Accounts

In every organisation there are various small payments required to be made.
These payments are generally repetative in nature.
A petty cashier is appointed by every organisation to maintain the records of

petty cash expenses . The book in which such expenses are recorded are known
as Petty Cash Book .
Petty cash book works on a imprest system. It means certain amount is given to
petty cashier on regular basis.
Say for example ₹ 2,000 weekly . The amount of expenses are deducted from
this balance amount and the balance amount is carried forward for the next
time period . Again, balance amount is given to the petty cashier to top up the
amount of ₹ 2,000.
Ledger is the principle book of accounting system. It contains different accounts
where transactions relating to that account are recorded.
It is the classification process in the accounting system . All transactions relating a

particular account are collected but one place in the ledger .
“A ledger is a book which contains all accounts of the business organisation

whether personal, real or nominal”.
It helps in finding out net results of all transactions in respect of a particular

account on a given date can be ascertained from the ledger.
Ledger helps in providing the following information:
1. How much amount is due from each customer or how much amount the
firm has to pay to each supplier,
2. How much is the amount of purchase and sale during a purchase and sale
during a particular period.
3. How much amount has been spent on each head of expenditure.
4. How much amount has been earned on account of each head of income.
Each ledger is divided into two equal parts. The LHS is known as debit side and
RHS is known as credit side.
As an account in ‘T’- shape , therefore ; sometimes it is called called ‘T’ account.

Dr. Name of the A/c Cr.
Date Particulars J.F Amt. (₹) Date Particulars J.F Amt. (₹)
According to this format the column will contain the information as given below:
An A/c is debited or credited according to the rules of debit and credit already
explained in respect of each category of account .
 Title of the Account

The Name of the item is written at the top of the format as the tittle of the account.
The title of the account ends with suffix account.
 Dr. Cr.
Dr. means Debit side of the account that isleft side and Cr. means Credit side of the
account i.e. right side.
 Date
Year , Month of transactions are posted in chronological order in this column.
 Particulars
Name of the item with reference to the originlnal book of entry is written on
debit/credit side of the account.
 Journal Folio
It records the page no. of the original book of entry on which relevant transaction is
recorded . This column is fillled up at the time of posting .
 Amount
This column records the amount in numerical figure corresponding to what has been
entered in the amount column of the original book of entry.
Steps to prepare Ledger:
There are two different steps in ledger :
1) Posting
2) Balancing
1. Posting
Posting means transfer of an entry from Journal to Lledger.
2. Balancing
It means making a comparison of total of two different sides of the ledger .
Rules for posting :
1. All transaction relating to an account should be entered at one place.
2. The word “To” is used before the accounts which appear on the debit side
of an account . Similarly, the word “By”is used before the accounts which
appear on the credit side of an account.
3. If an account has been debited in the Journal Entry , the posting in the
Ledger should also be made on the debit side of such ccount.
4. Similar process will be followed for transferring the accounts from credit
side in the journal .
5. Similar amount which has been posted on the debit side of an account
should also be posted on the credit side of another account.
6. It is not necessary to write the word “A/c” after the Pearsonal A/c’s.
Posting of Compound Journal Entry
When in a Journal Entry , two or more account are debited and only one account is credited
or vice-versa, the journal entry is termed as compound journal entry. In case of posting of a
compound journal entry , posting has to be made in all the accounts, whether debited or
credited in the entry.
Example: On 1st April 2017, sold goods for cash ₹ 20,000. Pass journal entry and
post it into ledger.
Dr. Journal Entry Cr.
Date Particulars L.F Amt. (₹) Amt. (₹)

2017 Cash A/c Dr. 20,000
April 1 To Sales A/c 20,000
(cash sales)
The above entry will be posted into Ledger A/c’s as follows:
2017
April 1 To Sales A/c 20,000
For example : If on 10th April 2017, cash received from Gopal & Co. is ₹ 14,800
and discount allowed to them is ₹ 200 the Component entry and the Ledger
A/c’s will be as follows :

2017 Cash A/c Dr. 14,800
April 10 Discount Allowed A/c Dr. 200
To Gopal & Co. 15,000
(cash received and discount allowed)
Cash A/c
2017
April 10 To Gopal & Co. 14,800
Discount Allowed A/c
2017
April 10 To Gopal & Co. 200
Gopal & Co.
Date Particulars J.F Amt.(₹) Date Particulars J.F Amt.(₹)

2017
April10 By Cash A/c 14,800
April10 By Discount
Allowed A/c 200
₹
Example A : Started business with cash 20,000

Cash A/c Dr. 20,000
To Capital A/c 20,000
In this journal entry , two ledger will be prepared i.e. Cash A/c and Capital A/c .
Cash A/c
To Capital A/c 20,000
Since, ledger is prepared for Cash A/c , position of cash will be considered in
journal. Here, cash is debit in Journal therefore ;
Item corresponding to with cash i.e. Capital A/c will be debited in

Ledger of Cash A/c.
Capital A/c
By Cash A/c 20,000
Since, ledger is prepared for Capital A/c , position of cash will be considered in
journal. Here, cash is debit in Journal therefore ;
₹
Example B : Purchased goods for cash 15,000

Purchase A/c Dr. 15,000
To Cash A/c 15,000
In this entry , ledger of Purchase A/c & Cash A/c will be prepared.
Purchase A/c
To Cash A/c 15,000
Since, ledger is prepared for Purchase A/c , position of purchase will be

considered in journal. Here, purchase is debit in Journal therefore ;
Item corresponding to with Purchase i.e. Cash A/c will be debiited in Ledger of
Purchase A/c.
Cash A/c
By Purchase A/c 15,000
Since, ledger is prepared for Cash A/c , position of cash will be considered in
journal. Here, Cash is credited in Journal therefore ;
Item corresponding to with Cash i.e. Capital A/c will be credited in Ledger of
Cash A/c.
Example C: Sold goods for cash 25,000

Cash A/c Dr. 25,000
To Sales A/c 25,000
In this journal, entries will be prepared i.e Cash A/c and Sales A/c .
Cash A/c
To Sales A/c 25,000
Since, ledger is prepared for Sales A/c , position of sales will be considered in
journal. Here, sales is debit in Journal therefore ;
Item corredponding with sales i.e. Sales will be debited in Ledger of Cash A/c.
Sales A/c
By Cash A/c 25,000
Since, ledger is prepared for Sales A/c , position of sales will be considered in
journal. Here, Sales is credited in Journal therefore ;
Item corresponding with sales i.e. Cash A/c will be credited in Ledger of
Sales A/c.
Example D: Paid Wages 2,000

Wages A/c Dr. 2,000
To Cash A/c 2,000
In this journal entry , two different ledger will be prepared i.e Wages A/c and Cash A/c .
Wages A/c
To Cash A/c 2,000
Since, ledger is prepared for Wages A/c , position of wages will be considered
in journal. Here, wages is debit in Journal therefore ;
Item corresponding with Wages i.e. Cash A/c will be debited in Ledger of
Wages A/c.
Cash A/c
By Purchase A/c 15,000
Since, ledger is prepared for Wages A/c , position of wages will be considered
in journal. Here, wages is debit in Journal therefore ;
Item corresponding with wages i.e. wages will be credited in Ledger of

Cash A/c.
Example E: Paid Salary 5,000

Salary A/c Dr. 5,000
To Cash A/c 5,000
In this journal entry , two ledger will be prepared i.e Salary A/c and Cash A/c .
Salary A/c
To Cash A/c 5,000
Since, ledger is prepared for Salary A/c , position of salary will be considered in
journal. Here, salary is debit in Journal therefore ;
Item corresponding to Cash will be debiited in Ledger of Salary A/c.

Cash A/c
By Salary A/c 5,000
Since, ledger is prepared for Salary A/c , position of salary will be considered in
journal. Here, salary is debit in Journal therefore ;
Item corredponding with salary i.e. Salary will be credited in Ledger of Cash A/c.
In this example all the above five transaction are shown in Cash A/c as
together in following manner :
Cash A/c
To Capital A/c 20,000 By Purchase A/c 15,000
To Sales A/c 25,000 By Wages A/c 2,000
By Salary A/c 5,000
Balancing means adjustment of total of the ledger . It helps in finding

out the balance of the ledger on a particular date.
Ledgers have two types of Balances :
1. Debit Balance
Total of debit side is greater than credit side.
2. Credit Balance
Total of credit side is greater than debit side .
All the accounts are classified into three categories according to their
nature; i.e.
1. Personal A/c ‘s
2. Real A/c’s
3. Nominal A/c’s
Balancing activity is conducted for ledger of Personal & Real A/c
Balancing of a ledger done on last side of the accounting period.
Nominal account totals are written as they are Debit amount

total in debit side & credit amount total in credit side .
When posting of all the transactions into the ledger is completed and the
accounts are balanced off . It becomes necessary to check the arithmetical
accuracy of the accounting work . For this purpose , the balance of each
and every account in the ledger is put on a list . The list prepared is
called trial balance.
a) Ledger A/c which shows a debit balance is put on the debit side of the
trial balance.
b) The A/c which shows a credit balance is put on the credit side of the trial
balance.
c) Account which shows no balance i.e. whose debit & credit totals are equal
is not in the trial balance.
If the total of the debit side of trial balance equals to that of its credit side, it is proved that
books are atleast arithmetically correct.
We have seen that the first entry in each year’s Journal is to record the
opening balances of various assets and liability at the beginning of the new
year. It is termed as the ‘Opening Entry’.
 As the account of all the assets will be debited in an Opening entry, an

A/c for each asset will be opened in the ledger and the posting will be
made on debit side by writing the words ‘By Balance b/d’
 Similarly , as the A/c’s of the liabilities will be credited in an Opening

entry , an account for each liability will be opened in the ledger and the
posting will be made on the credit side by writing the words “By Balance
b/d.
Posting the opening entry completely, all the accounts pertaining to assets and
liabilities in the beginning will be opened in the ledger.
Other Subsidiary books are:
 Purchase book
 Sales book
 Purchase Return book
 Sales Return book
 Bills Receivable book
 Bills Payable book
 Journal Proper
Bills Receivable & Bills Payble are not in syllabus.
 Purchase book:
All credit purchases of goods are recorded in the purchase journal whereas cash
purchase are recorded in the cash books .
Goods here, means only those things in which the firm is dealing.
Points to be noted while preparing purchases book:

Credit purchase of goods are only recorded in Purchase book.
Cash purchase are not recorded.
Purchase of assets in credit are also not recorded in Purchase book.
Amount of trade discount is deducted from the list price.
Periodic total of the purchase book is posted to the debit of
Purchases A/c in the Ledger.
Purchase (Journal) Book
Date Invoice Name of Supplier L.F Amt. (₹)
no. (Account to be credited)
1. Date
The date of purchase of goods on credit is recorded in this column.
2. Particulars
The name of the person or firm from whom the goods are purchased is
written in this column. Also it contains the description of the goods
purchase , its quantity, rate , gross amount, trade discount etc.
3. Invoice no.
The no. of the invoice or bill on the basis of which the transaction is being
recorded in the purchase book is mentioned in this column.
4. Ledger Folio or L.F

Page number of the ledger where the transactions are posted is recorded in
this column.
5. Total amount
The total amount of each transaction is shown in this column and the
amount of each transaction is posted to the credit of the Supplier A/c in
the Ledger.
The monthly total of the purchases book is posted to the debit of purchases
account in the ledger. Individual suppliers accounts may be posted daily.
Consider the following details obtained from M/s Kanika Traders and
observe how the entries are recorded in the purchase journal.
Date Details
2014 Purchased from M/s Neema Electronics (invoice no. 3250): 20 Mini-size T.V.@ ₹
Aug 04 2,000 per piece . 15 Tape recorders @ ₹ 12,500 per piece. Trade discount on all
items @ 20 %.
Aug 10 Bought from M/s Pawan Electronics (invoice no. 8260): 10 Video cassettes @ ₹
150 per piece , 20 Tape recorders @ ₹ 1650 per piece. Trade discount @ 10 % on
purchases.
Aug 18 Purchased from M/s Northern Electronics (invoice no. 4256): 15 Northern stereos
@ ₹ 4,000 per piece , 20 Northern colour T.V. @ ₹ 14,500 per piece .
Trade discount @ 12.5%.
Aug 26 Purchased from M/s Neema Electronics (invoice no. 3294): 10 Mini-size T.V.@ ₹
1,000 per piece . 5 ColourT.V. @ ₹ 12,500 per piece. Trade discount on all items
@ 20 %.
Aug 29 Bought from M/s Pawan Electronics (invoice no. 8281):210 Video cassettes @ ₹
150 per piece , 25 Tape recorders @ ₹ 1600 per piece. Trade discount @ 10 % on
purchases.
Books of Kanika Traders
Purchase (Journal) Book

Date Invoice Name of Supplier L.F Amt. (₹)
no. (Account to be credited)
2014
Aug 04 3250 Neema Electronics 1,82,000
Aug 10 8260 Pawan Electronics 31,050
Aug 18 4256 Northern Electronics 3,06,250
Aug 26 3294 Neema Electronics 54,000
Aug 29 8281 Pawan Electronics 38,700
Aug 31 6,12,000
Books of Kanika Electronics
Neema Electronics
2014
Aug 04 Purchases 1,82,000
Aug 26 Purchases 54,000
Pawan Electronics
2014
Northern Electronics
2014
Aug 18 Purchases 3,06,250
Purchases A/c
2014
Aug 31 Sundries as per 6,12,000
Purchases Journal
Purchase Return Book
In this book purchase return of goods are recorded.
Sometimes goods purchase are return to the supplier. For various reasons such
as:
1. Inferior quality
2. Defective goods
3. Not as per order
4. Damaged in transit etc.
For every return , a document is prepared which is known as debit note.
A debit note is a document evidencing a debit to be raised against a party for

reasons other than sale on credit.
DEBIT NOTE IS PREPARED FOR FOLLOWING :
a) For returning the goods to the supplier.

b) When an additional sum is recoverable from a customer.
Purchase Return (Journal) Book

Date Debit Particulars L.F Amt. (₹)
Note No.
SOLUTION : Purchase Return Book or Return Owtward Book
Date Particulars Debit L.F. Details Purchase Total

(Name of the Supplier ) Note Return Amount
Account to be Debited) no. ₹ ₹
2017
June 15 Radha Krishan & Sons. New Delhi 140 20,000
Less : Trade Discount @ 10% 2,000
18,000 18,000 18,000
June 20 Gopalsons , New Delhi 141 50,000 50,000 50,000
June 25 Raghubir Prasad , New Delhi 145 10,000 10,000 10,000

Total 78,000 78,000
 Sales book
All credit sales of stock are recorded in the sales journal. Cash sales are recorded in
the journal.
Points to be considered while preparing sales book .

a. Cash sales are not recorded in sales book.
b. Credit sale of any item other than goods are not recorded in
sales book .
c. Amount of trade discount is deducted from list price.
d. Periodic total of the sales book is posted to the credit of sales
account in the ledger.
Sales (Journal) Book

Date Invoice no. Name of the Customer L.F Amt. (₹)
(Account to be Debited)
Explaination of the Columns of Sales Book:

1) Date
The date of the sale of goods on credit is recorded in this column.
2) Particulars
In addition to the name of the customers , this column also contains the description of
Goods sold, its Quality , Rate , Gross amount , Trade discount etc.
3) Invoice No.
4) Ledger Folio L.F
5) Total Amount
Total amount of each transaction is shown in this column and the amount of each
transaction is posted to the debit of the customer’s account in the Ledger.
SOLUTION : Navketan Furniture House , Ludhiana
Sales Book
Date Particulars Invoice L.F. Details Sale Total
(Name of the Customer) no. Amount
Account to be Debited) ₹ ₹ ₹
2018
May 1 Five Star Furniture Co., Patiala 2,70,000
150 Chairs @ ₹ 1,800 each 1,80,000
36 Tables @ ₹ 5,000 each 4,50,000
3,60,000 3,60,000 3,60,000
May 15 Vishal Furniture House , Amritsar
10 Almirahs @ ₹ 11,000 each 1,10,000
50 Sofa sets @ ₹ 18,000 each 90,000
2,00,000
1,70,000 1,70,000 1,70,000
May 20 Prakash Furniture House , New Delhi
100 Chairs @ ₹ 2,000 each 2,00,000
1,90,000 1,90,000 1,90,000
May 30 Total 7,20,000 7,20,000
 Sales Return Book
This book is used to record the return of goods which were sold to the customers earlier.
This book is also known as return inward book .
A document is prepared to record the details of sales return known as Credit Note .
Note is also sent:
a) When a sales invoice is overcharged by mistake
b) A sales invoice is overcast
c) Some special discount is allowed to the customer because of defective goods
Sales Return (Journal) Book

Credit Note Name of the Customer L.F Amt. (₹)
(Account to be Credited)
SOLUTION : Sales Return Book or Returns Inward Book

Date Particulars Credit L.F. Details Sale Total
(Name of the Customer ) Note Returns Amount
Account to be Credited) no. ₹ ₹ ₹
2018
April 6 Ganga Parshad & Co, Karnal (Haryana) 6,000
Less : Trade Discount @ 15% 900 5,100 5,100
5,100
April 12 Shyam Oil Mills , Yamunanagar (Haryana) 40,000 40,000 40,000
April 18 Sanjay & Co, Faridabad (Haryana)

2,500 2,500 2,500
April 30 Total 47,600 47,600 47,6000

Solve Q. no. 13 to 16 given at page no. 146, 147, 148.

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In every organisation there are various small payments required to be made.

These payments are generally repetative in nature.

A petty cashier is appointed by every organisation to maintain the records of

It is the classification process in the accounting system . All transactions relating a

“A ledger is a book which contains all accounts of the business organisation

It helps in finding out net results of all transactions in respect of a particular

Ledger helps in providing the following information:

3. How much amount has been spent on each head of expenditure.

As an account in ‘T’- shape , therefore ; sometimes it is called called ‘T’ account.

 Title of the Account

Rules for posting :

1. All transaction relating to an account should be entered at one place.

Dr. Journal Entry Cr.

Date Particulars L.F Amt. (₹) Amt. (₹)

The above entry will be posted into Ledger A/c’s as follows:

Date Particulars L.F Amt. (₹) Amt. (₹)

Discount Allowed A/c

Gopal & Co.

Date Particulars J.F Amt.(₹) Date Particulars J.F Amt.(₹)

Example A : Started business with cash 20,000

Dr. Journal Entry Cr.

Date Particulars L.F Amt. (₹) Amt. (₹)

To Capital A/c 20,000

Item corresponding to with cash i.e. Capital A/c will be debited in

Dr. Journal Entry Cr.

Date Particulars L.F Amt. (₹) Amt. (₹)

To Cash A/c 15,000

Since, ledger is prepared for Purchase A/c , position of purchase will be

Dr. Journal Entry Cr.

Date Particulars L.F Amt. (₹) Amt. (₹)

To Sales A/c 25,000

Dr. Journal Entry Cr.

Date Particulars L.F Amt. (₹) Amt. (₹)

To Cash A/c 2,000

Item corresponding with wages i.e. wages will be credited in Ledger of

Dr. Journal Entry Cr.

Date Particulars L.F Amt. (₹) Amt. (₹)

To Cash A/c 5,000

Item corresponding to Cash will be debiited in Ledger of Salary A/c.

Balancing means adjustment of total of the ledger . It helps in finding

Ledgers have two types of Balances :

Balancing activity is conducted for ledger of Personal & Real A/c

Balancing of a ledger done on last side of the accounting period.

Nominal account totals are written as they are Debit amount

 As the account of all the assets will be debited in an Opening entry, an

 Similarly , as the A/c’s of the liabilities will be credited in an Opening

 Purchase Return book

 Sales Return book

 Bills Receivable book

 Bills Payable book

Bills Receivable & Bills Payble are not in syllabus.

Points to be noted while preparing purchases book:

4. Ledger Folio or L.F

Books of Kanika Traders

Purchase (Journal) Book

In this book purchase return of goods are recorded.

For every return , a document is prepared which is known as debit note.

A debit note is a document evidencing a debit to be raised against a party for

DEBIT NOTE IS PREPARED FOR FOLLOWING :

a) For returning the goods to the supplier.

Purchase Return (Journal) Book

Date Particulars Debit L.F. Details Purchase Total

June 20 Gopalsons , New Delhi 141 50,000 50,000 50,000

June 25 Raghubir Prasad , New Delhi 145 10,000 10,000 10,000