HOW TO POST TRANSACTIONS INTO LEDGER? Part - 2

HEY! Every one. It has been a long time since my last post. Well, last time I posted an article regarding How to post transactions into ledger? Part – 1 in which I gave an example for self ledger and general ledger, remember right! Ok in this article I will explain you how to post transactions into ledger for creditor’s and debtors. You must remember creditor is a person who gives credit or debt to the firm and the firm is liable to pay him later in the future. And debtor is a person who takes credit or debt from the firm and the firm is liable to receive the payment in the future.

EXAMPLE PROBLEM

Explanation: First let me explain the problem
Above in the question we are asked to prepare accounts of Ram, Sham and Mohan. So we will ignore other accounts involved, only Ram Sham and Mohan's accounts are prepared. And you must remember the personal account rule i.e. Debit the Receiver and Credit the Giver. Whatever the person is receiving is recorded on debit side of his account and whatever the person is giving is recorded on credit side of his account.

Now let me explain you each transaction in detail.

On Jan 1 goods are sold to Ram, only name is given that means it is a credit transaction so we will open Ram account, as he is receiving the goods so his account is debited as To Sales A/c. you must remember we can’t use Ram’s name in Ram’s Account instead we will write the alternate account name, i.e. To sales A/c.
On Jan 7 goods are sold to sham so separate account is opened for sham, as he is receiving the goods so his account is debited as To Sales A/c.
On Jan 12 goods are purchase from Mohan so separate account is opened for Mohan, as he is giving the goods so his account is to be credited as By Purchase A/c.
On Jan 17 goods are sold to Mohan on credit, as he is receiving the goods so his account is debited as To Sales A/c.
On Jan 22 cash is received from the Sham, he is giving the cash so his account is credited as By Cash A/c.
On Jan 24 goods are purchased from Sham for cash so this transaction will not be recorded in Sham account as payment is already made. Hence this transaction is ignored here.
On Jan 27 here received means cash so cash is received from Ram, Ram is the giver of the cash so his account is credited as By Cash A/c.
On Jan 28 goods are purchase for Ram so he is giving goods so his account is credited as By Purchase A/c.
On Jan 29 cheque is received from Sham as a payment, so his account is credited as By Bank A/c because payment is made through cheque, so bank is involved.
On Jan 31 cash is received from Mohan so he is giving the cash and his account is credited as By Cash A/c.
Solution: Here’s how their accounts will be like
On Jan 2, 27 and 28 are related to Ram so will be posted into Ram' Account.

Note: Here in Ram’s account debit side is greater than credit side so we get credit balance of 200 for his account which is transferred to the next month as To Balance b/d, means the firm is going to receive 200 in future from Ram. So Ram is a Debtor.
Next on Jan 7, 22 and 29 are related to Sham so will be posted into Sham's Account.

Note: Here in Sham’s account, both debit side and credit side is equal so his account is showing no balance, means his account is fully settled.
Next on Jan 12,17 and 31 are related to Mohan so will be posted into Mohan Account.😅 Oops sorry Balance c/d will always be on the last date of the moth i.e 31 please make point of date always.

Note: Here in Mohan’s account debit side is less than credit side so we get debit balance of 900 for his account which is transferred to the next month as By Balance b/d, means the firm is going to pay 900 in future to Mohan. So Mohan is a creditor.

Now let me give you one (DIY) for your practice let’s see how you will do! Well practice makes us perfect, hmmm no discrimination right! Well I have shared my knowledge with you let’s see did you gained that knowledge?🤗

DO IT YOURSELF (DIY):

I hope you are finding my blog useful. Next time I will inshallah teach you how to post compound journal entries into ledger?😀

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