Subdivision Of journal

                      Subdivision Of journal

From the above discussion it is clear that for a ledger business concern, one journal is not  sufficient to record all business transactions and there should be  several journal and several clerks to record the transaction. But how many journal a business should have?

 We know that different types of transactions take place in a business concern. Some transactions take place repeatedly (hundreds to thousands times in a year ) and some transactions take place once or twice in a year. Obviously, it is not logical to provide a separate journal for transactions which rarely take place. 

For this purpose different groups of transactions are made and separate book is provided  for each group . Each group is consisted of similar types of transactions:

(1) Special Journal 

(2) General Journal

                       Special Journal

By special journal we mean, a journal in which transactions relating to a certain special groups are recorded. 

Special journal is again subdivided into eight groups:

(a) Purchases Books Or Purchase Journal:

Whenever  goods are purchase by a business on credit , these are recorded in these books.(cash is not involved). So this is a 'special journal' only and only for credit purchases. Other name of this book are Purchase Day Book, Bought Book, Bought journal, Inward Invoice Book.  

(b) Sales Book Or Sales Journal:

When ever goods are sold to the customers on credit (without receiving cash immediately ) , these are recorded in this book So this is a 'special journal' only and only for credit sales. Other name of this book are Sales Day Book,  Inward Invoice Book or   only Day Book.

(c) Purchases Returns Books:

The goods bought on credit if subsequently return by us to the suppliers for some solid reasons are recorded in this book. This book is also known as Return Outward Book.

(d) Sales Returns Books:

The goods Sold on credit if subsequently return by the customers  for some solid reasons are recorded in this book. This book is also known as Return Inward Book.

(e) Bill Receivable Books:

Sometimes debtors pay by means of accepting a bill of exchange instead of cash. All the bills (acceptance) received from the debtors are recorded in this book.

(f) Bill Payable Books:

Sometimes creditors are  paid  by means of accepting  bills drawn by them instead of cash. All the bills (acceptance)given to the creditors are recorded in this book.

(g) Cash Book Or Cash Journal:

All the transactions in which cash is involved, (whether the business has paid cash or receive cash ) are recorded in this book.

(h) Petty Cash Book:

Apart from cash book, for small or petty expenses, another book is maintained which is known as "Petty Cash Book" . The expenses such as, traveling , coolie, postage, etc. are recorded in this book It is a part of a cash book.

                      General Journal

The transactions which do not fall within the scope of above mentioned books, are recorded in this "Journal" . e.g. purchase of an asset on credit, depreciation on assets, expenses payable, bad debts etc. It is also known as Journal proper , Modern Journal or principle journal. Some authors call it only "Journal".

Note:

The main function of the above books is to supply necessary information to the ledger. All the transactions are posted in the ledger on the basis of information available from these books, So these books are called 'Subsidiary Books' of ledger.

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Special Journals

                        Special Journals

In small business concern only one journal and one ledger may serve the purpose, because the number of transactions is very small. But in large  business concerns number of transactions are numerous, just one journal and one ledger will not do the job . That will cause much inconvenience .i.e , if if we have only one journal in a ledger scale business, it is not possible for one book-keeper to record all the transactions in time. On the other hand, it will not possible for more then one persons to use the same journal with the result that the accounting work will fall in arrear.Under double entry system transactions are first of all recorded in journal and thereafter posted to the ledger. We already know that the "Ledger" is the main book of account. The book which gives additional help to the main book (Ledger) is called Subsidiary Book. Thus the journal is the subsidiary book and the ledger is the main book. The 'journal' is an old french word meaning 'Daily Record' , and it is called so because everything that happens everyday is recorded into the book at once , before the exact details of transactions are forgotten. It is in journal that the 'Original Documents' are recorded.

There are, however , some more factors which necessitate the use of more than one subsidiary book (Journal:)

(1) If all the transactions are recorded in one book (Journal) , the book will be very large, bulky and difficult to handle .

(2) If one book-keeper is ask to record all the transactions, the possibility of errors and mistakes will be great. It will be also create opportunities for committing fraud.

(3) If all the transactions are recorded in one book, it will be difficult to trace out a particular transaction in future.

Advantages:

The following advantages are derived from division of journal:

(1)Because of subdivision the books cannot be bulky and hence there will be no difficulty in handling them.
(2) Accounting work is divided amongst a large number of employees. So work is done nicely and promptly and no work  is left in arrear.
(3) Each employee can be held responsible for mistakes committed by him. This serves as caution and care to the employees.
(4) The efficiency increase, because of the division of labour.
(5) By keeping the book under the custody of different employees the chances of frauds and defalcation are minimized.

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Insolvency Of One Party

              Insolvency Of One Party

When a person or a party is declared by a court as insolvent or bankrupt he is considered to be unable to pay his liabilities. It means, that bills accepted by him will be naturally dishonoured. Therefore, when it is known that a person has become insolvent, entry for dishonour of the bill should be passed both in the books of the drawer and the acceptor (insolvent party).

When a person becomes insolvent, his private property, if he has any, is sold by a liquidator appointed by the court. Something may be received from his estate. Thus after passing entries for dishonour, we should prepare acceptor's account in the books of the creditors (drawer).

The acceptor's account in the books of the drawer will disclose the net amount due from him. Generally the amount received from the estate of insolvent party is less than the amount due from him. The unsatisfied balance is treated as bad debts and debited to "bad debts" account in the books of the drawer and credited to "Deficiency account" in the books of the drawee.

On the inslovency of the drawee , the following entries are passed in the both parties:

In Drawer's Books:

(a) Entry for dishonour in usual manner.
(b) Cash A/c                 {with actual amount receive}
      Bad debts A/c         {unsatisfied amount}
      
              Drawee's A/c   {full amount}
Final dividend received and the balance treated as bad debts.

In Drawee's books:

(a) Entry for dishonour in usual way.
(b) Drawee's A/c            {full amount}
            Cash A/c             {with actual amount paid}
            Deficiency A/c    {with amount un paid}
Final claim paid to the creditor.

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Renewal Of A Bill

                  Renewal Of A Bill

Sometimes, the acceptor of a bill finds himself unable to meet his acceptance on the due date. So he may approach the drawer of the bill  before the maturity date arrives, to cancel the old bill and draw a new bill with extended date. The acceptor in this case will, of course, have to pay interest for extended period. Thus the cancellation of the old before maturity in return for a new bill (which includes interest) for an extended period is called "Renewal Of Bill". 

There are two new ways to renewal of a bill of exchange:

(a)The acceptor pays interest in cash and a new bill is accepted equal to the amount of the old bill.

(b)The  acceptor pays a part of the amount of the bill in cash and accepts a new bill for the balance plus interest.

The renewal of the bill under different conditions is explained with the help of following examples:

(1) On 1st January, 2005 A (the creditor) draws a bill for Rs.1,000 on his debtor B at 3 months. The due date of the bill is 4th April. On  31st March, the acceptor (B) approaches the drawer (A) and shows his inability to meet the bill. He request the drawer to cancel the old bill and on him a new bill for extended period. A agree on the condition that he will charge 20 as interest. Thus a new bill is drawn for Rs. 1,000+20 = 1020. The bill is accepted by the B.

(2) On 31st March, before the due date of the same bill, B the acceptor , approaches the drawer and shows his inability to meet the bill. He request the drawer to cancel the old bill and on him a new bill for extended period. A agree on the condition that he will charge 20 as interest. B pays Rs.20 for interest at the same time and accepts a new bill at two months for Rs. 1,000

(3)On 31st March the acceptor (B) requests the drawer for the cancellation of the old bill. A agrees. B pays 500 in cash as a part of the amount of the old bill and accepts a fresh bill for Rs. 510 (including Rs. 10 for interest) at two months (for an extended period).

Difference between Dishonour and Renewal of a bill

When a bill is duly presented by the holder to the acceptor on the due date and the acceptor refuses to meet the bill, this is a case of dishonour of the bill.

On the other hand, if the acceptor approaches the drawer himself and shows his inability to meet the bill and request the drawer to cancel the old bill and to draw on him a new bill for an extended period, it will be a case of renewal of the bill. 

 

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Dishonour Of A Bill Of Exchange

          Dishonour Of A Bill Of Exchange

We have discussed all options or possibilities in which a bill of exchange is presented to the acceptor on the due date and he readily honours it. Now let us see what happens when a bill is not honoured by the acceptor on the due date (cash is not paid to holder of the bill)? A bill of exchange is said to be Dishonoured when its acceptor refuse to pay the amount of the bill to the holder of the bill on its maturity. The bill then become useless and the party from whom it has been received will be liable to pay the for the amount. It is very important to know that, when a bill is dishonoured, in whose possession it  was ? because when a bill is dishonoured, all the parties involved are affected and books of accounts of all the parties have to be adjusted. 

For example:

 A draws a bill of Rs.5000 on B and B accepts it and returns it to A. A retains the bill in his possession till the due date . On the due date the bill is not honoured by the acceptor. We can see, there are two parties involved whose books are to be adjusted. If suppose, A has discounted or endorsed the bill, then there are three parties involved and books of accounts of all the parties are affected.

                               Notary Public

 

When a bill is dishonoured, the holder of the bill , (drawer, banker, endorsee or any other party) in order to make a strong ground for drawing legal proceeding against the acceptor may get the official recognition that the bill has been dishonoured. He goes to an official called Notary Public, and gives the bill to him .The Notary Public will present the bill for payment again to the acceptor and if the money is received he will hand over the money to the original party. But if the bill is again dishonoured, the notary public will note the face of dishonour and the reasons of dishonoured on the bill and will give back to the holder of the bill . It is now a strong evidence against the acceptor, in case, if the case id filed in the court.

                      Noting Charges

For this service the notary public will charge a small fee obviously from the holder of the bill. This fee is known as "noting charges" and is always recoverable from the party which is responsible for the dishonour (the acceptor).

Generally who pays noting charges :

(a) If the bill is retain by the drawer = The drawer will pay .

(b)If the bill has discounted = The bank will pay.

(c) If the bill has endorsed to the endorsee = The endorsee will pay. 

(d) If the endorsee has endorsed the bill to his creditor (a new endorse) = The new endorse will pay.

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BILL SENT TO THE BANK

           BILL SENT TO THE BANK 

(Fourth option)

If a businessman has numerous bills that he got from various debtors he may send those bills to his banker for collection purpose. It should be remembered that, this is not discounting of bill, the bills are sent for safety and collection purpose. The bank keeps the bill in its custody till the due date and on the due dates, the bank will present the bill to the various acceptors. After collecting the amount, the bank transfers the amount to the account of its customer (by giving credit to his account ). The bank charges some nominal fee from the customer for services he rendered. This is an expense to the customer and revenue for the bank.

The drawer opens a temporary account in his books, when the bill is sent to the bank for collection. The name of account is "Bank for collection account ". The bill is transferred to this account and the following entry is passed in journal of Drawer.

Bank for collection account............. Dr. XX.

       Bill Receivable account.................Cr. XX.

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ENDORSEMENT OF BILL OF EXCHANGE

  ENDORSEMENT OF BILL OF EXCHANGE

The drawer or holder of the bill may endorse (transfer) the bill in favour of his creditor for the clearance of his own debts. A bill of exchange is a "negotiable instrument" i.e. A document which is transferable by delivery without notice to the third party liable (drawee).

If the holder of the bill puts his signature on the back of the bill with a view to transfer the property contained in it (right to receive money  from the acceptor), then he becomes Endorser, and the person to whom the bill is transferred will become Endorsee.

                        Definition

This procedure by which a bill is transferred from one person to another for the settlement of debts is called Endorsement.

 

For Example: 

A drews a bill on B for Rs. 5,000 which is accepted by B at three months. A bought goods from C worth Rs.7,000 on credit basis. Now C is creditor of A for Rs. 7000. A endorsed the bill in favour of his creditor C for paying his debts up to the extent of Rs. 5,000. Thus C is now creditors of A up to the extent of Rs. 2000 only i.e. 7,000-5,000=2,000

Now C is the holder of the bill of exchange, which he has got from A . Being holder of the bill, C has all the four options before him. He may retain the bill till the due date. On the due date he will present the bill to the acceptor and receive cash from him.

One important point that we should remember is, whenever a bill is discounted or endorse, it will not be considered as the property (asset) of the person who has discounted or endorsed it and the Bill Receivable account is written off as it is no longer receivable . However, there is one possibility in which he can still affected by the bill i.e. the person liable to pay. So, this is a contingent liability of the endorser until the bill is honoured by the acceptor.

An Endorse Bill Is Contingent Liability Of The Endorser:

For example, on maturity date , C presented the bill t the acceptor B but he refused to make payment. C will receive the amount from the endorser A. So, A has to take up the liability and in return  A will receive the amount from B.

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Discounting Of A Bill Of Exchange

        Discounting Of A Bill Of Exchange

An Other Use Of Bill:

  When the acceptor of the bill is a reputable person the bill is as good as money, and any bank will discount it.

    

        If the drawer of the bill does not want to wait till the due date and he is in need of money, he may sell his bill to a bank at a certain rate of discount. The bill will be endorsed by the drawer with a signed and dated order to pay the bank. The bank will become then the holder and the owner of the bill. After getting the bill, the bank will pay cash to the drawer equal to the face value less interest or discount at an agreed rate from the number of days it has to run. This process is known as Discounting Of Bill.

For Example:

A drawer has a bill for Rs.10,000. He discounted his bill with his banker two months before its due date at 15%  p.a rate of discount. Discount will be calculated as,

             10,000× 15/100× 2/12 = 250

Thus the drawer will receive cash worth Rs.9750 and will bear the loss of Rs.250.

The bank will keep this bill in its possession till the due date. On maturity the bank will present the bill to the acceptor and will receive cash from him (if the bill is honoured). In case, the acceptor does not make the payment to the bank, then the drawer or any person who has discounted the bill will have to take his liability (he will pay cash to the bank).

Discounted bill is a contingent liability of the drawer:

There for we see that until a bill is honoured on the due date, there is always a chance that the drawer will become liable on the  bill. This is called a contingent liability-- a liability that will only arise if a certain event occurs -- acceptor does not honour the bill.

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Acceptance Of Bill Of Exchange

        Acceptance Of Bill Of Exchange

Every bill has to be accepted by the drawee. After the drawer has prepared the draft, it is sent to the drawee for the acceptance. Acceptance is an indication on the part of the drawee that he is willing to accept the liability under the bill. Acceptance is given by putting his signature across the face of the bill together with the place and the date. After acceptance , a  bill a bill of exchange is called Acceptance.

How Transactions Relating To Bills OF 
Exchange Are Recorded?

In a business concern, numerous bills of exchange are drawn and accepted. Generally under such condition special journal are used to record the bill of exchange, called Bill Receivable Journal and Bill Payable Journal. From these two journals the totals are posted to Bill Receivable Journal and Bill Payable Journal respectively.

Every Bill Has Two Different Aspects:

(a) To the drawer who has sold goods and want to 

be paid from them, it is a Bill Receivable, he hopes to receive money on the due date. It is a sort of asset for the drawer and as good as money.

(b) To the acceptor of the bill, who has bought  goods on credit and has agreed to honour the bill on the due date, it is a bill Payable. The acceptor must arrange in due course the funds available to honour the bill when it falls due.

Accounting Treatment For Bill Receivable and Bill Payable 

 

We can understand the accounting of bills of exchange with the help of an illustration. Let us suppose, Mr. Salman is a manufacturer of shoes and Mr. Imran is a retail trader of shoes. Mr Imran (the  buyer) wishes to buy shoes  (goods) from the manufacturer (seller) but he has no money. He is agreed to accept the bill of exchange for 90 days, if goods are sold to him on credit basics. So both the parties agreed. Mr. Salman supplies goods to Mr. Imran Rs. 10,000 for a 90 days credit and draws upon him a bill for the full value of goods for 90 days on 1st January ,2005.   

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Types of Bill of Exchange

              Types of Bill of Exchange 

The bills of exchange are classified on two different basics: 

(1)On The Basis Of Period

(2) On The Basis Of Exchange

(1) Period

On the basis of period bills are of two types:

(a)  Demand Bill Of Exchange:

There is no fixed date for the payment of such bill. They become payable any time, when they are presented by the holder.

(b) Terms Bills Of Exchange:

These bills are payable after specified period of time. The period after which these bills become due for payment is called Tenor.

(2) Object

On the basis of purpose of writing the bill, the bills can be classified as:

(a) Trade Bill

These bills are drawn and accepted against the sale and purchase of goods on credit. These are by the seller and accepted by the buyer.

(b) Accommodation Bills

Such bills do not involve any sale and purchase of goods, rather they are drawn without any consideration. The purpose is to help any party or both the parties financially.

Classification Of Bill of Exchange:

(a) Inland Bills

These bills are drawn in a country upon persons living in the same country or made payable in the same country. Both drawer and acceptor reside in the same country.

(b) Foreign Bills

These bills are drawn in one country and accepted and payable in another country, e.g. a bill drawn in Pakistan and accepted and payable in London.

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how bill of exchange work

How a bill of Exchange Work?

How a Bill Of Exchange operate first we have to read the following points:

(1) A person who wants to purchase goods but he has no money, may agree to accept the bill of exchange drawn upon him at some future date for the value of the goods he wants to purchase. For example, Mr.B(a retail trader) wishes to purchase furniture from a furniture manufacturer(Mr.A) has no money. Mr.A is agree to sell furniture for a 90 days credit worth Rs.10,000.

(2)The drawer (Mr.A) draws a bill for Rs.10,000 on the cutomer (Mr.B), the drawee, who accept it (thus becoming the acceptor of the bill) and returns it to the drawer. The drawer delivers the furniture and has 90 days bill for Rs. 10,000.

(3) He can keep the bill till due date and present it on the due date before the acceptor.

The use of Bill Of Exchange:

(4) When a drawee (the acceptor) acknowledges the obligation in the bill he is bound by law to honour the bill on the due date. If he is a reputable person the bill is as good as money, any bank will discount it . There are special kind of banks which do this job and are called "discount houses". What do the discount house do ? They cash the bill by giving the drawer the present value of the bill.

present value = face value of the bill₋ interest at an    agreed rate for the number of days the  bank has to wait

so the drawer who discounts the bill with the bank get less then the face value.

(5) On the due the date the bank will present the bill to the acceptor, who honours it by paying the full value. The bank has entered the amount of interest it deducted when it discounted the bill.

Where does the acceptor get the money to honour the bill?

The answer is that he was given 90 days to sell the the goods at profit, he is liable to honour the bill.

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Accounting For Bill Of Exchange

   ACCOUNTING FOR BILL OF EXCHANGE

No businessman wants to sell goods on credit to his customers who may prove unable or unwilling to pay their debts. Today, however, in every field of retail trade it appears that sales and profits can be increased by selling goods on credit basics. The manufacturers and the wholesalers sell goods mostly on credit. Credit is very powerful instrument to promote sales, so most of the business transactions, in most business concerns, are carried out on credit basis.

                A bill of exchange is a method of payment used between businessman which has certain advantages over other methods of payments. It has a very precise definition which is given below, from the bill of exchange Act 1882.

A Bill OF Exchange is defined as:

     " An unconditional order in writing, addressed by one person  and signed by the person giving it,requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum  certain in money to or to the order of a specified  person, or to the bearer" 

The following points must be kept in mind to understand the definition:

(a)  The person who writes out the order to pay is called the drawer.

(b) The person whom the bill of exchange is drawn (who is order to pay) is called the drawee.

(c) The  drawee may accept the bill. This is a special use of word "Accept" because it means that he accepts to pay the amount payable expressed in the bill, i.e. if he accept the obligation to pay he write "Accepted" across  the face of the bill and sign it. From that time on he is known as the "Acceptor" of the bill and has absolute liability to honour the bill on the due date.  

(d) The amount of money must be mentioned clearly. For example i cannot  make out a bill requiring someone to pay the value of my house or car. That is an uncertain sum. It must say ' five thousand rupees or ten thousand rupees'.

(e) The time must be fixed or at least be determinable. For  example "60 days after" date is  quite easily determinable. If the bill is made out on 1st July, it will be 29th August.

(f) The person who is entitled to receive the money from the acceptor is called the "payee" It is usually the drawer who is supplying goods to the value of the of the bill, and wants to be paid from them. If the drawer decides, the bill can be made payable to someone else by endorsing it. That is why definition says, to pay.....to, or to the order of, a specified 

(g) A bill can be made payable to a bearer, but it is risky, since any finder of the bill or any, thief, cam claim the money from acceptor.

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Methods Of Preparing Trial Balance

           Methods Of Preparing Trial Balance

There are three methods of preparing trail balance:

1.Total or Gross Trial Balance.

2.Balance or Net Trail Balance.

3.Total - cum - balance trail balance.

                     Total or Gross Trail Balance

Under this method two sides of all the ledger accounts are totaled up. Thereafter,  a list of all the accounts is prepared in a separate sheet of paper with two "Amount" columns on the right-hand side. The first one for debit amounts and the second one for credit amounts. The total of the credit side and debit side of each account is then placed on "Debit Amount" column and "Credit Amount" column respectively of the list. Finally, the two columns are added separately to see whether they agree or not. This method is not generally followed in practice.

                     Balance Or Net Trail Balance

Under this method first of all the balances of all the ledger are drawn. Thereafter the debit balance and credit balances are recorded in "Debit Amount" column and "Credit Amount" column respectively and two columns are added separately to see weather they agree or not.This is the most popular method and generally followed. 

The various steps involved in the preparation of "Balance Trail Balance"are given below;

1.Find out the balance of each account in ledger.

2. Write up the name of account in the first column.

3. Record the account number in second column.

4. Record the debit balance of each account in debit column and credit balance in credit column.

5.Add up the debit and credit columns and records the totals.

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Trail Balance

                                         Trial Balance

The fundamental principle of Double entry system is that at any stage , the total of Debits must be equal to the total of the credits. If entries are recorded and posted correctly, the ledger will reflect equal debits and credits, and the total credit balances will then be equal to the total debit balances.



Every business concern prepares final accounts at the end of the year to ascertain the result of the activities of the whole year. To ensure correct result, the concern must be free from doubt that the books of accounts have been correctly recorded throughout the year. Trial balance is prepared to to test the arithmetical accuracy of the books of accounts.As we know that under doule entry system of each and every transaction one account is debited and other is cedited with an equal acmount. If all the transactions are correctly recorded strictly according to this rule, the total amount of debit side of the ledger accounts must be equal to that of credit side of all the ledger accounts. This verification is done through Trail balance.



If the trial balance agrees, we may assume that the books are correct. On the other hand, if it does not agree, it indicates that the books are not correct - there are mistakes somewhere. The mistakes are to be detected and corrected  -- otherwise, correct result cannot be ascertained. There are, however, a few types of errors which the trail balance cannot detect. in other words, the trail balance will agree in spite of the existence of those errors. 

The trail balance serves two main purposes:

1. To check the equality of debits and credits -- an arithmetical or mathematical test of accuracy.

2. To provide information for use in preparing final accounts.

Thus in the light of above discussion a trail balance may be defined as:

               "An informal accounting schedule or statement
                that lists the ledger account balances at a point 
                in time and compares the total of debit balances
                        with the total of credit balances."

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Balancing An Account Of Ledger

                              BALANCING AN ACCOUNT

The difference  between the two sides of an account is its balance. The balance is written on the lesser side to  make the two sides equal. This process of equalising the two sides of an account is known as Balancing.

The rules for balancing an account are stated below:

1. Add up the amount columns of both the sides of an account and written the totals in a separate slip of paper.

2. Find out the difference of the two totals.

3.Write down the difference on the leaser side of the account.

4.now total up the both sides and write the totals and draw double lines under them.

5. Again write the difference on the opposite sides below the double lines.

Debit Balance:

If the debit side of an account is heavier, its balance is known as Debit Balance.

Credit Balance:

 If credit side is heavier, its balance is known as Credit Balance. 

Zero Balance:

If the two sides of an account are equal, that account will show Zero Balance.

The rules for determining the balance are as follow:

      Total Debit  =  more than total credit = Debit balance

      Total credit  =  more than total debit = Credit balance

      Total Debit  =  Total credit                   = Nil  balance

It may be noted that at the time of balancing an account debit balance is placed on the credit side and credit balance on the debit side. this balance is known as Closing Balance and when next year will start, it will  be the opening balance. in other words, What is closing balance in this year, is the opening balance of the year.

                              NORMAL BALANCES 

The normal balance of various accounts are illustrated below:

Accounts of assets normally have                          Debit balance.

Accounts of expenses normally have                     Debit balance.

Accounts of revenue normally have                       Credit balance.

Accounts  of liabilities normally have                    Credit balance.

Accounts of owner normally have                          Credit balance

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Posting Procedure

                                            Posting Procedure

Here is the procedure of posting in the ledger account:

1. Locate the ledger account for the first debit in the journal entry.

2. Record the date in the date column on the debit side of the account. The date is the date of transaction rather than the date of posting.

3. Record the name of the opposite account (account credited in the entry) in the reference column.

4. Record the page number of the journal in the journal reference column from where the entry is being posted. 

5. record the amount of the debit in the "Account Column" on the debit side the account. 

6. Locate the ledger account for the first credited in the journal entry and follow the same procedure.

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Standard Form Of Ledger Account

                Standard Form Of Ledger Account

It appears that each account has got two similar sides-- the left hand is called debit side (briefly Dr.) and the right side is called credit side (briefly Cr).Now a days these two words debit and credit are not used, because it is obvious that the left hand is debit and right hand  is credit side.

Detailed discussions are being made below about the column of an account:

1.DATE:

The date of the transaction is written in this column in two lines__ in the first line the year and in the second line, first the name of month  and there after the actual date.

2.REFERENCES:

In this column  the name of the opposite account in the journal entry is written.For example, a journal entry contains two accounts, cash account is debited and sales account is credited. While making the posting in the cash account, amount will be written on debit side of the cash account in amount column but in the reference column the opposite account (sales account) will be written in the same way while making the posting in the sales account , amount will be written on the credit side  account in the amount column but in the reference the opposite account (cash account ) will be written.

3.JOURNAL REFERENCES (J.R).

The page number of the journal from where the transaction has been posted, is mentioned in this column. This will help in locating the entry in the journal easily.

4.AMOUNT:

The amount of the transaction is written in this column.

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Ledger: The Main Books Of Accounts

                   Ledger The Main Books Of Account

The book in which accounts are maintained, is called Ledger. Generally, one account is open on one page of this book, but if transactions relating to a particular account are numerous, it may extend to more then one page. All transactions relating to that account are recorded therein chronologically. From journal each transaction is posted to at least two concerned accounts-- debit side of one account and credit side of another account .Remember that, if there are two accounts involved in a journal entry, it will be posted to two accounts in the ledger and if the journal entry consists of three accounts (compound entry) it will be posted to three different accounts in the ledger. 

Posting:

The process of transferring information-- debits and credits-- from journal to ledger is known as Posting.The goal of all  transactions is ledger. 

                    Transaction →  Journal → Ledger
So, the book in which all the transaction of a business concern are finally recorded in the concerned accounts in a summarised and classified form, is called Ledger.

Forms Of Ledger Accounts:

1. Standard form. 
2. Self- balancing form.

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