LEDGER AND TRIAL BALANCE

Rules of Posting :

a. Posting from the Debit Side of Cash Book :

Entries appearing on the debit side of Cash Book are to be posted to the Credit Side of respective accounts in the Ledger by writing the words
‘By Cash A/c’ if it is from the Cash Column
By Bank A/c if it is from the Bank column.

b. Posting from the Credit Side of Cash Book :

Entries appearing on the credit side of the Cash Book are to be posted to the Debit side of respective accounts in the ledger by writing the words.
‘To Cash A/c’ if it is from the Cash Column
‘By Bank A/c’ if it is from the Bank Column

(c) All contra entries marked ‘C’ are ignored while posting from the Cash Book to the Ledger because double aspect of such transactions is completed in the Cash Book itself.

Case III- Ledger posting from Purchases book

Journal Entry for Credit Purchases is

Purchases A/c Dr

To Supplier

Therefore the rules of posting from Purchases Book are.

1. The total of the Purchases book will be posted to the Debit side of Purchase A/c and the words “To Sundries as per Purchase Book” will be written in the particulars column.

2. Each of the Supplier’s A/c will be Credited and the words. “By Purchases A/c” will be written in the particulars column.

Case IV- Ledger Postings from Sales Book :

Journal Entry for Credit sales is

Customer Dr

To Sales A/c

Hence rules for posting from sales Book are

1. Total of the Sales Book will be posted to the credit side of sales A/c by writing the words “By Sundries as per Sales Book”
2. Customer’s personal A/cs are debited by writing the words “To Sales A/c”

Case V- Ledger Postings from Purchase Return Book :

Journal Entry for purchase Return is

Personal A/c of Supplier Dr

To Purchase Return A/c.

1. Supplier’s A/c (to whom the goods are returned) is debited by writing the words “To Purchase Return A/c”)


2. The total of the Purchases return Book is credited to the Purchases Return A/c by writing the words “By Sundries as per Purchases Return Book”.

Case VI - Ledger Postings of Sales Return Book :

Journal Entry for the Sales Return is -

Sales Return A/c Dr

To Customer

1. Individual Customer’s A/cs by whom the goods are returned are Credited by writing the words “By Sales Return A/c”.


2. The total of the Sales Return Book is posted to the Debit of Sales Return A/c by writing the words. “To Sundries as per Sales Return Book”.

Case VII - Ledger Postings from Bills Receivable Book :

Bills Receivable book shows the names of the persons from whom the Bills are Received. Therefore the Journal Entry is

B / R A/c Dr

To Personal A/c

1. Posting will be done on the Credit side of the Personal A/cs by writing the words. “By Bills Receivable A/c”.


2. The total of the Bills Receivable Book will be posted to the debit side of Bills Receivable A/c by writing the words “To Sundries as per Bills Receivable Book”.

Case VIII - Ledger Postings of Bills Payable Book :

Bills payable is a liability, therefore the Journal Entry is

Personal A/c Dr

To Bills Payable A/c.

1. Personal A/cs will be debited by writing the words. “To Bills Payable A/c”.
2. Total of the Bills Payable Book will be posted to the credit of Bills Payable A/c by writing “By Sundries as per Bills Payable Book”.

Closing and Balancing of Accounts :

Normally after every month or whenever a businessman is interested in knowing the position of various A/cs, the accounts are balanced. Various steps for this purpose are –

1. Debit and Credit sides of each A/c are totalled.


2. The difference between the two sides is inserted on the side which is shorter so as to make their totals equal.


3. The words “Balance C/d” i.e. the balance carried down and written against the amount of difference.


4. In the next period, the balance is brought down on the other side by writing the words ‘Balance b/d’.


5. If the Debit side exceeds the Credit Side the difference is a Debit Balance where as. If the Credit side exceeds the Debit side the difference is a Credit Balance.

Important :

1. Debit Balance of a Personal A/c means the person is a Debtor of the firm whereas Credit Balance of a Personal A/c indicates that the person is a Creditor of the firm.


2. Real A/cs (which include Cash and all other Assets A/cs) will usually show Debit Balances.


3. Nominal A/cs (A/cs of Income and Expenses) are transferred to Trading and Profit and Loss A/c of the firm at the end of the Accounting Period.


4. Debit Balance of any A/c means an Asset or an Expense whereas Credit Balance means a liability, Capital or Income earned.