finance basics ledger

8/11/2019 Finance Basics Ledger

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Finance Basics

Introduction to Accounting Need for Accounting

Meaning of Accounting

Attributes of Accounting

Branches of Accounting

Users of Accounting Information

Accounting Cycle

Accounting Equation Introduction and Meaning

Effects of Business Transactions on Accounting Equation

Purchase of an asset of credit

Rules of Accounting Equation


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Finance Basics

Double Entry System Types of Accounting

Rules of the Double Entry System (Debit and Credit)

Advantage of Double Entry System

Journal Meaning of Journal

Objectives of Journal Rules of Journalizing

Miscellaneous Journal Entries


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Finance Basics

Ledger

Trial Balance

Cash Book


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Finance Basics

Ledger

Meaning of Ledger Ledger is the principal book of accounts. It

contains all the accounts of a business whetherreal, personal or nominal. It is also called thebook of final entry.

A ledger may be defined as a summary statementof all transactions relating to a person, asset,

expense or income which have taken placeduring a given period of time and shows their neteffect.


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Finance Basics

Ledger

Ledger posting

The following example will make the process of

posting clear:JOURNAL

Date Particulars

L.F.

Debit

(SAR)

Credit

(SAR)

2010April 1

Ramysa/c Dr.To Sales a/c

(Being goods sold on credit)

20002000


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Finance Basics

Ledger

Ledger postingLedger (RamysAccount)

Ledger (Sales Account)

Date Particulars Amount Date Particulars Amount

2010

April 1

To Sales a/c 2000


2010

April 1

By Ramysa/c 2000


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Finance Basics

Ledger

Ledger posting (More example)Ledger (Cash Account)


Jan 1

Jan 5

Jan 16

Jan 25

To Capital a/c

To Sales a/c

To Sales a/c

To Badr & Co.

10,000

1,700

650

2,850

Jan 3

Jan 4

Jan 7

Jan 26

Jan 31

Jan 31

By Furniture a/c

By Purchase a/c

By tele rent a/c

By bank a/c

By Salaries a/c

By Balance a/c

900

4,000

400

2,500

600

6,800

15,200 15,200

Feb 1 To Balance b/d 6,800


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Finance Basics

Ledger

Ledger posting (More example)Ledger (Sales Account)


Jan 31 To Balance c/d 5,250 Jan 1

Jan 5

Jan 16

By Badr & Co.

By Cash a/c

By Cash a/c

2,900

1,700

650

5,250 5,250

Feb 1 By Balance b/d 5,250


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Finance Basics

Ledger

Difference between Journal and Ledger

Journal Ledger

1. Nature It is the book of firstentry

It is the book of secondaryentry.

2. Record This is the book of

chronological record

The ledger is an analytical

record

3. Datewise Entries are mad

datewise

Postings are made

accountwise

4. Permanency This is only the

original record and

not a permanent

record

This is a permanent

record of various accounts


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Finance Basics

Ledger

Difference between Journal and Ledger

Journal Ledger

5. Processing The process ofjournal entries is

known as journalizing

The process is knows asposting

6. Narration The narration is given

after every entry.

The narration is not given.

7. Folio Folio of journal iswritten

Ledger folio is written

8. Basis in final

accounts

Final accounts cannot

be prepared directly

from journal

Ledger is the basis of

preparing the final

accounts

9. Balancing Journal is notbalanced

Every account is balanced


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Finance Basics

Ledger Advantages of Ledger

This is an important book of a business. It records thesummary of all the transactions effected in a specific period.

The following are the advantages of ledger:1. Knowledge of assets: Leger records each and every

asset separately; hence, it can readily give theknowledge of present value of asset.

2. Knowledge of purchases and sales: It can give a clearpicture of purchases and sales.

3. Knowledge of profit and loss: Ledgers are the basis ofprofit and loss account. No business result can beknown unless we prepare the profit and loss account.


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Finance Basics

Ledger Advantages of Ledger

4. Arithmetical accuracy: Ledgers are helpful for preparing

the trial balance. If in a trial balance both debit and

credit sides are equal, then it is evident that the ledger

balances are correctly carried forward. Thus, it is a

check of arithmetical accuracy.

5. Knowledge of income and expenditure: In ledger, a

separate account of income and expenditure is kept

which can tell us how much is spent on each item.

6. Helpful in preparing balance sheet: Various ledger

balances are carried to the trial balance, which is the

basis of the balance sheet.


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Finance Basics

Ledger Questions

Choose the correct answer

1. Ledger is a set of:a) balances

b) accounts

c) rules

d) None of these


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Finance Basics

Ledger Questions


1. Ledger is a set of:a) balances

b) accounts

c) rules

d) None of these


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Finance Basics

Ledger Questions


2. Assets always have .. balances:a) debit

b) credit

c) Both debit and credit

d) None of these


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Finance Basics

Ledger Questions


3. If the total of debit side of an account is higher thantotal of credit side, it is called balance:

a) debit

b) Credit

c) debit or credit

d) None of these


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Finance Basics

Ledger Questions


3. If the total of debit side of an account is higher thantotal of credit side, it is called balance:

a) debit

b) Credit

c) debit or credit

d) None of these


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Finance Basics

Ledger Questions


4. . Is the principal book of accounts.a) Ledger

b) Journal

c) Trial balance

d) None of these


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Finance Basics

Ledger Questions


4. . Is the principal book of accounts.a) Ledger

b) Journal

c) Trial balance

d) None of these


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Finance Basics

Ledger Questions


5. The process of transferring entries from journal toledger is called...

a) balancing

b) posting

c) recording

d) None of these


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Finance Basics

Ledger Questions


5. The process of transferring entries from journal toledger is called...

a) balancing

b) posting

c) recording

d) None of these

finance basics ledger

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