Ledgers SS1 Book Keeping Lesson Note

A ledger is the principal Book of account whereas journals are the books where entire are first made before they are posted to the ledger, the ledger is the book where all the items in the cash book, purchase and sales journals, return inward and return outward journals, journal proper and the petty cash book are posted to the ledger to maintain the double entry principle.

RULES FOR POSTING TRANSACTIONS TO THE LEDGER.

1. Posting From The 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 cash books are posted to the debit side of the ledger.

2. Ruling Of The Ledger                                                                                                                                                                     The ruling of the ledger is the same as that of the cash book. Hence it is said that the cash book is a ledger as fur as the cash account is a ledger as file as the cash account is concerned

3. Posting The Purchase 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 are posted to the debit of purchases account in the ledger.

4. Posting The Sales Journal: All the separate individual sales are posted to the debit of the account of the customer to whom the sales are made while the total sales for the month are posted to the credit side of the sales account in the ledger

MEANING OF SOME EXPRESSIONS

Balance carried down (c/d)

Balance brought down (b/d)

Balance ‘c/d’ represents the balancing figure (i.e. the difference between the debit and the credit sides) usually entered at the lower side to cause the greater side of the ledger (the side with the higher amount) balance Ib/j’ is usually written below the balancing lines, to form the first entry in the subsequent period. 

CLASSIFICATION OF ACCOUNTS

1. Real Accounts: This a record of the amount of assets, liability, reserves and capital accounts that appear on a Balance sheet at a definite moment in time. A real account is also called a permanent account

2. Nominal Account: This is a temporary account that reports gains and losses and is usually closed at the end of the accounting year. e.g. sales accounts or salary accounts.

3. Personal Accounts: These are the elements or accounts which represent an individual or organization. An example is a bank account

4. Impersonal Account: This is any account other than a personal account: an impersonal account could be classified as either a real account, in which property is recorded, or a normal account, in which income, expenses and capital are recorded.

LEDGER VS JOURNALS

1. The ledger is the principal Book of account whereas the journals are the books where entire books are first made before they are posted to the ledger.

2. The ledger is the book where all the items in the cash book, purchase and sales journals, return inward and return outward journals, journal proper and the petty cash book are posted to the ledger to maintain the double entry principle.

FUNDAMENTAL RULES OF DOUBLE ENTRY 

The following two fundamental rules of double-entry bookkeeping should always be remembered:

1. Accounts which receive value should be debited.
2. Accounts which give value should be credited.

ASSIGNMENT 

1. Define Ledger    
2. Differentiate between real and nominal account