General ledger – Definition, Format, Process and Example

Introduction
What is general ledger?
Specimen of ledger accounts
Steps to prepare general ledger
- Posting
- Balancing an account
Example of general ledgers

Introduction

After passing the entries in journal-register, the transactions are classified and grouped for preparation of accounts. The principal book which contains all set of accounts (viz. nominal, personal and real accounts), is known as Ledger. It is also known as principal books of account in which account-wise balance of each account is determined. General ledger – Definition, Format, Process and Example

What is general ledger?

General Ledger is a process of summarizing all the financial transaction of an account for a given period in a prescribed format with the objective to ascertain the closing balance at the end of the given period.

Specimen of ledger accounts

A general ledger account has two sides debit (left part of the account) and credit (right part of the account). Each of the general ledgers debit and credit side has four columns. General ledger – Definition, Format, Process and Example

Date
Particulars
Journal folio i.e. reference number of the page from where the entries are taken for posting and
Amount

Date

Particulars

Journal Folio

Amount

(Rs.)

Date

Particulars

Journal Folio

Amount

(Rs.)

Steps to prepare general ledger

Posting

The methodology of transferring the debit and credit items from journal to classified accounts in the ledger is known as posting. The posting of the ledger should be followed in accordance with the rules. General ledger – Definition, Format, Process and Example

Rules for posting of entries in the ledger accounts

A separate individual account is opened in ledger book for each account and entries from ledger are posted to respective accounts accordingly.
It is a practice to use words ‘To’ and ‘By’ or ‘Dr’ or ‘Cr’ while posting transactions in the ledger. The word ‘To’ or ‘Dr’ is used in the particular column with the accounts written on the debit side while ‘By’ or ‘Cr’ is used with the accounts written in the particular column of the credit side.
The concerned account debited in the journal should also be debited in the ledger, but reference should be of the respective credit account.

Balancing an account:

At the end of each month or year or any particular day, it is necessary to ascertain the closing balance in an account.

This is not a too difficult thing to do; suppose a person has bought goods worth 1,000 Bangladeshi taka and has paid only 850 Bangladeshi taka, he owes 150 Bangladeshi taka and that is the closing balance in his account.

Therefore, to ascertain the balance in any account, you must total the sides and ascertain the difference. The difference is the closing balance of the account. If the credit side total is higher than the debit side total, it is a credit balance and otherwise it is a debit balance. General ledger – Definition, Format, Process and Example

The credit balance is written on the debit side as, “To Balance c/d”. Here, ‘c/d’ refers to balance carried down. By doing this, two sides will be equal. The totals of both debit and credit side are written on the two sides opposite one another. Then the credit total balance is written on the credit side as “By balance b/d (i.e., brought down)”. This becomes the opening balance for the new period.

Similarly, the debit balance is written on the credit side as “By Balance c/d”, the totals then are written on the two sides. Just like credit side, the total debit balance is written on the debit side as, “To Balance b/d”, as the opening balance of the new period.

Examples of general ledger

ABC and Co., a partnership firm registered in Kenya had following entries to be posted in its ledger books.

2019	Particulars	Amount
Jan 1	Opening stock of Raw material	320
May 10	Purchase of Raw material by cheque	900
Oct 11	Purchase of Raw material on credit from XYZ Co.,	1,280
Nov 2	Returned goods purchased from XYZ Co.,	340

As discussed above, the first step in the process of preparing general ledger is posting. The following are ledger posting of ABC and Co.

Posting the above entries in the books of ABC and Co.,

(Dr). Raw Material A/c. (Cr)

Date	Particulars	Amount	Date	Particulars	Amount
1.1.15	To balance b/d	320	31.12.15	By XYZ Co.,	340
10.5.15	To Bank	900	31.12.15	By balance c/d	???
11.10.15	To XYZ Co.,	1280
1.1.16	To balance b/d.	???

Once the posting is done, the next step balancing of accounts. This step will help you determine the closing balance of ledger accounts for a given period. In above example, we need to find out the closing balance of Raw material A/C (Indicated with question mark(?)) General ledger – Definition, Format, Process and Example

Balancing of accounts in books of ABC and Co.,

Particulars	Amount
Debit side totals (320+900+1280)	2470
Credit side totals	340
Ideology (Debit Side total > Credit side total) then the balance is	Debit balance
Rule 1: Rule of balancing (Debit balance to be written on credit side as By balance c/d which comes to) [ 2,470 ( – ) 340]	To balance c/d = 2,130 Kenyan shillings
Rule 2: Balances to be written on both sides (in the given example on)	Debit Side as By balance b/d = 2,130

After balancing, the following is the completed general ledger account of Raw Material A/c of ABC and Co.

Dr). Raw Material A/c. (Cr)

Date	Particulars	Amount	Date	Particulars	Amount
1.1.15	To balance b/d	320	31.12.15	By XYZ Co.,	340
10.5.15	To Bank	900	31.12.15	By balance c/d	2130
11.10.15	To XYZ Co.,	1280
Total		2470	Total		2470
1.1.16	To balance b/d.	2130

CALL US FOR ANY QUERY WE ARE GLAD TO HELP YOU OUT @9811782542 & 9911721597

Are You Looking For ledger account format
Are You Looking For how to prepare ledger account
Are You Looking For ledger account format in excel
Are You Looking For importance of ledger
Are You Looking For ledger format in excel
Are You Looking For what is general ledger with an example
Are You Looking For general ledger in sap
Are You Looking For ledger in accounting
Are You Looking For general ledger vs trial balance
Are You Looking For general ledger worksheet
Are You Looking For trial balance vs journal entry
Are You Looking For general ledger software
Are You Looking For uses of ledger
Are You Looking For types of ledger accounts
Are You Looking For cash at bank journal entry