Basics of Financial Accounting - II Ledger Posting

The journal entry specifies which account is to be debited and which account is to be credited.

In the ledger each account has a left side which is termed the debit site and a right side which is termed as credit side.

Thus the account has ths structure of "T" left portion being the debit side and right portion being the credit side and hence accounts are called T accounts.







From the journal, the entries are posted in various accounts in the ledger.


If in the journal, it is specified that the account is to be debited, the entry is shown in the debit side with the remark "to account name." The account name is the account which is to be credited for this transaction. Hence from a ledger account of account A, one reads a debit entry as Account A debtor to Account B.

If the account A is to be credited, the entry is shown on the credit side with the remark "by Account name". The account name specifies the account to be credited in this transaction. One can read the entry as Account A credited by Account C.

Thus, based on the journal entries, various accounts in the ledger posted. Please note that for each journal entry, two entries are made in the ledger. One entry is made in the account which is to be debited and another entry is made in the account which is to credited. Therefore, after complete ledger posting any journal entry, the total debit postingss in entire ledger is equal to the total of credit postings.

Periodically, the balances in the ledger accounts are totalled and it is verified whether the total of debit balances is equal to the total of credit balances are not. If both of them do not tally, there is some error and hence the entries are checked once again till a matched balance of debits and credits appear. The statement made for this purpose is called trial balance.