READI

NGOFLEDGERACCOUNTS

MEANING
“I
nter
pret
ati
onoft
heent
ri
esi
nthel
edgeraccount
s”

Hel
pst oknow:
(
a)Natureoft
ransaction.
(
b)Amountoftransact i
on.
(
c)Sequenceoftransactions.
(
d)Bal
anceonapar t
icularday.
(
e)Natureoft
hatbalance.

THINGSTOBECHECKED
(1)OpeningBalanceoft heaccount .
(2)Amountoft ransactionsent eredi
nt heaccount.
(3)Periodf
orwhi cht heaccounti sprepared.
(4)Accounti
ngpr incipl
ei .
e.recordi
ngondebi tsi
deandcr editsi
de.
(5)Amountofcl osingbal ance.
(6)Treatmentgivent othecl osingbalancei.
e.t
ransfert
ot r
adingorPr
ofi
t&
LossA/corcar r
iedforwar d.

STEPSI
NREADI
NGALEDGERACCOUNT
St
epI Checkt
heopeni
ngbal
anceoft
heaccount
.
St
epI
I PassJour
nal
Ent
ryf
oreacht
ransact
ion.
St
epI
IIChecktheaccountdebit
edandt
heaccount
cr
edit
edinthejournal
entry
.
St
epI
V From t
hejournal
ent
rytryt
oj udget
he
tr
ansacti
onthatmusthavetakenpl
ace.
St
epV Underst
andt hemeaningoftransact
ion
withref
erencetoothert
ransacti
ons
recor
dedint hel
edgeraccount.
St
epVICheckt
heCl
osi
ngbal
anceoft
heaccount
 Thi
s procedur
e ensur
es cor
rectr
eadi
ng and i
nter
pret
ati
on ofl
edger
account
s.

PURCHASES/ SALESLEDGERACCOUNT
(
1)In-
dept h Checki ng:mai ni t
ems ofexpendi t
ure& i ncome fort he
business-sampl ebasi s.
(
2)Verifi
cati
onofPost ing:
Purchases-CashBook,Pur chaseReturnBook,t heDebi
t/
CreditNote
Register,
Cr edi
tor sA/ c,Bi
ll
sPay abl
eA/cetc.
Sales–CashBook, SalesDayBook, Sal
esReturnBook,theDebit
/Credi
t
NoteRegi ster,Debt orsA/c,Bil
l
sReceivabl
eA/cet c.
postingoncor rectsi deofaccountandwi t
hcorrectamount.sequence
ofthedat es.
(
3)TotalsandCast ing:
(
4)Verifi
cati
onofBal ances:
(
5)Amountofpur chases:Quant it
yandRat es
(
6)CheckingPay mentAgai nstBil
ls

DEBTOR’ SLEDGERACCOUNT
(
1)Creditsalestodebtors.
(
2)Salesreturns.
(
3)Amountr eceivedfr
om debtorsei
theri
ncashorbycheque.
(
4)Bil
lsRecei v
ablesacceptedbydebtor
s.
(
5)Dishonourofbi l
l
sreceivabl
esandcheques.
(
6)Baddebt swri
ttenoff
.
(
7)DiscountAll
owed.
(
8)Directdeposi
tbydebtor
sint heBankA/
c.
(
9)OpeningandCl osi
ngBalances.

Dr
. Debt
or’
sAccount Cr
.
Dat
e Par
ti
cul
ars L Amou Date Part
icul
ars L Amoun
F nt F t
Xxx ToBalanceb/
d xxxxx xxx ByCash xxxxx
Xxx ToSales xxxxx xxx ByBank xxxxx
Xxx ToBil
l
sReceivabl
e xxx BySalesRetur
n xxxxx

Dishonoured xxxxx xxx ByDi

scount xxxxx
Xxx ToBank( Di
shonour xxx ByBi
l
lsRecei
vabl
e xxxxx
ofa
cheque) xxxxx xxx ByBadDebts xxxxx
Xxx ToInterest xxxxx xxx ByBal
ancec/d xxxxx
Xxx ToCr edit
orsA/c xxxxx
xxxxx xxxxx

CREDITOR’ SLEDGERACCOUNT:
(
a)CreditPur
chasesf rom suppl i
ers.
(
b)Purchasereturns.
(
c)Amountpai dtocr edi
torseitherincashorbycheque.
(
d)Bi
llsPayablesacceptedbyus.
(
e)Di
shonourofbi llspayablesandcheques.
(
f)Di
scountr ecei
v ed.
(
g)Bi
llsrecei
vablesendor sedtocr edi
tor
s.
(
h)OpeningandCl osingBal ances.
Dr. Cr edit
or’
sAccount Cr.
Date Par
ti
cul
ars L Amoun Dat e Part
icul
ars L Amoun
Ft . Ft
xxx ToBil
ls xxx ByBalanceb/d xxxxx
Pay
able xxxxx xxx ByPur chases xxxxx
xxx ToBank xxxxx xxx ByBi l
ls xxxxx
xxx Tocash xxxxx Payabledi
shonoured

xxx ToDi scount xxxxx xxx ByBank

xxx ToPur chase xxxxx (Di
shonourofcheque) xxxxx
retur
ns
xxx ToBi l
ls xxx ByI
nter
est xxxxx
recei
v ables
a/c xxxxx
xxx Tobal ancec/ d xxxxx xxx

xxxxx xxxxx

CASHACCOUNT
(
1)Cashsales
(
2)Coll
ect
ionf r
om debtors
(
3)Cashpurchases
(
4)Paymenttocr edi
tors
(
5)Cashreceiptonbill
srecei
vabl
e
(
6)Cashpay mentonbi l
lspay
able
(
7)Paymentofv ari
ousexpenses
(
8)Cashdepositedintobank
(
9)Cashwithdrawnf r
om bank
Dr. CashAccount Cr.
Dat
e Par
ticul
ars L Amount Dat e Par t
icul
ars L Amount
F F
Xxx ToBalanceb/d xxxxx xxx ByPur
chases xxxxx

Xxx Tosal
es xxxxx xxx ByCredi
tor xxxxx
Xxx ToDebtor xxxxx xxx By Bil
l
s xxxxx
Payabl
e
Xxx To bi
ll
s xxxxx xxx ByBank xxxxx
recei
vabl
e
Xxx ToBankA/ c xxxxx xxx ByEx
penses xxxxx

Xxx To Mi
sc. xxxxx xxx ByDr
awi
ngs xxxxx
Recei
pts
xxx ByBal
ancec/
d xxxxx

xxxxx xxxxx

FIXEDASSETA/ C
(
1)Opening&Cl osingBalances.
(
2)Purchaseoffixedasset.
(
3)Expensesincidentalt
opur chaseoff
ixedasset
.
(
4)Saleoffi
xedasset .
(
5)Depreci
ationonf i
xedasset .
(
6)Profi
torlossonsal eofasset .

Dr
. FixedAssetAccount Cr.
Dat
e Par
ti
cul
ars L Amoun Date Par
ti
cul
ars L Amoun
F t F t
xxx ToBal
anceb/
d xxxxx xxx ByDepreci
ati
on xxxxx
xxx ToBankA/ c xxxxx xxx ByBank xxxxx
xxx To Bank A/
c xxxxx xxx ByProf
it& Loss xxxxx
(Tr
ansport
ati
on) A/c
xxx ToABCA/ c xxxxx xxx ByBal
ancec/d xxxxx

xxx ToPr
ofi
t&LossA/
c xxxxx xxx xxxxx

xxxxx xxxxx

LOANS/ ADVANCETAKEN
(
1)Openi
ngandClosingbalances.
(
2)Recei
ptofmoney .
(
3)Amountofint
erestchar
ged.
(
4)Repaymentofl
oanbycashorbycheque.

Dr
. LoanAccount Cr
.
Dat
e Par
ti
cul
ars L Amoun Dat
e Parti
cul
ars L Amoun
Ft Ft
xxx ToBank xxxxx xxx By Bal
ance xxxxx
b/
d
xxx To Goods/Share xxx ByBank xxxxx
Capi
tal xxxxx
xxx Tobalancec/d xxxxx xxx ByI
nter
est xxxxx
xxxxx xxxxx
 LOANS/ ADVANCEGIVEN
(
1)Openi
ngandClosingbalances.
(
2)Paymentofadvanceordisbursementofl
oan.
(
3)Amountofint
erestchar
ged.
(
4)Repay
mentofadv ancegiven.

Dr
. AdvanceAccount Cr.
Date Par
ticul
ars L AmountDat e Par
ti
cul
ars L Amount
F F
xxx Tobalanceb/d xxxxx xxx ByBank Xxxxx

xxx ToBank xxxxx xxx ByBal

ancec/
d Xxxxx

xxx ToI
nter
est xxxxx
xxxxx Xxxxx

BI
LLSRECEI VABLEACCOUNT
(
1)OpeningandClosi
ngbalances.
(
2)Acceptanceofbi
ll
bythedr awee.
(
3)Recei
ptofmoneyonbi l
lsrecei
vable.
(
4)Endorsementofbi
ll
srecei
v abl
etoacr edi
tor
.
(
5)Di
scounti
ngofbi
llwit
hthebank.
(
6)Di
shonourofbi
ll
srecei
vabl
e.

Dr. Bil
l
sRecei
vabl
eAccount Cr
.
Dat
e Par
ti
cul
ars L AmountDate Parti
cular
s L Amount
F F
xxx Tobal
anceb/
d x
xxxx xxx ByCash/ BankA/c Xxxxx

xxx ToDebt
orsA/
c x
xxxx xxx ByBankA/ c Xxxx
x
xxx ByDiscountA/c Xxxx
x
xxx ByCredit
orsA/c Xxxx
x
xxx By Bank f
or Xxxx
x
col
l
ectionA/c
xxx ByDebtorsA/c Xxxx
x
xxx ByBalancec/d
x
xxxx Xxxx
x

Bil
lsPayabl
eAccount
(
1)OpeningandClosingbalances.
(
2)Acceptanceofbi
ll
sbyus.
(
3)Paymentofmoneyonbi l
lspayabl
e.
(
4)Dishonourofbi
ll
spayable.

Dr. Bi
l
lsPay
abl
eAccount
Cr
.
Dat
e Par
ti
cul
arsL Amount Dat
e Par t
icul
ars L Amount
F F
xx
x To Cash/
Bank xxxxx xxx ByBal
anceb/d Xxxxx
A/
c
xx
x To Cr
edi
tor
s xxxxx xxx By Cr
edi
tor
s Xxxxx
A/
c A/
c
xx
x Tobal
ancec/
d xxxxx

xxxxx Xxxxx

EXPENSESACCOUNT
Dr
. ExpensesAccount Cr.
Dat
e Par
ti
cul
ars L Amou Dat e Par ti
cul
ars L Amou
F nt F nt

xxx ToCash/Bank xxxxx xxx ByPrepai

d Xxxxx
A/c expenses

xxx Tooutstandi
ng xxxxx xxx ByPr
ofi
t&Loss Xxxxx
expenses A/c
xxxxx Xxxxx
 I
NCOMESACCOUNT
Dr. I
ncomeAccount Cr
.
Dat Par
ti
cul
ars L Amt. Dat Par
ti
cul
ars L Amt
.
e F e F
xxx To income xxxxx xxx ByCashA/
c xxxxx
recei
vedi
n
Advance
xxx To Prof
it& Loss xxxxx xxx By outst
andi
ng xxxxx
A/c i
ncome
xxxxx xxxxx

DEFERREDREVENUEEXPENDITUREACCOUNT
Dr. Defer
redRev
enueExpendi
tur
eAccount
Cr
.
Par
ti
cul
ars L Amt
. Dat Par
ti
cul
ars L Amt
.
Dat F e F
e
xxx ToBal
anceb/
d xxxxx xxx ByPr
ofi
t& Loss xxxxx
A/
c
Xxx To Cash/
Bank xxxxx Xxx ByBal
ancec/
d xxxxx
A/
c
xxxxx xxxxx
Il
lust
rat
ion19:
Howwi l
lyou,
asanaudi
tor
,makescr
uti
nyoft
hefol
lowi
ngl
edgeraccount
?Whatconcl
usi
onswi
l
lyou
draw?
I
nthebooksofKT&Co.
Ramesh’
sA/
c
Dat
e Par
ti
cul
ars Amt. Dat
e Par
ti
cul
ars Amt.
Rs. Rs.
2003 2003
Feb.1 ToBal
anceb/
d 2,
000 Feb.4 BySalesReturn 450
3 ToSal
es 8,
000 12 ByBank 9,
500
4 ToSal
es 450 12 ByDiscount 500
16 ToSal
es 5,
000 18 ByBil
lsReceivabl
e 5,
000
25 ToSal
es, 6,
500 26 ByBil
lsReceivabl
e 4,
000
28 ByBalancec/d, 2,
500
21,
95 21,
95
0 0
(
T.Y.
B.Com,
Oct
.2003)

I
ll
ust
rat
ion20:
Howwi l
lyour
ead,
asanaudi
tor
,theJani
’
sledgerA/
cint
hebooksofM/
s.Bombay&Co.
?
Jani
’
sA/
c
Dat
e Par
ti
cul
ars Amt. Dat
e Par
ti
cul
ars Amt.
Rs. Rs.
2002 2002
Jan.
1 ToBal
anceb/
d 6,
000 Jan.1 ByBil
l
sRecei
vabl
e 4,
000
May ToSal
es 5,
000 Bysal
esr
etur
n 1,
000
 25
Sept. ToBil
l
sReceiv
abl
e 2,
500 ByBank 950
8
ToI
nterest 500 ByDiscount 50
ToSales 7,
000 June ByBank 2,
350
5
Dec. ToBil
l
sReceiv
abl
e 8,
000 ByDi
scount 150
12
ToI
nterest 400 ByBi
ll
sRecei
vabl
e 2,
500
Dec. ToSales 5,
000 Sept
. ByBank 2,
000
15 8
ByBi
ll
sRecei
vabl
e 8,
000
Dec. ByBank 8,
400
15
Dec. ByBal
ancec/
d 5,
000
31
34,
400 34,
400
(
T.Y.
B.Com,
Mar
ch2004)

I
ll
ust
rat
ion21:
Commentonthef
oll
owi
ngaccountasanaudi
tor
.
I
nthebooksKJ
CashA/ c
Date Date
Par
ti
cul
ars Rs. Par
ti
cul
ars Rs.
2003 2003
Jan.1 ToBalanceb/d 4,
000 Jan.1 BySalari
es 1,
000
1 ToSales 20,
500 2 ByTelephone 6,
000
2 ToSales 28,
350 4 ByCarri
age 450
5 ToSales 21,
240 5 ByBank 8,
000
6 ToReena 350 6 ByRit
a 3,
000
7 ToCommi ssi
on 200 7 ByWages 13,
600
10 ToBil
l
sReceivabl
e 1,
200 9 ByBank 42,
490
10 ByBalancec/d 1,
300
75,
840 75,
840
(
T.Y.
B.Com,
Oct
.2004)

I
ll
ust
rati
on22:
Scrut
ini
seandgi
vey
ourcomment
sasanaudi
toront
hef
oll
owi
ngLedgerAccount
.
InthebooksofM/
sAchar
ya
Dr
. Mr
s.Vy
asAccount Cr
.
Dat
e2004 Par
ti
cul
ars Rs. Dat
e2004 Par
ti
cul
ars Rs.
14thJan. ToBank 10,
000 1stJan. ByBal
anceb/f 10,
000
22ndJan. ToPur
chaseRet
urns 3,
000 21stJan. ByPur
chase 28,
000
22ndJan. ToBi
l
lsPay
abl
e 20,
000 1stFeb. ByPur
chase 14,
000
23r
dJan. ToBankA/
c 4,
950 25t
hFeb. ByBi
l
lsPay
abl
e 20,
000
23r
dJan. ToDi
scountA/
c 50 25t
hFeb. ByI
nter
est 100
2ndFeb. ToBankA/
c 13,
860 1stMar
ch ByPur
chase 21,
000
2ndFeb. ToDi
scountA/
c 140 31stMar
ch ByBal
ancec/
fd 25,
000

26t
hFeb. ToBi
l
lsPay
abl
e 20,
100
30t
hMar
ch ToVai
shy
aA/
c 21,
000
 31stMar
ch ToBank 25,
000

Tot
al 1,
18,
100 Tot
al 1,
18,
100

I
ll
ust
rati
on23:
Scrut
ini
seandcommentont
hef
oll
owi
ngLedgerAccount
.
I
ntheLedgerofSpect
rum Lt
d
Dr
. Bi
l
lsRecei
vabl
eAccount Cr
.
Date Date
Par
ti
cul
ars Rs. Par
ti
cul
ars Rs.
2004 2004
1Oct. ToBal
anceB/f
d 59,
000 4Oct. ByBank 21,
000
10Oct
. ToKedar 17,
500 27Oct
. ByBank 19,
800
16Oct
. ToRanj
it 68,
000 27Oct
. ByDiscount 200
30Nov
. ToPandey 41,
200 12Nov
. ByMohan 18,
000

15Dec. ToKer
kar 20,
500 13Dec. ByBank 17,
500

16Dec. ByNi
ti
n 68,
000

31Dec. ByBal
anceC/
f 61,
700

Tot
al 2,
06,
200 Tot
al 2,
06,
200

Composi
ti
onofOpeni
ngBal
ance
Duefr
om DueDate Rs.
Gopal 04/
10/04 21,
000
Narayan 27/
10/04 20,
000
Mohan 12/
11/04 18,
000
59,
000
(
T.Y.
B.Com,
Oct
.2005)

I
ll
ust
rati
on24:
Scrut
ini
seandcommentont
hef
oll
owi
ngLedgerAccount
.
InthebooksofADDLt
d.
Dr
. PlantandMachi
ner
yA/c Cr
.
Dat
e Dat
e
Par
ti
cul
ars Rs. Par
ti
cul
ars Rs.
01-
01-
2005 ToBal
anceb/
fd 12,
50,
000 31-
03-
2005 BySal
eofMachi
ner
yA/
c 3,
00,
000

01-
06-
2005 ToBankA/
c 6,
50,
000 31-
10-
2005 ByAssetDi
scar
dedA/
c 1,
50,
000

01-
07-
2005 ToBankA/
c(I
nst
all
ati
on) 50,
000 31-
12-
2005 ByBal
ancec/
fd 15,
00,
000

19,
50,
000 19,
50,
000

Dr
. Pr
ovi
sionf
orDepr
eci
ati
ononPl
antandMachi
ner
yA/
c Cr
.
Dat
e Dat
e
Par
ti
cul
ars Rs. Par
ti
cul
ars Rs.
 31-
03-
2005 To Sal
e of Machi
ner
y 2,
40,
000 01-
01-
2005 ByBal
anceb/
fd 6,
30,
000
A/c
31-
10-
2005 ToAssetDi
scar
dedA/c 1,
45,
000 31-
12-
2005 ByP&LA/
c 1,
22,
500

31-
12-
2005 ToBal
ancec/
fd 3,
67,
500

7,
52,
500 7,
52,
500

(
T.Y.
B.Com,
Mar
ch2006)

I
ll
ust
rati
on25:
Scrut
ini
seandcommentont
hef
oll
owi
ngLedgerAccount
.
(
i)I
nthebooksofBhumi
kaComput
ersLt
d.
Dr
. Sal
ari
esAccount Cr.
Amoun Amoun
Date Date
Par
ti
cul
ars t Par
ti
cul
ars t
2006 2006
Rs. Rs.
April
, ToBank(
Mar
ch) 10,
000 Sept
. ByPr
ofi
tandLossA/
c 60,
000
10 30
May,8 ToBank(
Apr
il
) 10,
000
June, ToBank(
May) 10,
000
10
Jul
y, ToBank(
June) 10,
000
10
Aug., ToBank(
Jul
y) 10,
000
10
Sept., ToBank(
Aug.
) 10,
000
10
al 60,
Tot 000 al 60,
Tot 000
(
T.Y.
B.Com,
Mar
ch2007)

I
ll
ust
rati
on26:
Scrut
ini
seandcommentont
hef
oll
owi
ngLedgerAccount
.
(
ii
)Int
hebooksofM/s.Par
esh&SonsLt
d.
Dr
. I
nter
estonI
nvest
mentAccount Cr
.
Amoun Amoun
Date Dat e
Par
ti
cul
ars t Par
ti
cul
ars t
2006-
07 2006-07
Rs. Rs.
Apr
il1 ToInt
erestAccrued June30 ByBank 2,
400
onInvestment 1,
200 Sept.30 ByBank 1,
600
Mar
ch ToP&LA/ c 6,
600 Dec.31 ByBank 2,
400
31
Mar
ch ByI
nter
estAccr
ued
31
onI
nvest
ment 1,
400
Tot
al 7,
800 Tot
al 7,
800
(
T.Y.
B.Com,
Mar
ch2007)