Learn On Your Own Writing Up Of Ledger Posting And Balancing:

Writing up ledger posting and balancing of ledger refers to the process of transferring of entries from Journal to respective Ledger Account and finding out differences if any at the end of the year.

The journal book consists of all journal entries recorded date wise in chronological order, but it does not show us the position of a particular account at any point of time. To find out specific information of a particular account at a given date, the book-keeper has to check and segregate all the transactions from the journal and make a total of all of it. Now this is a very tedious task. To avoid this, the debit and credit transactions of the journal entry is segregated and transferred to respective ledger accounts recorded in different pages with respective distinguishing name of different accounts and are compiled into one book called "Ledger Book".

A Ledger is a book of account containing a classified summary of every single transaction cash or credit recorded in Cash Book and Journal. Every account relating to assets, liabilities, capital, expenses and revenues are maintained in Ledger. It is a complete set of accounts of a business concern and is rightly called as Principal Book.

Features of Ledger:

Ledger is an account book that contains various accounts to which various business transactions of a business enterprise are posted.

It is a book of final entry because the transactions that are first entered in the journal or special purpose Books are finally posted in the ledger. It is also called the Principal Book of Accounts.

In the ledger all types of accounts relating to assets, liabilities, capital, revenue and expenses are maintained.

It is a permanent record of business transactions classified into relevant accounts.

It is the 'reference book' of accounting system and is used to classify and summarise transactions to facilitate the preparation of financial statements.

Ledger Posting:

Writing up ledger or ledger posting is the process of transferring of entries from Journal to Ledger.

Every account relating to assets, liabilities, capital, expenses and revenues are maintained in Ledger. Posting is done into the respective account depending upon the basic nature of the account (Real, Personal or Nominal) and considering the basic nature of the account, ledger posting is done.

At the close of the period, the account is balanced.

Balancing of Ledger:

After the completion of the ledger posting, the account needs to be balanced. Balancing of Account refers to the process of making both the sides of an account equal.

If the debit side of an account is heavier than the credit side, the differential amount between the two sides will be known as 'debit balance'. Similarly, if the credit side is heavier than the debit side, the differential amount will be known as 'Credit Balance'.

Balancing of an account is done by totalling the heavier side of the account first and than transferring the same total into the shorter side. In the shorter side, (debit or credit) the differential amount is written with the words "To" or "By" Balance c/d.

Here, it is worthy to be noted that all accounts other than nominal accounts representing incomes and expenses are not balanced. They are transferred to profit and loss account and at end of the financial year.

Importance of Ledger:

Ledger is an important book of Account. It contains classified records of all business transactions. At the end of the accounting period, each account will contain the entire information of all the transactions relating to it. Following are the advantages of ledger.

  1. Ledger provides detailed information about incomes and expenses at one place.
  2. The information reflected in different ledger accounts helps management in taking financial decisions
  3. It also helps the management in keeping a close check in management of business
  4. Ledger reflects the financial position of the business. The position of its assets and liabilities
  5. Ledger accounts provide instant information regarding the amount receivable from and payable to other parties through the account receivables and payables.
Types of Ledger:

1. Assets Ledger:

It contains accounts relating to assets only e.g. Machinery account, Building account, Furniture account, etc.

2. Liabilities Ledger:

It contains the accounts of various liabilities e.g. Capital (Owner or partner), Loan Account, Bank Overdraft, etc.

3. Revenue Ledger:

It contains the revenue accounts e.g.. Sales account, Commission earned account, Rent received account, interest received account, etc.

4. Expenses Ledger:

It contains the various accounts of expenses incurred, e.g. Wages account, Rent paid account, Electricity charges account, etc.

5. Debtors Ledger:

It contains the accounts of the individual trade debtors of the business. Individuals, firms and institutions to whom goods and services are sold on credit by business become the "Trade Debtors" of the business.

6. Creditors Ledger:

It contains the accounts of the individual trade Creditors of the business. Individuals, firms and institutions from whom a business purchases goods and services on credit are called "Trade Creditors" of the business.

7. General Ledger:

It contains all those accounts which are not covered under any of the above types of ledger. For example Landlord A/c, Prepaid insurance A/c etc.