In standard form of ledger account, the page of the ledger is divided into two equal halves. The left hand side is known as the debit side and the right hand side as the credit side. As it takes the shape of capital letter “T”, it is also known as “T” account. The debit side is used for recording debit entries and credit side is used for recording credit entries. The title of the account is written in the center at the top of the page.The account number is written in the extreme right hand corner.
The standard form of ledger account does not show the balance after each entry. The balance is found out after certain period or when needed so this form of account is also called periodical balance form of ledger account.
Format of standard ledger account
Notice that each side of ledger account is divided into four columns. The purpose of these columns is briefly described below:
(1). Date column: In this column year, month and date of the entry is recorded in the same manner as in the general journal.
(2). Description: In this column the title of the corresponding account, i.e., the other account account included in the journal entry.
(3). Posting reference: In this column, the general journal page number is recorded.
(4). Amount: In this column, the amount of the account is recorded
Method of posting
The posting process consists of the following steps:
- Trace the ledger account in which the entries are to be posted.
- If an account is debited in the general journal, it will be posted on the debit side in the ledger account and if it is credited in the general journal, it will be posted on the credit side.
- In description column, the title (name) of the account included in other part of the journal entry is written. For example, if we are posting an account included in the debit part of the journal entry, the account or accounts in the credit part will be written in description column.
- The amount of the entry is written in the amount column of the ledger account.
Balancing the ledger account
Balancing means finding out the debit or credit balance of a ledger account. This process may be divided into the following steps:
- Total the debit and credit sides of the account.
- Find out the difference between the two totals found in step one.
- Put the difference on the lighter side. The difference so placed is the balance of the account. If the debit side of account is heavier than its credit side, the account is said to have a debit balance. In case the credit side of the account is heavier than its debit side, the account is said to have a credit balance. If the total of two sides of account is equal, the balance will be zero.
Record the following transactions in general journal and post them into ledger accounts.
Jan. 01: Mr. A started business with cash $45,000.
Jan. 04: Purchased merchandise for cash $4,500.
Jan. 10: Sold merchandise to Mr. John $1,450.
Jan. 31: Cash received from Mr. John $1,400 and allowed him a discount of $50.