JOURNAL & LEDGER POSTING

PRESENTED BY :
Chander Mohan
GUIDED BY :
Alka Rani Sharma (Teacher Trainer)
 JOURNAL

Journal may be describe as a book in which the transaction are

recorded in the order of occurrence i.e. in chronological order.
It is called a book of prime entry because all business
transactions are entered first in the book. The process of
writing the a transaction in journal is known as journalising
and the transaction written in journal is known as journal
entry.
 LEDGER
Ledger is principal book of accounts. It is most important
book in accounting system. It contain all the accounts
(assets, Liabilities, capital, revenue and expenses.) to
which the transaction recorded in the book of original
entry are transferred. Ledger is ultimate destination of all
the transaction. It is also called book of final entry. In
ledger, the information is classified by nature and
relevance. It may be maintain as bound book or loose leaf
sheet or in floppy disk.
 Need of journal

Journal is needed and is useful in the following

respects :-
 Convenient recording of the transactions;
 Maintaining and preserving the identity the
transactions;
 Ascertaining the true nature of transaction with the
help of narrations;
 Maintaining permanent record of information.
 …contd.
 To find out readily and without trouble – how much
due to us and how much is payable by us to suppliers;
 The net effect of all the transaction taken place during
a particular period to one account only known at a
glance;
 The difference between debits and credits gives us the
net result of the transaction relating to one person,
one asset, one expenditure head or one source of
income.
 Types of Account
It may be classified as under :-
 Personal Account
Natural Personal Account
Artificial Personal Account
Representative Personal Account
 Impersonal Accounts
Real Accounts
Tangible Real Accounts
Intangible Real Accounts
 Nominal Accounts
 Rules of debit and credit
(classification based)
 Personal Accounts :
Debit the Receiver, and
Credit the giver (supplier);
 Real Accounts :
Debit what comes in, and
Credit what goes out;
 Nominal Accounts :
Debit expenses and losses, and
Credit income and gains.
 Steps of Journalising
 Ascertain what accounts are involved in a transaction.
 Ascertain what is nature of accounts involved.
 Ascertain which rule of debit and credit is applicable for each of the
accounts involved.
 Ascertain which account is to be debited and which is to be credited.
 Record the date of transaction in the ‘date column’.
 Write the name of the account to be debited very close to the left hand side
alongwith the abbreviation ‘Dr’.
 Write the name of the account to be credited in the next line preceded by the
word ‘To’ at a few spaces towards right in the ‘particular column’.
 Write ‘narration’ within brackets in the next line in ‘particulars column’.
 Draw a line across the entire ‘ particulars column’ to separate one Journal
Entry from the other.
 Characteristics of Journal
 It is a book of original entry because transaction is recorded at first stage in this
book.
 It is the first step in the recording process of double entry system of book-
keeping.
 It is also known as day book or diary because transactions are recorded in it on
day to day basis as and when they take place.
 It is chronological record of all transactions taking place according to the order
of occurrence.
 Every entry in journal is accompanied with narration which describes briefly the
true nature and context of the transaction.
 Amount of the transaction is recorded in both debit and credit column- side by
side. It helps in maintaining arithmetical accuracy of the books.
 Journal and ledger are inter linked because next step after journal is the ledger.
 Rules of Debit
1.Personal Account is Debited when :
(I) A person owes us for receiving the benefit e.g., credit sales by
the business.
(II) Obligation of the business is discharged or reduced e.g.
payment to a creditor.
(III) A person becomes liable to business for performance in the
future e.g. prepaid expense.
2. Real Account is debited when :
(I) Some asset is purchased.
(II) Value of the asset increases.
3.Nominal Account is Debited when :
(I) Expenditure is incurred e.g. payment of salary, rent etc.
(II) Loss is suffered due to some reason like fire theft, etc.
 Rules of Credit
1.Personal Account is Credited when :
(1) Business owes to someone for benefit received e.g. goods purchased) on
credit.
(2)Obligation towards business is discharged or reduced by a person e.g.
receipt from debtor.
(3)Liability of the business towards someone increases for getting some service
or benefit e.g. salaries /wages outstanding.
2.Real Account is Credited when :
(1) Asset is sold.
(2) Asset value decreases due to depreciation.
3. Nominal Account is Credited when :
(I) Business earns income by way of interest, dividend, commission etc.
(II) Business gains e.g. bad debts recovered etc.
 Hints for Journalising

1.Treatment of cash/ credit transaction

(1) Purchased goods for Rs.1200 cash

Purchases Account ……………Dr. 1200

To Cash Account …………………….. 1200

(2)Purchased goods for Rs. 1200on credit/ from Arun

Purchases Account ……………Dr. 1200
To Arun Account …………………….. 1200
 2. Treatment of payment on
personal / expenses account

(1) Paid Rs. 500 to Varun on account

Varun Account ……………Dr. 500
To Cash Account ………………….. 500
(2)Paid Salary to Aman Rs.1000
Salary Account ……………Dr. 1000
To Cash Account ……………….. 1000
 3. Treatment of Receipt on
Personal/ Income Account

(1) Received Rs. 500 from Tarun on account

Cash Account ……………Dr. 500
To Tarun Account …………………….. 500
(2) Received Rs. 500 from Tarun as Commission
Cash Account ……………Dr. 500
To Commission Account ………………500
 4.Treatment Of Trade
Discount
Trade discount as such is not recorded in the books.
The transaction is recorded with only the net
amount.
Sold goods to Raman of the list price Rs. 1000,
Trade discount 10%
Raman Account ……………Dr. 900
To Sales Account ………………….. 900
 5.Treatment of Cash Discount
(1)Received Rs. 1000 from Arun in full settlement
against the amount due Rs. 1050.
Cash Account ……………Dr. 1000
Discount A/C …………….Dr. 50
To Arun Account …………………….. 1050
(2) Paid Rs. 960 to Varun in full settlement of Rs.
1000.
Varun Account ……………Dr. 1000
To Cash Account ………………….. 960
To Discount Account ………………… 40
 6.Treatment of Bad Debts.

Sarkar who owed us Rs. 1000 is declared

insolvent and 60 paise in a rupee is received
Cash Account ……………Dr. 600
Bad Debts A/C …………….Dr. 400
To Sarkar Account …………….. 1000
 7. Treatment of Bad Debts
Recovered
It is evident the above entry that whenever
irrecoverable amount is written off, the personal
account is credited.
Sarkar remitted Rs. 400 against the amount
previously written off as bad.
Cash Account ……………Dr. 400
To Bad Debts Recovered Account.. 400
 8.Treatment of Personal
Expenses of the owner

X withdrawl cash for personal use

Drawing Account ……………Dr. 600
To Cash Account ………………….. 600
X withdrawl goods for domestic use
Drawing Account ……………Dr. 600
To Purchases Account …………….. 600
 9.Treatment of Payment /
Receipt on the behalf of
Customer or supplier
Paid cartage on the behalf of our customer Mr. Y
Rs. 100
Y Account ……………Dr. 100
To Cash Account ……………..100
Supplier Mr. Z paid cartage Rs. 100 on our behalf
Cash Account ……………Dr. 100
To Z Account …………………….. 100
 10.Treatment of Exchange of
new asset with old one
 The value of old furniture was Rs. 350 while the
value of new furniture was Rs.900, balance paid in
cash.

Furniture (new) Account ……… Dr. 900

To Furniture(old) A/C ……………… 350
To Cash Account ……………….. 550
 11.Treatment of goods given
as Charity /Advertisement
 Gave away as charity goods costing Rs. 100
and cash Rs.50.

Charity Account ……………Dr. 150

To Purchases A/C ………………. 100
To Cash Account …………….. 50
 12.Treatment of goods lost in
Accident/ Fire

 Goods worth Rs. 4000 were destroyed in a fire.

Insurance company paid 80% of the loss.

Cash Account …………… Dr. 3200

Loss by fire A/C …………….Dr. 800
To Purchases Account …………….. 4000
 13. Treatment of Depreciation
on Fixed Assets

 Plant purchased for Rs. 7000. Provide

Deprecation @10% P.A. for full year.

Deprecation Account ……………Dr. 700

To Plant Account …………………….. 700
 14. Expenses Outstanding

 Salary of staff Rs. 30000 is outstanding.

Salaries Account ……………Dr. 30000

To Salaries outstanding A/c…….30000
 15. Interest on Capital

 Interest on Capital @ 10% on capital of Rs.

500000

Interest on Capital Account ……Dr.5000

To Capital Account …………….. 5000
 16. Interest on Drawing

 Interest on drawing is charged from owner Rs. 500

Drawing Account ……………Dr. 500

To Interest on Drawing A/c ……….. 500
 17. Purchase and sale of
Investment or other assets
 A machine is purchased for rs. 50000.
Transportation expenses Rs. 2000 and
Installation charges Rs. 3000 on this
machine.
Machine A/C …………….Dr. 55000
To Cash Account …………………….
55000
Compound Journal Entries
 Actually, when more than one entry is
combined it becomes a compound Entry.
 Compound entries may assume anyone of the
following fotms;
 Debit one account and crediting two or more
accounts.
 Debiting two or more accounts and crediting one
account.
 Debiting several accounts and crediting several
accounts.
Opening Journal Entry
 In the case of a continuing business, we
are required to pass an entry in the
journal for bringing in the new books all
assets and liabilities as appearing in the
books on the last day of the previous
year. Rule of passing opening entry is to
debit each asset account; credit each
liability account; excess of debits over
credit represents capital balance.
Total Debits – Total Credits = Capital
 Advantages of Journal:-
(1)All business transactions are entered in journal in chorological order
with narration.
(2)Transaction are recorded in the journal as and when these take
place at the convenience of the entity.
(3)It is ensures that double entry rules have been followed.
(4)Transactions taking place and recording are at the same time,
therefore, chance of cooking or manipulating the facts are
minimized.
(5) In case the total of amount column debit and credit do not tally, it is
sure and quick indication that some error has been committed.
(6) The information contained in the journal is primary source of
financial statistics of the business.
 Limitation of Journal :-

(1)The journal will be long and unveildy, if the business has too
many transactions.
(2)It is not possible to ascertain daily cash balance from journal.
Separate book is to be maintained for this purpose.
(3)It is difficult and time consuming to locate a transaction in the
journal if date of transaction is forgotten.
(4)It is time consuming to post each and every transaction from
the journal to ledger.
 Difference Between Journal and
Ledger
 Journal
1.It is the book of prime entry.
2.As soon as the transaction
originates, it is recorded in
journal.
3.Transactions are recorded
in order of occurrence i.e.
strictly in order of dates.
4. Narration is written for each
entry.
5.Accuraracy of the books
can not be tested.
6.Journal is not balanced.
 Ledger
1.It is the book of final entry.
2.Transactions are posted after
recorded in the journal.
3.Transactions are classified
according to the nature and
are grouped in the concerned
accounts.
4. Narration is not required.
5.Accuracy of the books is tested
by means of list of balances.
6.Every account in the ledger is
balanced at appropriate time.
 Step involved in Ledger
Posting
 Transactions relating to one account, over a period,
are identified from the journal in the chronological
order.
 Transactions, identified, are recorded at one place
called account.
 This gives rise to summarized and classified
information relating to each particular account at
one place.
 Each account is divided into two parts i.e. debit and
credit.
 Whenever desired, two sides are totaled and
difference between two totals (known as balance)
is ascertained. Such balance provides us the ready
information regarding the particular account on a
Format of Ledger Account-
DATE PARTICULAR F AMT DATE PARTICULAR F AMT
 Advantages of ledger
 Transaction relating to a particular person, item or head of expenditure
or income are grouped in the concerned account at one
place.
 When each account is periodically balanced, it reflects the
net position of that account.
 Ledger is the stepping stone for preparing Trial balance-
which tests the arithmetical accuracy of the accounting
books.
 Since the entries recorded in the journal are referenced into
ledger, the possibility of errors or defalcations are reduced to
the minimum.
 Ledger is the destination of all entries made in journal or sub-
journals.
 Ledger is the store house of all information which
subsequently is used for preparing final accounts and
financial statements.