Ledger Accounts and Posting to Ledger Accounts

Ledger Accounts and Posting to Ledger Accounts

Ledger accounts are the T accounts. The data are posted to the debit and credit side of the relevant ledger account from the journal entries. We have discussed the journal entries in detail earlier. Once the 1^st step of accounting cycle completes, that is recording financial transactions via journal entries, it is transferred to the ledger accounts.

At the end of the period, the debit side of the assets accounts is calculated and after making journal entries of depreciation on to the credit side of the asset ledger account, the remaining balance is carried forward to the next accounting period. On the other hand, liabilities and capital account’s credit balance is calculated and the debit side if have any balance is subtracted. Any remaining balance is carried forward in the ledger account to the next accounting period.

Ledger Accounts is the second step in the accounting cycle.

Example:

We will use the same example solution that we used for journal entries to prepare the ledger accounts.

Example

Zeta Plc is engaged in manufacturing beauty soaps for sale in African countries. It is regarded as one of the biggest market leader in the industry. The reason for such a huge success is using advanced equipment and high caliber skilled labors. Following transactions relates to Zeta Plc.
1.    Total sale for the year is $1,000,000. 70 {1bb28fb76c3d282be6cfd0391ccf1d9529baae691cd895e2d45215811b51644c} of the sale is done on credit terms to large distributors. While remaining sale is done via company’s own outlet.
2.    Soda and other chemicals were purchased during the period amounting to $25,000. 25 {1bb28fb76c3d282be6cfd0391ccf1d9529baae691cd895e2d45215811b51644c} purchases were based on cash basis while the others are on 60 days credit terms.
3.    In order to grow organically in international markets, Zeta Plc has taken a loan of $30,000 from a local bank. The interest is payable @ 10 {1bb28fb76c3d282be6cfd0391ccf1d9529baae691cd895e2d45215811b51644c}.

Required:

Prepare journal entries and post to appropriate ledger accounts.

Solution

Ledger Accounts