Ledger Posting

Ledger Posting

🟢 Lite — Quick Review (1h–1d)

Rapid summary for last-minute revision before your exam.

Ledger posting is the act of transferring each debited and credited item from the Journal (or subsidiary books) into the respective Ledger Account, where transactions are classified account-wise. The ledger is called the principal book of accounts because every journalised entry ultimately lands here.

• Format used: T-account with a Debit (Dr.) side on the left and a Credit (Cr.) side on the right.
• Posting convention: debit-side entry in the journal is recorded as “To ” on the debit side of the concerned ledger account, and the corresponding credit-side entry is recorded as “By ” on the credit side. The date, journal folio (J.F.) and amount are also written.
• Balancing: at period end, total the two sides; the difference is the closing balance, written on the side with the smaller total to make both sides equal. Balance is then carried forward as the opening balance for the next period.
• The Trial Balance is prepared only after all ledger accounts are balanced.

🟡 Standard — Regular Study (2d–2mo)

Standard content for students with a few days to months.

Purpose and place in the accounting cycle

Journal entries record transactions chronologically and dual-aspect-wise. The ledger groups these entries account-wise, so that for any account (Cash, Purchases, Capital, Ram’s A/c, etc.) the cumulative effect of all transactions during the period can be seen at a glance. Because of this classifying function, the ledger is termed the principal book of accounts.

Mechanics of posting

For every journal entry, two postings are made:

1. The debit is posted to the debit side of the account debited, written as “To ”.
2. The credit is posted to the credit side of the account credited, written as “By ”.

Both postings carry the same date as in the journal, the J.F. (Journal Folio) number, and the amount in the inner column. Cash transactions are typically posted from the Cash Book directly (no J.F.), while credit transactions flow through the Journal Proper or subsidiary books (Purchases Book, Sales Book, Returns Books, Bills Receivable/Payable books).

Format of a ledger account

Dr.                  <Account Name>                       Cr.
─────────────────────────────────────────────────────────────
Date | Particulars | J.F. | ₹  |  Date | Particulars | J.F. | ₹

Personal and real accounts are balanced at the end of the period; nominal accounts are closed by transfer to Trading or P&L A/c.

Balancing procedure

• Total both sides.
• Insert the larger total on the smaller side as “By Balance c/d” (credit-side total higher ⇒ credit balance) or “To Balance c/d” (debit-side total higher ⇒ debit balance).
• On the next date, the reverse entry “To Balance b/d” or “By Balance b/d” opens the account.

Worked relationship

If for Purchases A/c total debits = ₹ 1,20,000 and total credits = ₹ 15,000, the balancing figure = ₹ 1,05,000, written on the credit side as By Balance c/d, indicating a debit balance (an asset/expense balance carried forward).

Typical CMA Foundation question patterns

• Posting 6–10 journal entries to ledger accounts (5 marks).
• Balancing given ledger accounts (2 marks).
• Short note: Distinguish between Journal and Ledger (3–5 marks).
• Preparing ledger accounts from a trial balance and additional information.

🔴 Extended — Deep Study (3mo+)

Comprehensive coverage for students on a longer study timeline.

Edge cases in posting

• Compound (composite) journal entry: a single journal entry affects more than two accounts (e.g., purchase of machinery for ₹ 50,000 plus ₹ 5,000 paid as wages, total ₹ 55,000). Each affected account must be posted separately — omitting even one posting breaks the dual-aspect equality.
• Contra entry: a transaction where Cash/Bank appears on both sides (e.g., cash deposited into bank). It is recorded only in the Cash Book (Contra column) and is not posted to the ledger to avoid double counting.
• Opening entries: in the very first year of a business, the opening balance sheet items are passed through a single Journal Entry and then posted normally. From year two onward, balances appear as “To/By Balance b/d” without any journal entry.
• Posting from subsidiary books: Purchases Book → individual creditors’ accounts (credit side, “By Purchases A/c”) and total to Purchases A/c (debit side). The reverse applies for the Sales Book. Return Inward goes to the debit of Sales Return A/c and credit of the concerned customer.

Common mistakes examiners exploit

1. Swapping “To” and “By” — this reverses the side of the entry and corrupts balances.
2. Writing the narration inside the ledger instead of just the contra account name.
3. Posting only the debit leg of a compound entry.
4. Putting the balance on the wrong side when balancing — debit balance must close on the credit side (“By Balance c/d”) and vice-versa.
5. Posting Sales to Sales Return A/c or Purchases to Purchase Return A/c due to look-alike names.

Connection to next steps

Balanced ledger accounts feed the Trial Balance (Σ Debit balances = Σ Credit balances), which is the foundation for Trading Account, P&L Account, and Balance Sheet. Any misposting here directly distorts all downstream statements, so CMA Foundation examiners frequently test this step with 4–5 mark practical problems.

Practice prompts

1. From the following journal entries, post the transactions into the ledger accounts of Ram, Shyam, Purchases, Sales, and Cash, then balance each personal account: (i) Sold goods to Ram ₹ 20,000; (ii) Purchased goods from Shyam ₹ 15,000; (iii) Received cash from Ram ₹ 10,000; (iv) Paid cash to Shyam ₹ 5,000.
2. A compound entry reads: “Purchased furniture ₹ 30,000 and goods ₹ 20,000 from Mohan, paid ₹ 10,000 in cash, balance on credit.” Show all ledger postings and identify which side Mohan’s account will have a balance on.

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