Questions
6–8 questions in board exams
Difficulty
Medium
Importance
Fundamental pillar for Class 11 Accountancy boards
Overview
The ledger acts as the principal book of accounts where transactions from the Journal are classified into individual accounts, serving as the basis for financial statement preparation. Mastering this topic is essential because it is the foundational step for detecting arithmetic errors via the Trial Balance and creating accurate final accounts.
Ledger Posting and Balancing
Ledger posting involves transferring debits and credits from the journal to specific account heads in the ledger. Balancing an account is the process of finding the net difference between the total of the debit side and the credit side at the end of the accounting period.
- Debit balance occurs when total debit exceeds total credit
- Credit balance occurs when total credit exceeds total debit
- Nominal accounts are closed by transferring to the Trading or P&L account
- Real and Personal accounts are carried forward as 'Balance c/d'
- Always write 'To' for debit entries and 'By' for credit entries
Subsidiary Books
Subsidiary books are books of original entry used to record repetitive transactions of a similar nature, reducing the volume of entries in the Journal. Key books include the Cash Book, Purchase Day Book, and Sales Day Book.
- Cash book records only cash and bank transactions
- Purchase book records only credit purchases of goods for resale
- Trade discount is deducted before recording in the subsidiary book
- Cash discounts are recorded only in the Cash Book
- Returns inward book records sales returns; Returns outward book records purchase returns
Trial Balance
A Trial Balance is a statement prepared to check the arithmetical accuracy of the ledger accounts by ensuring total debits equal total credits. It is not an account itself, but a schedule of balances extracted from the ledger.
- Assets and expenses typically carry debit balances
- Liabilities, capital, and income typically carry credit balances
- Closing stock is usually kept outside the Trial Balance
- Total of debit column must equal total of credit column
- Suspense account is used to rectify temporary differences
Formula Sheet
Closing Balance = Opening Balance + Total Debits - Total Credits
Total Debits = Total Credits (Condition for Trial Balance agreement)
Exam Tip
Always verify that your Trial Balance totals match; if they do not, check for omitted entries or transposed digits in your ledger balances first.
Common Mistakes
- Confusing the posting of cash discount with trade discount in the subsidiary books.
- Forgetting to include the opening balance in the new period's ledger account.
- Treating cash discount as a ledger entry when it should only be recorded in the cash book.
More Revision Notes
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