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Ledger and Trail Balance

Meaning and Need of Ledger

Ledger is the principal book of double entry system in which all the different accounts are

opened whether related to personal, real or nominal. Since this book is prepared after journal and

other subsidiary books, this book is also known as book of secondary entry.

Balancing of Ledger Accounts:

1. If debit side total is more it is debit balance.

2. If credit side total is more it is credit balance.

Accounts are divided into two parts for the purpose of balancing (1) Accounts which are closed

by transfer to Profit and Loss Account to determine profit (nominal accounts). (2) Accounts

which are shown in Balance Sheet to express financial position (real and personal accounts).

Example: 1

Journalize the following transactions. Post them into the ledger and take balances of the


April 1 Samrat started business with cash Rs. 40, 0000.
April 3 Goods Purchased for Cash Rs.1, 20,000.
April 5 Goods Purchased from Bhanu Rs. 80,000.
April 7 Goods Sold for Cash Rs.40, 000.
April 10 Goods Sold for Bharat Kumar Rs.1, 20,000.
April 15 Cash Received from Bharat Kumar Rs.1, 15,000.
April 15 He was allowed discount Rs. 5,000.
April 17 Paid Charity Rs.1, 000.
April 18 Paid to Bhanu Rs.39, 000.
April 18 Received Discount from him Rs. 1,000.
April 25 Paid Salary Rs. 5,000.
April 25 Paid Rent Rs.4, 000.
April 27 Deposited into Bank Rs.20, 000.
April 30 Purchased furniture from Patel and paid by cheque Rs. 15,000.
Ledger Posting from Subsidiary Books

Posting from Sales Book: When goods are sold on credit, purchaser becomes a debtor and his
account is debited and sales account is credited. While posting these entries in ledger each
debtor’s account is debited by writing “To Sales a/c” on the debit side of the account. Sales
account in ledger is credited by the total of the sales book by writing “By Sundries as per sales
Posting from Purchases Book: Purchases account in ledger is debited by writing “To Sundries
as per purchases book” by the total of purchases book. Accounts of individual creditors in
ledgers are credited by writing “By Purchases a/c”.
Posting from Sales Returns Book: Goods sold earlier are when received back from debtors;
their accounts in ledger are credited by writing “By Sales Returns Account” on the credit side.
Sales Returns account is debited by writing “To Sundries as per Sales Returns Book” on the
debit side.
Posting from Purchases Returns Book: On returns being made by suppliers their account in
ledger is debited by writing “To Purchases Returns a/c” on the debit and Purchases Returns
Account is credited by writing “By Sundries as per purchases returns book” on the credit side of
the account.

Example 2:

Enter the following transactions in the Journal Proper of M/s Rawat and Co. and post into the

Sept. 5 Purchased Furniture from Sunil on credit Rs.1, 16,000
Sept.10 Sold Old Furniture to Naman on credit Rs.14, 000
Sept.12 Goods withdrew for personal use Rs.11, 500
Sept.14 Anil become insolvent and bad debts written off Rs.1, 500
Sept.22 Goods given away as donation Rs.1, 450
Sept.28 Goods lost by fire Rs.1, 800.

Trail Balance

As per accounting equation, debit side of the books is always equal to credit side of the books
and thus, to find out arithmetical accuracy of the accounts and confirm that debit side is equal to
credit side, trail balance is prepared. Trail Balance is a statement and it is not an account.

Objects of Trail Balance:

1. Reliability of Correctness of Ledger: In order to find out the amounts posted in the
ledger is correctly posted or not, trail balance is prepared.

2. Summary of Ledger Accounts: Trail Balance shows summary of all ledger accounts on
a particular date.

3. Helpful in Preparation of Final Accounts: This also helps in the preparation of final
accounts since final accounts are prepared after making trail balance.

4. Helpful in Detecting Errors: Not all, but trail balance helps in the detecting the errors
made in the posting of amounts in accounts.

Methods of Preparation of Trail Balance:

1. Total Method.
2. Balance Method.
3. Total and Balance Combined Method.

1. Total Method: The debit and credit totaled separately for all ledger accounts and they
are entered into debit and credit side of the trail balance in front of the name of the
2. Balance Method: The balances of different ledgers accounts are entered in the trail
balance column as per their balances and accounts which do not have balances are not
entered into the trial balance.
3. Total and Balance Combined Method: Under this method four amount columns are
maintained. First two for debit and credit totals and last two for debit and credit balances.
It has the advantages of both the methods, but needs more time and energy.

Schedule of Debtors and Creditors:

The personal accounts of customers generally have excess debit total are called debtors whereas
suppliers with excess credit total are creditors. These are entered in the Schedule of Debtors and
Schedule of Creditors respectively.

Preparation of Trial Balance by identifying the nature of accounts: The balances of accounts
depend on their nature. Assets and Expenses have debit balances whereas Liabilities, Capital and
Income have credit balances.