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Types of Ledger Accounts

Arjun EP

Published on: June 21, 2020

Ledger Account

There are two types of ledger accounts format.

They are ‘T’ and continuous balance form.

‘T’ ACCOUNT

“T” Account is mostly used in business firms.

It is divided into two parts i.e. on left hand side debit and right hand side credit.

Theere are two formats of ledger ‘T’

T Account

To ……….

Ledger Account

Date

Particulars

Amount

Date

Particulars

Amount

CONTINUOUS BALANCE LEDGER OR RUNNING ACCOUNT BALANCE LEDGER

Continue balance form is also known running balance form.

This is an alternative form of ‘T’ ledger account.

Generally, it is adopted by financial institutions and other business firms for cash and bank transactions.

According to this format, ledger is divided into seven columns.

They are date, particulars, folio, debit amount, credit amount, balance and debit or credit.

The specimen of running balance form is given below:

Continuous Balance Ledger (Cash or Bank Account)

Date

Particulars

Dr Amount

Cr Amount

Balance

Dr/Cr

Keep in mind

Cash and bank balance always has debit balance.

Comes in cash or cheque is recorded in debit column.

Goes out cash or cheque is recorded in credit column.

All incomes are recorded in debit column.

All expenses are recorded in credit column.

No transaction of credit purchase, credit sales, outstanding expenses in cash and bank account.

PROBLEM:

AM Trade Link has following extracted data (all transactions through bank)

1 Feb, Bank balance Rs 50,000 at City Bank.

3 Feb, Goods (inventory, merchandise) purchased Rs 24,000.

10 Feb, Sales revenue Rs 40,000.

15 Feb, Furniture purchased Rs 4,250.

20 Feb, Mobile and internet bill paid by mobile bank Rs 750.

25 Feb, Office rent paid Rs 6,500.

27 Feb, Cheque received from ABC Traders Rs 12,750.

28 Feb, Salary paid to office boy Rs 8,000.

Required: Continuous balance ledger of bank

[Answer: Balance c/d = 59,250]

SOLUTION

City Bank Account

In the book of AM Trade Link

Date	Particulars	LF	Dr Amount	Cr Amount	Balance	Dr/Cr
1 Feb	Balance b/d				50,000	Dr
3 Feb	Goods purchased			24,000	26,000	Dr
10 Feb	Sales		40,000		66,000	Dr
15 Feb	Furniture purchase			4,250	61,750	Dr
20 Feb	Mobile and internet bill			750	61,000	Dr
25 Feb	Office rent paid			6,500	54,500	Dr
27 Feb	ABC Traders		12,750		67,250	Dr
28 Feb	Salary paid			8,000	59,250	Dr