TERM 3 2020: Lesson 2

Preparation of T Ledger Accounts

The procedure for entering details into the ledger is called posting. To post to a ledger account in T
format:

1. Identify the account and account number and open an account if one is not already in
existence.

2. Identify the side of the account affected.

3. Show the date of the transaction

4. Fill in the particulars column with the name of the other accounts affected.

5. Place the relevant amount on the correct side

Remember all transactions will affect at least two different ledger accounts.

These steps would be repeated for the other accounts affected by the transaction.

Example:

For the following transaction:

Date Transactio Accounts Types of Nature of Inc/Dec Dr/Cr Amount

n Involved account account
2005
$
Jan 1 Owner Cash at A Dr Inc Dr 20,000
3 introduced bank 1
$20,000 Capital 4 OE Cr Inc Cr 20,000
cash into 2 5
business

The posting would appear as follows, with each step being numbered in italics.

Dr Ledger 2
Cr
Date Particular Folio Amount Date Particular Folio Amount
s s
2005 $ 2005 $
Cash at Bank 1 No 3103
Jan 1 Capital 20,000
3 4 5
Capital No 5101
Jan 3 Cash at 20,000

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 3 Bank 5
4

The completed ledger, in T account format, showing all the transactions in Table 2.1, appears as
follows. Note that similar types of account are kept together.

Dr Ledger Cr
Date Particular Folio Amount Date Particular Folio Amount
s s
2005 $ 2005 $
Asset Accounts
Cash at Bank No 3103
Jan 1 Capital 20,000 Jan 3 Motor 15,000
vehicles
7 ABC Co 2,000
Furniture No 3201
Jan 5 ABC Co 4,000
Motor Vehicles No 3203
Jan 3 Cash 15,000
Liability Acccounts
ABC co No 4102.1
Jan 7 Cash 2,000 Jan 5 Furniture 4,000
Owner’s Equity Account
Capital No 5101
Jan 1 Cash 20,000

Because ABC is an other payable (not an accounts payable) its chart of accounts number begins with
4102. As it is the first other payable it receives the number 4102.1

EXERCISE A

1. Refer back to your exercise on analysing transactions No 1, post the transactions to the
ledger using the T format.

2. Again refer back to your exercise on analysing transaction No 2, post transactions to the
ledger using the T format

T account balancing

To balance off an account, the following steps must be carried out:

1. Add up the amounts on the debit side of the account

2. Add up the amounts on the credit side of the account
3. Subtract these two amount, the difference is called the balance
4. Place the balance on the similar side of the account. These is called the balance to be carried
down (balance c/d) and will make both sides equal
5. Total both sides on the same line

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 6. Bring down the balance onto the opposite side below the total. This iscalled the balance
brought down (balance b/d) and is dated the next day. It is called a debit balance if the debit
side is larger. It is called a credit balance if the credit side is larger.

Consider the following cash at bank example:

Cash at Bank No 3103

Jan 1 Capital 20,000 Jan 3 Motor Vehicle 15,000
7 ABC Co 2,000
To find the balance of these account:

1. The debit side adds to $20,000

2. The credit side adds to $17,000
3. The difference is $3,000
4. This amount is called the balance to be carried down and is placed on the smaller
side of the account, in this case the credit side
5. Both sides are totalled at $20,000
6. The balance is brought down (Balance b/d) on the debit side because the debit side
is the larger.

The balanced Cash at Bank would appear as:

Cash at Bank No 3103

Jan 1 Capital 20,000 Jan 3 Motor Vehicle 15,000
7 ABC Co 2,000
31 Balance c/d 3,000
20,000 20,000
Feb 1 Balance b/d 3,000

EXERCISE B

1. You are required to balance the following account

Motor Vehicles No 3203

Jan 1 Capital 20,000 Jan 4 Cash 10,000
19 Vehicle Trader 9,000
25 Cash 10,000

2. You are given the following ledger account for M Peter and required to balance the following
account.

Cash at Bank No 3103

Mar 1 Capital 50,000 Mar 3 Furniture 10,000
10 Capital 25,000 5 Motor Vehicles 20,000

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15 Equipment 12,000 19 J Black 5,000
28 F Green 9,000