Ledger Posting and Balancing

1. Introduction

In accounting, business transactions are first recorded in the Journal or subsidiary books. These transactions are then transferred to individual accounts in the Ledger.

The process of transferring entries from the Journal to the appropriate Ledger accounts is called Ledger Posting.

After posting all transactions, each Ledger account is balanced to determine the difference between its debit and credit totals.

2. Ledger

Definition

A Ledger is the principal book of accounts in which all transactions relating to a particular account are recorded separately.

For example:

Cash transactions → Cash A/c
Purchases of goods → Purchases A/c
Sales of goods → Sales A/c
Amount payable to Ravi → Ravi A/c
Rent paid → Rent A/c

Purpose of Ledger

The Ledger helps us to:

Know the balance of each account.
Find the amount receivable from customers.
Find the amount payable to suppliers.
Determine expenses and incomes.
Prepare the Trial Balance.
Prepare final accounts.

4. Meaning of Ledger Posting

Ledger Posting means transferring the debit and credit aspects of a transaction from the Journal or subsidiary book to the appropriate Ledger accounts.

Example

Suppose:

Cash received from Ravi ₹5,000

Journal entry:

Cash A/c Dr. ₹5,000
To Ravi A/c ₹5,000

Posting:

Cash Account

Since Cash is debited:

Debit Cash A/c with Ravi’s account.

Ravi Account

Since Ravi’s account is credited:

Credit Ravi A/c with Cash account.

5. Rules for Ledger Posting

A very important rule is:

The account which is debited in the Journal is debited in the Ledger, and the account which is credited in the Journal is credited in the Ledger.

However, the particulars written in the Ledger are generally the opposite account.

Example

Journal:

Purchases A/c Dr. ₹10,000
To Cash A/c ₹10,000

Posting:

Purchases A/c — Debit side

Date	Particulars	Amount
xx	To Cash A/c	₹10,000

Cash A/c — Credit side

Date	Particulars	Amount
xx	By Purchases A/c	₹10,000

6. Meaning of “To” and “By”

In traditional Ledger presentation:

On Debit side

The particulars usually begin with:

To ______

On Credit side

The particulars usually begin with:

By ______

Example:

If salary is paid in cash:

Salary A/c Dr.
To Cash A/c

Ledger:

Salary A/c

Debit	Amount
To Cash A/c	₹5,000

Cash A/c

Credit	Amount
By Salary A/c	₹5,000

By Sita A/c ₹8,000

8. Balancing of Ledger Accounts

After posting all transactions for a particular period, the debit and credit sides of an account are totalled.

The difference between the two sides is called the balance.

Formula

Balance = Larger Total − Smaller Total

9. Types of Ledger Balances

An account may have:

Debit Balance
Credit Balance
Nil Balance

Debit Balance

If the debit side is greater than the credit side:

Debit Balance = Debit Total − Credit Total

Examples:

Cash A/c
Debtors A/c
Purchases A/c
Expenses

Credit Balance

If the credit side is greater than the debit side:

Credit Balance = Credit Total − Debit Total

Examples:

Capital A/c
Creditors A/c
Sales A/c
Income

10. Steps in Balancing a Ledger Account

Step 1

Add the debit side.

Step 2

Add the credit side.

Step 3

Find the difference between the two totals.

Step 4

Write the difference on the smaller side as:

By Balance c/d — when the account has a debit balance.

To Balance c/d — when the account has a credit balance.

Step 5

Total both sides.

Step 6

Bring the balance into the next accounting period as:

To Balance b/d or By Balance b/d.

11. Example of Debit Balance

Suppose Cash Account contains:

Cash A/c
Debit
To Capital		₹50,000
To Sales		₹20,000

Credit
By Purchases		₹15,000
By Rent		₹5,000

Calculation

Debit total:

₹50,000 + ₹20,000 = ₹70,000

Credit total:

₹15,000 + ₹5,000 = ₹20,000

Balance:

₹70,000 − ₹20,000 = ₹50,000

Therefore, Cash has a Debit Balance of ₹50,000.

The balancing entry is:

By Balance c/d ₹50,000

12. Example of Credit Balance

Suppose Ravi’s Account has:

Ravi A/c
Debit
To Cash	₹8,000
Credit
By Purchases	₹20,000

Credit total = ₹20,000

Debit total = ₹8,000

Balance:

₹20,000 − ₹8,000 = ₹12,000

Therefore, Ravi has a Credit Balance of ₹12,000.

This means:

The business still owes Ravi ₹12,000.

Balancing entry:

To Balance c/d ₹12,000

13. Balance c/d and Balance b/d

These two terms are very important.

Balance c/d

c/d = Carried Down

It is used to balance the account at the end of the accounting period.

Balance b/d

b/d = Brought Down

It represents the balance brought into the next accounting period.

Example

Suppose Cash has a debit balance of ₹30,000.

At the end of the year:

By Balance c/d ₹30,000

In the next period:

To Balance b/d ₹30,000

So:

Balance c/d → Closing balance

Balance b/d → Opening balance of next period

14. Debit Balance vs Credit Balance

Basis	Debit Balance	Credit Balance
Debit side	Greater	Smaller
Credit side	Smaller	Greater
Examples	Cash, Debtors, Expenses	Capital, Creditors, Income
Meaning	Amount available/receivable or expense	Amount payable, capital or income

15. Personal, Real and Nominal Accounts

The traditional rules help understand which side of the Ledger receives an entry.

Personal Account

Debit the receiver
Credit the giver

Example:

Paid ₹5,000 to Ravi.

Ravi receives money:

Ravi A/c Dr.

Real Account

Debit what comes in
Credit what goes out

Example:

Purchased furniture for cash.

Furniture comes in:

Furniture A/c Dr.

Cash goes out:

Cash A/c Cr.

Nominal Account

Debit all expenses and losses
Credit all incomes and gains

Example:

Paid salary ₹10,000.

Salary is an expense:

Salary A/c Dr.

16. Complete Example: Ledger Posting and Balancing

Consider the following transactions:

Started business with cash ₹1,00,000.
Purchased goods for cash ₹20,000.
Sold goods for cash ₹30,000.
Paid rent ₹5,000.
Purchased goods from Ravi ₹15,000.
Paid Ravi ₹10,000.

Journal Entries

No.	Transaction	Debit	Credit
1	Capital introduced	Cash ₹1,00,000	Capital ₹1,00,000
2	Cash purchase	Purchases ₹20,000	Cash ₹20,000
3	Cash sale	Cash ₹30,000	Sales ₹30,000
4	Rent paid	Rent ₹5,000	Cash ₹5,000
5	Credit purchase	Purchases ₹15,000	Ravi ₹15,000
6	Paid Ravi	Ravi ₹10,000	Cash ₹10,000

Cash Account

Debit:

To Capital ₹1,00,000
To Sales ₹30,000

Credit:

By Purchases ₹20,000
By Rent ₹5,000
By Ravi ₹10,000

Debit total:

₹1,30,000

Credit total:

₹35,000

Balance:

₹95,000 Debit

Purchases Account

Debit:

To Cash ₹20,000
To Ravi ₹15,000

Total:

₹35,000 Debit

Sales Account

Credit:

By Cash ₹30,000

Total:

₹30,000 Credit

Rent Account

Debit:

To Cash ₹5,000

Total:

₹5,000 Debit

Ravi Account

Credit:

By Purchases ₹15,000

Debit:

To Cash ₹10,000

Balance:

₹5,000 Credit

Therefore, the business still owes Ravi ₹5,000.

17. Important Exam Points

Remember these rules:

Rule 1

Debit in Journal → Debit in Ledger

Rule 2

Credit in Journal → Credit in Ledger

Rule 3

Debit side particulars generally use “To”.

Rule 4

Credit side particulars generally use “By”.

Rule 5

Debit total > Credit total → Debit Balance

Rule 6

Credit total > Debit total → Credit Balance

Rule 7

Balance c/d is used for closing the account.

Rule 8

Balance b/d is used for bringing the balance into the next period.

Practice Questions

A. Short Answer Questions

What is a Ledger?
What is meant by Ledger Posting?
What is the purpose of a Ledger?
What is a Debit Balance?
What is a Credit Balance?
What does c/d stand for?
What does b/d stand for?
What is the difference between Journal and Ledger?
Why is the Ledger called the principal book of accounts?
What is the meaning of “To” and “By” in Ledger accounts?

B. Identify the Debit and Credit Accounts

For each transaction, identify the Debit Account and Credit Account.

Started business with cash ₹80,000.
Purchased furniture for cash ₹15,000.
Purchased goods for cash ₹20,000.
Sold goods for cash ₹25,000.
Purchased goods from Ravi ₹18,000.
Sold goods to Sita ₹12,000.
Paid salary ₹8,000.
Paid rent ₹5,000.
Received cash from Sita ₹7,000.
Paid Ravi ₹10,000.

C. Ledger Posting Practice

Prepare the necessary Ledger Accounts for the following transactions:

Started business with cash ₹1,50,000.
Purchased goods for cash ₹30,000.
Sold goods for cash ₹45,000.
Purchased furniture ₹20,000 for cash.
Paid salary ₹10,000.
Paid rent ₹8,000.
Purchased goods from Kumar ₹25,000.
Sold goods to Ramesh ₹18,000.
Received ₹12,000 from Ramesh.
Paid ₹15,000 to Kumar.

Required: Prepare:

Cash A/c
Capital A/c
Purchases A/c
Sales A/c
Furniture A/c
Salary A/c
Rent A/c
Kumar A/c
Ramesh A/c

Balance all applicable accounts.

D. Balancing Practice

Question 1

Prepare and balance Cash A/c:

Cash received from capital ₹1,00,000
Cash sales ₹30,000
Paid purchases ₹20,000
Paid salary ₹8,000
Paid rent ₹7,000
Purchased furniture ₹15,000

Find the closing Cash Balance.

Question 2

Prepare and balance Ravi A/c:

Purchased goods from Ravi ₹40,000
Paid Ravi ₹15,000
Purchased additional goods from Ravi ₹20,000
Paid Ravi ₹25,000

Find the closing balance and state whether it is Debit or Credit.

Question 3

Prepare and balance Sita A/c:

Sold goods to Sita ₹30,000
Received cash from Sita ₹10,000
Sold additional goods to Sita ₹15,000
Received cash from Sita ₹20,000

Find the closing balance.

E. Complete Ledger Problem

Prepare and balance all necessary Ledger Accounts from the following transactions:

April 1: Started business with cash ₹2,00,000.

April 3: Purchased goods for cash ₹40,000.

April 5: Purchased goods from Ravi ₹30,000.

April 8: Sold goods for cash ₹50,000.

April 10: Sold goods to Sita ₹25,000.

April 12: Paid rent ₹10,000.

April 15: Paid Ravi ₹20,000.

April 18: Received ₹15,000 from Sita.

April 20: Purchased furniture for cash ₹25,000.

April 25: Paid salary ₹12,000.

April 30: Received additional cash sales ₹20,000.

Required:

Prepare and balance:

Cash A/c
Capital A/c
Purchases A/c
Sales A/c
Ravi A/c
Sita A/c
Rent A/c
Furniture A/c
Salary A/c

F. Higher-Level Practice

Question 1

A student says:

“If an account has a debit balance, Balance c/d should always be written on the debit side.”

Is this statement correct? Explain with an example.

Question 2

Explain why Ravi A/c is credited when goods are purchased from Ravi on credit.

Question 3

Explain the difference between:

Balance c/d
Balance b/d
Debit Balance
Credit Balance

Question 4

A business has ₹50,000 cash. During the month:

Cash sales = ₹30,000
Purchases paid in cash = ₹15,000
Salary paid = ₹5,000
Rent paid = ₹4,000
Capital introduced = ₹20,000

Prepare Cash A/c and calculate the closing balance.

Question 5

Prepare the Ledger Accounts and determine the balance of each account:

Capital ₹1,00,000
Cash purchases ₹20,000
Credit purchases from Ravi ₹25,000
Cash sales ₹35,000
Credit sales to Sita ₹30,000
Cash paid to Ravi ₹10,000
Cash received from Sita ₹15,000
Salary paid ₹8,000
Rent paid ₹5,000
Furniture purchased for cash ₹12,000

Quick Revision Formula

Journal → Ledger Posting → Balancing → Trial Balance → Final Accounts

And remember:

Debit side = Left side
Credit side = Right side
Debit Total > Credit Total → Debit Balance
Credit Total > Debit Total → Credit Balance
Balance c/d → Closing balance
Balance b/d → Opening balance