Ledger Entries

Week: 9 (Nine)

Topic: Ledger Entries

Meaning of Ledger

A ledger is a book or record used to classify and summarize all financial transactions in a business. It contains an account for each of the major items or people with whom they do business where business transactions are posted after being recorded in the journal.

The ledger classifies all individual account into assets, liabilities, income or expense. Everything the business owns is an asset which makes its account an asset account (e.g: equipment, building, etc), if the business owes someone, that debt is a liability which makes it account a liability account (e.g: loan, credit purchases, etc), anything that brings money into the business is a source of income which means its account is an income account (e.g: sales, dividend, etc) while all items on which money is epent to run the business is an expense which makes its account an expense account (e.g: rent, energy bill, etc). 

Preparation of a Ledger Account

To prepare a ledger account, write the name of the business at the middle of a page and the title of the particular ledger account under it and underline them. Make a straight line in the middle of the page from top to bottom beginning right under the line separating the title. The right side is called credit side indicated with Cr while the left side is called debit side indicated with Dr. Each side should have four columns with the following headings in the order; Date, Particulars, Folio and Amount.

Recording Transactions in a Ledger Account

To record any financial transaction in the ledger, the following rule must be followed.

1. If the business receives cash or any physical item, the items and their value should be written on the debit side of the ledger.
2. If the business gives out cash or makes payment for goods or services, it should be recorded on the credit side.

Example: Record the following transactions in the cash account of Sarima, Boma & Dornubari Nigeria Limited.

1. On the 13th November, goods worth N118,000 was purchased.
2. On 7th November, cash sales of N92,800 was made.
3. On 20th November they received N25,000 as payment for their hall used for a wedding reception.
4. On 30th November salary payment of N23,500 was made.

Classwork

Record the following transactions in the cash account of Cornerstone Investments Nigeria Limited.

1. On the 2nd of December, cash sales of N78,000 was made.
2. On 5th December, cash sales of N32,800 was made.
3. On 10th December goods worth N52,300 was purchased.
4. On 15th December light bill of N2,500 was paid.

Homework

Record the following transactions in the cash account of Cornerstone Investments Nigeria Limited.

1. On the 4th October, they received N107,000 as payment for the sale of one of the generators they no longer use.
2. On 12th October, street security fee of N12,500 was paid.
3. On 19th October goods they were paid N142,000 for the event management job they did the previous weekend.
4. On 25th October fuel of N6,500 was bought.
5. On 29th October, they bought goods worth N7,900 on credit from Dynaspark Nigeria Limited.