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LEDGER POSTING FROM JOURNAL ENTRIES

Journal is the book of original record. In case of small firms, all business transactions are recorded in the journal. Big firms record their transactions in subsidiary books and those transactions which do not find a place in subsidiary books are recorded in the journal. We cannot ascertain the position of different accounts at a glance through journal. It is, therefore, necessary that we should prepare ledger accounts with the help of journal entries. Let us take an example to explain ledger posting from journal entries.

Illustration 1. Pass the following journal entries and post them in the ledger accounts:

2005                                                                                                                            $

Jan. 1   Started business with cash ..………………………………………………………………….. 20,000

Jan. 3   Purchased goods from Vivek ………………………………………………………………. 5,000

Jan. 6   Paid to Vivek ………………………………………………………………………………… … 4, 900

Discount allowed.……………………………………………………………………………………………………100

Jan. 9   Purchased furniture. …………… ………………………………………. …………………. .. 2,000

Jan. 12 Paid salaries………………………………………………………………………………………. 1,000

Jan. 15 Rent received…………………………………………………………………………………….. 500

Jan. 18 Sold goods to Vineet ………………………………………………………………………..…. 4,000

Solution:                                                                                            Journal Entries

Ledger Posting

Cash Account

                       Dr.                                                                                                                                                                                                                        Cr.

Capital Account

                           Dr.                                                                                                                                                                                         Cr.

Purchases Account

                        Dr.                                                                                                                                                                                                      Cr.

Vivek’s Account

                                 Dr.                                                                                                                                                                                                                   Cr.

Discount Received Account

            Dr.                                                                                                                                                                                                          Cr.

Furniture Account

         Dr.                                                                                                                                                                                                                    Cr.

Salaries Account

           Dr.                                                                                                                                                                                                                   Cr.

Rent Account

          Dr.                                                                                                                                                                                                                    Cr.

Vineet’s Account

         Dr.                                                                                                                                                                                                                       Cr.

Sales Account

        Dr.                                                                                                                                                                                                                            Cr.

Explanation

We have been making cash, an asset’s account, which is debited for increase and credited for decrease. All the transactions resulting in the increase of cash will be posted at the debit side of the cash book and those resulting in decrease will be posted at the credit side of ti1e cash book. Alternatively following rules of posting should be noted :

  1. We never use the name of the same account which we have been preparing either at the debit or credit side of the account. It should be verified from the previous cash account that we have not written ‘To ash A/c’ or ‘By Cash A/c’ in it anywhere.
  2. It should be seen that the account being prepared has been debited or credited. If the account has been debited, posting will be made at the debit side of the account and if the account being prepared is credited in the journal entry the posting will be made at the credit side of the account.
  3. We write the name of reverse account at the debit or credit side of the account, as we do not use of the same account. This is why, while making posting of the first journal entry in the cash account, we shall write capital account, which is opposite to the cash account being prepared. It means that we write the of account to be credited for the debit of the account being prepared. While preparing an account being debited in the journal entry the name of the account credited in the entry will be written. In the same way, while preparing an account being credited, in the journal entry the name of the account being debited in the will be written. This fact can be verified from the previous cash account.

In case of compound entries the amount written against the account being prepared will be written. With reference to journal entry on Jan. 6, we have written $ 4,900 in the cash account and while preparing we shall write $ 100, the amount written against discount account.