the ledger by eingel09


									The Ledger
        Ledger refers to the accounting book in which the accounts and their related amounts as recorded in
the journal are posted periodically. This book is known as the “book of final entry” because the balance of
accounts in the ledger is used to prepare financial statements.

        The basic form of the ledger is the T-account. Hence, it is sometimes called the “modified T-account”.
There are two kinds of ledger: general ledger and the subsidiary ledger.

The General Ledger is a grouping of all accounts used in preparing the financial statements. It is generally called
a controlling account because it report in summarized form of activities that have taken place as recorded in its
subsidiary ledger.

The parts of the formal general ledger are as follows:


 Name of the account                                                              An account number which is
 (Cash,        Accounts             Item describes the nature of                  assigned to each account title
 Receivable, etc.)                  transaction in which the                      is used to facilitate recording
                                    account is involved                           and cross-referencing.

                                              GENERAL LEDGER
Account: Accounts Receivable                                                           Account No. 120
Date              Item                PR      Debit      Date                   Item            PR    Credit
200x                                                     200x
1/1    Beginning Balance                  50,000         1/15     Collections                    CI02   100,000
       Sales on account              CI01 200,000

Date identifies when          PR identifies the page            The transaction columns are used for
the      transaction          number of general                 recording the amount of transaction from the
happened                      journal from which the            general journal.
                              information is taken              Peso sign and decimal point are ignored.
                                                                This is a two-column general ledger. A ledger
                                                                could also be three columns or two columns


A subsidiary ledger is a group of like accounts that contains the independent data of a specific general ledger.
Whenever individualized data must be maintained for a specific general ledger account, a subsidiary ledger is

An example of subsidiary ledger is the respective individual record of various receivables from customers. The
total amount of this record is the controlling account – that is, the general ledger.

The parts of the subsidiary ledger are as follows:
                      The description column            A customer’s number is used
Name        and       describes the nature of           as a reference in keeping
address      of       transaction                       customer’s record
                             Accounts Receivable
                             SUBSIDIARY LEDGER

Name:          Balingkit Furniture Enterprises                                               GENERAL LEDGER
Address:       102 Magsaysay St., Baguio City            Customer No:   20                   Account: Accounts
 Date                                            Transaction                                     Receivable
 200x           Description            PR      Debit      Credit   Balance                   TOTAL AMOUNT:
  1/1    Previous Balance                                          50,000                           150,000

       Name:             Cuesta Enterprises
       Address:          28 General Luna St., Baguio City            Customer No:    28
       Date                                              Transaction
       200x              ITEM             PR         Debit         Credit      Balance
         1/5    Sales                                200,000                    200,000
        1/30    Collection                                          100,000     100,000

      The date should be          The ( ) in the post-       The       transaction      The totals of the
      the same on the             reference       (PR)       columns reflect the        running      balances
      general journal and         indicates that the         debits and credits of      comprise the total
      the general edger           posting has been           the           specific     amount      in    the
                                  effected        and        customer’s account         general ledger

   1. The 150, 000 accounts receivable in the general ledger is the total of the claims from Balingit and
       Cuesta which is 50,000 and 100,000, respectively
   2. Some accountants journalize a single account title consisting of both the general ledger and subsidiary
       ledger accounts as the following:

                                                GENERAL LEDGER
   Date                                                               Page Number:                       12
   200x                      Descriptions                      PR          Debit                Credit
     1/5      Accounts receivable – Cuesta Enterprises                        200,000

           The general ledger account        The subsidiary ledger

        After transactions are recorded initially in the journal books, they are transferred to the general ledger,
a process referred to by the accountants as “posting”.

       While the journal records the transactions in their chronological order, the ledger organizes the
information by account.
        Using the general journal for the purpose of knowing the balance of an account could be very
inconvenient because accounts are not recorded as a group in the journal. Gathering information about a
particular account, one would need to scan all the pages of the journal. Accordingly, the ledger complements
the journal by providing the running balance of an account.


1. The two-money column ledger is a conventional form of a ledger as shown below:

                                   GENERAL LEDGER
Account:    ______________________________                                       Account No. ________
Date             Item           PR Debit   Date                       Item               PR    Credit

Note: Observe that the ledger is just an expanded T-Account with the addition of date, item and post-reference
(PR) columns.

2. The three-money column ledger is a balance column ledger account as shown below:

                              GENERAL LEDGER
       ACCOUNT: ______________________________________ Account No: _______
        Date          ITEM          PR      Debit        Credit   Balance

3. The four-money column ledger is also a balance-column ledger account

                                   GENERAL LEDGER
ACCOUNT : ______________________________________                                           Account No: _____
                                               Transaction                                 Balance
   Date         ITEM           PR          Debit         Credit                      Debit         Credit


To effect the posting of economic transactions from the general journal to the general ledger, the following
procedures are generally observed:

In the Ledger:

   Locate the corresponding account in the ledger
   Transfer the following information from the journal to the respective account ledger:
            o Date
            o Explanation
            o Debit or credit amount
   Place the page of the journal where the information transferred is located in the post-reference column of
    the ledger account.

In the Journal:

   Place in the post-reference column of the journal the number of the account as indicated in the ledger.
             o Posting to the ledger is usually made periodically. The transactions recorded in the general
                 journal posted to the general ledger at the end of each day, week or month depending on the
                 needs of the business for an updated account balances.


Transaction: Mr. J invested 50,000 cash in his business evidenced by Official Receipt No. 005. The journal entry
and posting to the ledger would be:

                                     GENERAL JOURNAL
Date                                                 Page Number:                                12
200x                    Descriptions             PR       Debit                         Credit
  1/1     Cash                                 GL-01          50,000
              Mr. J, Capital                   GL-42                                        50,000
               To record owner’s investment in
          business per OR# 005

                     GENERAL LEDGER
Account No. 01
Account:    CASH
Date     Item      PR   Debit Date  Item                   PR    Credit
1/1              GJ-45  50,000

                                                               GENERAL LEDGER
                                          Account No. 42
                                          Account:    J, CAPITAL
                                          Date     Item      PR Debit Date Item                   PR     Credit
                                                                      1/1                        GJ-45   50,000

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