Ledger in Accounting | Posting Journal Entries to Ledger

hello everyone hi welcome to the channel
of WallStreetmojo watch the video till the end and also if you are new to
this channel then you can subscribe us by clicking the bell ican friends today
we’re going to learn an important component of the accounting which is
called as ledger because ledger is like something based on which your trial
balance is prepared and from trial balance your financial statements
pure profit and loss accounts that that I mean to say the y you see affairs your cash flow statement that means the balance sheet and so on and so forth
so the ledger is like is is a very important component but more than
important then is the the journal entries because based on the journals
the ledgers are prepared so let’s see the importance over here of legend
ledger the purpose of the ledger is to summarize all the journal entries so
that you know they can be used for future references and for creating the
financial statement it is use for the future references and for creating the
financial statement let’s understand this see ledger is in an accounting in a
book is called the second book of entry it’s called the second book of entry
because you know after recording the entry into the journal it is recorded in
the ledger so like you know the journal is the first and foremost thing and then
comes the ledger because all the entries which have been recorded over here i’ve
been recorded in the T format of the ledger account so in ledger account the
accountant does not need to write any narration but in journal entry you need
to write your content basically needs to you know create or T format so what is
this T format the T format is something like this which I’ll show you in the in
the coming forth it’s okay I’ll show it right now only the date is over here
then there is particulars then we have the data of amount then again this three
things will remain the same because this is for the debit side and this is for
the credit side and there’s a line over here and there’s one line in between
over here so that’s why it’s called the T format right this is a bigger column
because you need to write the particulars let’s say this is in account
for an asset account let’s say plant and machinery accounts ledger so this is how
the ledger is prepared see the purpose of the ledger is to
basically summarize all the journal entries right so that they can be used
for the future references for creating the financial statement now let’s look
at some of the examples like for ease of understanding the meaning of the ledger
in accounting we’ll take some examples you know same example we took in the
case of the you know different journal entry type so we’ll put them in in a
right format let’s understand the ledger is accounting examples in in some format
let’s say there’s a guy called M who buys goods in cash so what would the
ledger entry in the accounting so there’ll be something like that like
this is that you know because the goods are purchased in cash so the goods comes
in the in terms of I’m doing enough journal entry goods comes in and the
cash is going out so this will be a credit entry this will be a debit entry
let’s say a 10,000 was the amount and 10,000 amount was Vihar so this is let’s
say the goods account and let’s prepare another account that’s your cash account
so this is your journal entry that you’re prepared for the goods
now you will record the data over here so in the goods account the cash is
debited right so the cash account over here
which will be debited at 10,000 and in the cash account the Goods account will
be treated so 10,000 will come over here so in this manner the whole journal
entry has been recorded now you know you know let’s take another example let’s
say there’s a company called G company which sells goods in cash
sells goods in cash so what is coming in the cash is coming in there
and goods are going out that is credit let’s say they sold the cash for 12,000
and this is the debit amount this is the great amount so we’ll record this entry
over here or something like this now the cash is coming in 10,000 and the goods
will be debited over here because they are going out and let’s say this on are
of the same date let’s take it as 8-10-2018 so let’s keep the date for
all the same not this one let’s keep this as 9 because you
won’t be selling on the same day over here it will be 9 and this will be
880920 sorry 8-10-2018 so you’ll get to know
that you know on 8 which all transaction that happened and online
which transactions have have occurred in the due course so this is how the entry
are been recorded now let’s say there is a guy called Mr. U who pays off his
his long term debt in cash he pays off what is dead so what would
be the ledger the ledger will be something like this the long-term debt
account debit to the cash account that will be credited right so the long-term
debt over here will come as as let’s say over here
$1,50,000 and there’ll be another account that will be
prepared that’s the long-term debt account let’s prepare the long-term debt
account over here this will be long-term debt account okay so over here the
long-term debt account will be recorded over here as cash and that would be $1,50,000 this is happening on 10-10-2018 so these are
the three examples that I took so as to make you understand how the ledger
account exactly works now let’s balance all these accounts and
understand how the balancing happens so they both are in the same state so you
know the total over here is going to be 10,000 it’s going to be the same right
but over here the total is going to change the total over here this the
higher has to be taken to 1,50,000 + 10,000 that is 1,60,000 so this is
the amount of the cash that is going out and this is the amount of the cash that
is coming in so 1,60,000-10,000 cash that as that is an incoming cash so
over here again sorry this has to be 1,60,000 and there will be a balance
configure your so balanced cash this is impossible because you know the case
over here is is it’s differentiated because the cash cannot be negative so
you can say this is your bank od you can say that you know and let’s
consider as 160000 – 10000 you have taken some bank OD so based on that you have walked out but had it been this vice versa the case you have taken 1,50,000 over here and nothing in here and the cash control X control V then
your total will change absolutely things are going to change now so you will have
a balance in your cash account that will be standing at this will be your total
and your balance carry it forward will be 1,60,000 –
10000 so this is your cash accounts balance okay
and same with the case over here the balance that is going to be carry forward is going to be 1,50,000 so the total has to be the same the total has to go to
the same way 1,50,000 this has to match so this how
the accounting entries have been recorded in John in in the ledger
account now I would like to state something that you know ledger in
accounting books is basically a source for you know the trial balance the
balance sheet the income statement so it’s it’s really important see ledger in
is in its trust sense is the source of all the financial statement by looking
at the ledger you know one can understand what transactions are
basically recorded and what what happened during a particular period and
how one looks at a company should so for example you know the balancing the
ledger will either have the debit balance or the or the credit balance
over here and you take this amount to the trial balance and record the data
based on the trial balance you will pick up those numbers let’s say or that you
see this is your TB this is your debit this is your credit so you will get the
data over here and based on this data you will record your things in the
income statement because this will be the final balances in the trial balance
and then based on that you’ll prepare on the basis of trial balance you prepare
your balance sheet and including your cash flow statement because no doubt the
trial balance will help you to provide the cash flow statement so I hope you
have got a great idea regarding the ledger so that’s it for this particular
topic if you have learned and enjoyed watching this video please like and
comment on this video and subscribe to our channel for the latest updates thank
you everyone Cheers

One thought on “Ledger in Accounting | Posting Journal Entries to Ledger”

Leave a Reply

Your email address will not be published. Required fields are marked *