Ledger — Organizing Accounts

Thursday morning. Meera opens the journal she filled yesterday and stares at the eleven entries. "I can see everything that happened on July 15th," she says. "But what if Rawat Aunty asks me — how much total cash do we have? Or how much does Joshi Ji owe us? I would have to read through every single entry and pick out the ones that mention cash or Joshi Ji." Negi Bhaiya nods. "Exactly. That is why we have the ledger. The journal tells you what happened, in order. The ledger tells you the complete story of each account, all in one place."

What is a Ledger?

Imagine you have a school notebook. You write Hindi notes, English notes, Math notes, Science notes — all mixed together, in the order the classes happen during the day. If someone asks, "Show me all your Math notes," you would have to flip through every page, picking out the Math parts. Messy, right?

Now imagine you have a separate notebook for each subject. All Math in one place. All Hindi in another. Much easier to find things.

That is exactly what a ledger does.

A ledger is a book where each account gets its own separate page.

• One page for Cash Account — all cash-related entries go here.
• One page for Sales Account — all sales entries go here.
• One page for Rent Account — all rent entries go here.
• One page for Joshi Ji's Account — everything about Joshi Ji goes here.

The journal is organized by date (what happened first, second, third...). The ledger is organized by account (everything about cash, everything about sales...).

Sharma Sir says:

"The journal is like a CCTV camera — it records everything in order. The ledger is like an album sorted by person — all photos of one person in one place."

The T-Account Format

Each ledger account is written in a special format that looks like the letter "T." That is why it is called a T-account.

Here is the basic structure:

                        Account Name
 ─────────────────────────────────────────────────────
      Dr. (Debit Side)     |     Cr. (Credit Side)
 ─────────────────────────────────────────────────────
 Date | Particulars | Amt  | Date | Particulars | Amt
 ─────────────────────────────────────────────────────
      |             |      |      |             |
      |             |      |      |             |

The left side is the Debit (Dr.) side. The right side is the Credit (Cr.) side.

Each side has three columns:

• Date — when the transaction happened
• Particulars — the name of the other account involved (very important!)
• Amount — the rupee amount

How to Post from Journal to Ledger

"Posting" means copying information from the journal into the correct ledger account. Here is the process, step by step.

Step 1: Pick a journal entry.

Step 2: Look at the account that was debited. Go to that account's ledger page. Write the entry on the left (debit) side. In the "Particulars" column, write "To [name of the credited account]."

Step 3: Look at the account that was credited. Go to that account's ledger page. Write the entry on the right (credit) side. In the "Particulars" column, write "By [name of the debited account]."

The key rule: In the Particulars column of a ledger, you always write the name of the OTHER account — the one on the opposite side of the journal entry.

Let us see how this works with one example.

Example: Posting a Rent Payment

Journal entry:

Posting to Rent Account (debited in journal, so write on the LEFT side):

                          Rent Account
 ─────────────────────────────────────────────────────
      Dr. (Debit Side)     |     Cr. (Credit Side)
 ─────────────────────────────────────────────────────
 Date    | Particulars| Amt | Date | Particulars| Amt
 ─────────────────────────────────────────────────────
 15-Jul  | To Cash    |5,000|      |            |

Posting to Cash Account (credited in journal, so write on the RIGHT side):

                          Cash Account
 ─────────────────────────────────────────────────────
      Dr. (Debit Side)     |     Cr. (Credit Side)
 ─────────────────────────────────────────────────────
 Date    | Particulars| Amt | Date | Particulars| Amt
 ─────────────────────────────────────────────────────
         |            |     |15-Jul| By Rent    |5,000

Notice how in the Rent Account, the Particulars says "To Cash" — telling you where the money went. And in the Cash Account, the Particulars says "By Rent" — telling you why the cash went out.

Meera Posts All Entries to Ledgers

Now Meera will post all 11 journal entries from July 15th into their respective ledger accounts. Let us build each ledger account one by one.

She has the following accounts to create:

1. Cash Account
2. Purchases Account
3. Sales Account
4. Joshi Ji Account
5. Dimri Ji Account
6. Salary Account
7. Rent Account
8. Electricity Expense Account
9. SBI Bank Account
10. Bisht Traders Account
11. Drawings Account

Let us do the most important ones in detail.

Ledger 1: Cash Account

Cash appears in many transactions on July 15th. Meera collects all of them:

Cash was debited (cash came in) in these entries:

• Cash sale: Rs. 1,800
• Received from Dimri Ji: Rs. 2,500
• Cash sale (afternoon): Rs. 4,200

Cash was credited (cash went out) in these entries:

• Purchased goods: Rs. 12,000
• Salary to Kamla: Rs. 4,000
• Rent: Rs. 5,000
• Electricity: Rs. 1,200
• Deposited in bank: Rs. 5,000
• Drawings: Rs. 2,000

Remember, Rawat Aunty started the day with Rs. 25,000 cash (balance brought forward from July 14th).

                          Cash Account
 ─────────────────────────────────────────────────────────
      Dr. (Debit Side)          |     Cr. (Credit Side)
 ─────────────────────────────────────────────────────────
 Date   | Particulars   | Amt   | Date   | Particulars      | Amt
 ─────────────────────────────────────────────────────────
 1-Jul  | To Balance b/d|25,000 | 15-Jul | By Purchases     |12,000
 15-Jul | To Sales      | 1,800 | 15-Jul | By Salary        | 4,000
 15-Jul | To Dimri Ji   | 2,500 | 15-Jul | By Rent          | 5,000
 15-Jul | To Sales      | 4,200 | 15-Jul | By Electricity   | 1,200
        |               |       | 15-Jul | By SBI Bank      | 5,000
        |               |       | 15-Jul | By Drawings      | 2,000
        |               |       | 15-Jul | By Balance c/d   | 4,300
 ─────────────────────────────────────────────────────────
        | Total         |33,500 |        | Total            |33,500
 ─────────────────────────────────────────────────────────
 16-Jul | To Balance b/d| 4,300 |        |                  |

How to read this:

• The left side shows all the times cash came in: opening balance (Rs. 25,000), two cash sales (Rs. 1,800 and Rs. 4,200), and receipt from Dimri Ji (Rs. 2,500). Total debit = Rs. 33,500.

• The right side shows all the times cash went out: purchases, salary, rent, electricity, bank deposit, and drawings. Total = Rs. 29,200.

• The difference is: Rs. 33,500 - Rs. 29,200 = Rs. 4,300. This is the closing balance (Balance c/d = "carried down").

• The closing balance is written on the smaller side to make both sides equal (Rs. 33,500 = Rs. 33,500).

• The next day starts with this balance as the opening balance (Balance b/d = "brought down") on the debit side (because cash is an asset, and assets have debit balances).

Ledger 2: Sales Account

Sales was credited in three entries:

                          Sales Account
 ─────────────────────────────────────────────────────────
      Dr. (Debit Side)          |     Cr. (Credit Side)
 ─────────────────────────────────────────────────────────
 Date   | Particulars   | Amt   | Date   | Particulars   | Amt
 ─────────────────────────────────────────────────────────
 15-Jul | To Balance c/d| 9,500 | 15-Jul | By Cash       | 1,800
        |               |       | 15-Jul | By Joshi Ji   | 3,500
        |               |       | 15-Jul | By Cash       | 4,200
 ─────────────────────────────────────────────────────────
        | Total         | 9,500 |        | Total         | 9,500
 ─────────────────────────────────────────────────────────
        |               |       | 16-Jul | By Balance b/d| 9,500

Sales is an income account. Income has a credit balance. So the closing balance goes on the debit side (the smaller side), and the opening balance for the next day goes on the credit side.

Total sales for the day = Rs. 1,800 + Rs. 3,500 + Rs. 4,200 = Rs. 9,500.

Ledger 3: Purchases Account

Purchases was debited in two entries:

                        Purchases Account
 ─────────────────────────────────────────────────────────
      Dr. (Debit Side)          |     Cr. (Credit Side)
 ─────────────────────────────────────────────────────────
 Date   | Particulars      | Amt   | Date   | Particulars   | Amt
 ─────────────────────────────────────────────────────────
 15-Jul | To Cash          |12,000 | 15-Jul | By Balance c/d|20,000
 15-Jul | To Bisht Traders | 8,000 |        |               |
 ─────────────────────────────────────────────────────────
        | Total            |20,000 |        | Total         |20,000
 ─────────────────────────────────────────────────────────
 16-Jul | To Balance b/d   |20,000 |        |               |

Purchases is an expense. Expenses have a debit balance. Total purchases = Rs. 12,000 + Rs. 8,000 = Rs. 20,000.

Ledger 4: Joshi Ji Account (Debtor)

Joshi Ji bought goods on credit. He owes Rs. 3,500.

                        Joshi Ji Account
 ─────────────────────────────────────────────────────────
      Dr. (Debit Side)          |     Cr. (Credit Side)
 ─────────────────────────────────────────────────────────
 Date   | Particulars   | Amt   | Date   | Particulars   | Amt
 ─────────────────────────────────────────────────────────
 15-Jul | To Sales      | 3,500 | 15-Jul | By Balance c/d| 3,500
 ─────────────────────────────────────────────────────────
        | Total         | 3,500 |        | Total         | 3,500
 ─────────────────────────────────────────────────────────
 16-Jul | To Balance b/d| 3,500 |        |               |

Joshi Ji is a debtor (someone who owes us). Debtors are assets. Assets have debit balances.

Ledger 5: Bisht Traders Account (Creditor)

We bought goods on credit from Bisht Traders. We owe them Rs. 8,000.

                      Bisht Traders Account
 ─────────────────────────────────────────────────────────
      Dr. (Debit Side)          |     Cr. (Credit Side)
 ─────────────────────────────────────────────────────────
 Date   | Particulars   | Amt   | Date   | Particulars   | Amt
 ─────────────────────────────────────────────────────────
 15-Jul | To Balance c/d| 8,000 | 15-Jul | By Purchases  | 8,000
 ─────────────────────────────────────────────────────────
        | Total         | 8,000 |        | Total         | 8,000
 ─────────────────────────────────────────────────────────
        |               |       | 16-Jul | By Balance b/d| 8,000

Bisht Traders is a creditor (someone we owe money to). Creditors are liabilities. Liabilities have credit balances.

Ledger 6: Rent Account

                          Rent Account
 ─────────────────────────────────────────────────────────
      Dr. (Debit Side)          |     Cr. (Credit Side)
 ─────────────────────────────────────────────────────────
 Date   | Particulars   | Amt   | Date   | Particulars   | Amt
 ─────────────────────────────────────────────────────────
 15-Jul | To Cash       | 5,000 | 15-Jul | By Balance c/d| 5,000
 ─────────────────────────────────────────────────────────
        | Total         | 5,000 |        | Total         | 5,000
 ─────────────────────────────────────────────────────────
 16-Jul | To Balance b/d| 5,000 |        |               |

Rent is an expense. Debit balance.

Balancing an Account — Step by Step

Meera asks Sharma Sir, "How exactly do I balance an account?"

Sharma Sir explains the steps:

Step 1: Add up all the amounts on the debit side. Add up all the amounts on the credit side.

Step 2: Find the difference between the two totals.

Step 3: Write the difference on the smaller side with the words "Balance c/d" (carried down). This makes both sides equal.

Step 4: Write the same amount on the bigger side below the total line, with the words "Balance b/d" (brought down) and the next date. This becomes the opening balance for the next period.

Which side does the balance go?

Meera writes this in her notebook and underlines it twice.

The "Particulars" Column — An Important Detail

Negi Bhaiya points out something that confuses many beginners:

"In the journal, you write 'Rent A/c Dr., To Cash A/c.' But in the ledger, you do it differently. On the Rent Account's debit side, you write 'To Cash.' On the Cash Account's credit side, you write 'By Rent.' You always write the name of the OTHER account."

Here is the rule:

• On the debit side of a ledger, write "To" followed by the name of the account that was credited.
• On the credit side of a ledger, write "By" followed by the name of the account that was debited.

This creates a cross-reference. If you are looking at the Cash Account and you see "By Rent — Rs. 5,000" on the credit side, you know immediately: Rs. 5,000 went out, and it went toward rent. You can then go to the Rent Account to see the other side.

Journal vs. Ledger — A Quick Comparison

Think of it like cooking: the journal is your recipe (step-by-step instructions). The ledger is your kitchen organized by shelf — spices on one shelf, dal on another, rice on another.

Filling in the L.F. Column

Remember the "L.F." column in the journal that Meera left blank? Now she can fill it in.

As she posts each journal entry to the ledger, she notes the ledger page number in the journal's L.F. column. And in the ledger, there is a corresponding column (sometimes called J.F. — Journal Folio) where she writes the journal page number.

This creates a two-way link:

• Journal → Ledger (L.F. column)
• Ledger → Journal (J.F. column)

If you ever need to trace a transaction back to its source, you can follow these page numbers like a trail.

Quick Recap

• A ledger gives each account its own page. All entries for that account are collected in one place.
• The format is a T-account: debit side on the left, credit side on the right.
• Posting means copying entries from the journal to the appropriate ledger accounts.
• In the Particulars column, write the name of the OTHER account — use "To" on the debit side and "By" on the credit side.
• Balancing an account: find the difference between debit and credit totals, write it on the smaller side as "Balance c/d", then bring it down as "Balance b/d."
• Assets and expenses have debit balances. Liabilities, income, and capital have credit balances.
• The L.F. (Ledger Folio) connects the journal to the ledger, creating a traceable trail.

Practice Exercise — Try This Yourself

Using the journal entries from the practice exercise in the previous chapter (the 8 transactions on 20th July 2025), post them to the following ledger accounts and balance each one:

1. Cash Account
2. SBI Bank Account
3. Capital Account
4. Furniture Account
5. Purchases Account
6. Sales Account
7. Bisht Traders Account
8. Dimri Ji Account
9. Miscellaneous Expense Account

Remember:

• If an account was debited in the journal, post it on the LEFT (debit) side of that account's ledger.
• If an account was credited in the journal, post it on the RIGHT (credit) side.
• In the Particulars column, write the name of the other account.
• After posting all entries, balance each account.

Check yourself: Does Cash A/c have a debit balance? Does Capital A/c have a credit balance? Does Sales A/c have a credit balance? If yes, you are on the right track.

Fun Fact

The word "ledger" comes from old English and Dutch words meaning "to lie" — as in, a book that lies open on a desk, always ready for reference. In medieval Europe, merchants kept their ledgers chained to their desks because they were so valuable. Losing your ledger was like losing your entire business history. Today, the ledger lives inside computer software, but the principle has not changed in 500 years. Every business in the world — from Rawat Aunty's kirana shop to Reliance Industries — keeps a ledger.

In the next chapter, Meera will take all the ledger balances and put them on one single page — the trial balance. It is accounting's way of asking: "Did I get everything right?"