
cash. Purchases Account is debited and Cash Account is credited.
While posting this entry into ledger, it will be posted both in Purchase
Account as well as in Cash Account.

Posting will be made on debit side of the account which has been
debited in the journal entry and, similarly, on credit side of the
account which has been credited in the journal, entry. Remember, the
postings into ledger account will be made in chronological manner
(date-wise).

In the particular column, the name of the account (preceded by ‘To’)

credited in the journal entry will be written. Similarly, while posting
on the credit side of the account, we shall write the name of the
account (preceded by ‘By’) debited in the journal entry.

The amount of journal entry will be shown in the amount columns of

both accounts and finally accounts will be balanced.

Let us again take Illustration 1 and study how the posting of journal
entries is made in the ledger.
JOURNAL ENTRY
JAN. 1 CASH A/C---- DR 20000
TO CAPITAL A/C 20000

POSTING IN LEDGER

 Balance in an account signifies the net result of all transactions

relating to it during a given period of time. For example, the balance in
personal account will indicate whether the business owes to the party
or the party concerned owes to the business.

The debit balance in a personal account i.e., excess of debit total over
its credit total, shows that the party concerned owes to the business.
On the contrary, in case of credit balance in personal account, it
indicates that the business owes to the party concerned.

All real accounts relate to assets, hence, show the debit balance only.
The balance in nominal accounts indicate profit (in case of credit
balance) and loss (in case of debit balance). The balance in nominal
accounts are transferred to Profit and Loss Account.