Home » Accounting Explanation » Preparing Ledger Accounts


EXAMPLE No.2

Johnny Bravo set up business selling Air Conditioners, trading under the name of "kings cool shop" . He put $500,000 in his business (First transaction). Following are the transactions occurred in the first trading month.

   
   January 1.Started business with cash $500,000
   January 2.Purchased Air Conditioners on credit $200,000 
   January 3.Paid rent of shop for the period amounting to $3000
   January 4.Raised loan from bank $100,000
   January 7.Purchase of Shop fittings (for cash) $2000
   January 9.$4000 paid to the trade account payable
   January 13.Sale of Air Conditioners on credit $10,000
   January 16.$700 paid as Interest on bank loan
   January 19.$3000 received from a debtor (Account receivable)
   January 26.Withdrawal of cash on account of profit $5000 by the owner of the business  
  


First off we have to record double entries in General Journal, after that we would put these transactions in Ledger Accounts




  DATE  DESCRIPTION FOLIO DEBIT CREDIT





   Jan. 1

   Cash

                    Capital

   $500,000

   
   

   $500,000





   Jan. 2

   Purchases

                    Creditor

   $200,000

   
   

   $200,000





   Jan. 3

   Rent expenses

                    Cash

   $3000

   
   

   $3000





   Jan. 4

   Cash

                    Bank loan

   $100,000

   
   

   $100,000





   Jan. 7

   Shop fittings

                    Cash

   $2000

   
   

   $2000





   Jan. 9

   Creditor

                    Cash

   $4000

   
   

   $4000





   Jan. 13

   Debtor

                    Sales

   $10,000

   
   

   $10,000





   Jan. 16

   Interest expenses

                    Cash

   $700

   
   

   $700





   Jan. 19

   Cash

                    Debtor

   $3000

   
   

   $3000





   Jan. 26

   Drawings

                    Cash

   $5000

   
   

   $5000







Here are the ledger accounts for above mentioned transactions

Back to General journal ↑




DEBIT
Cash account



CREDIT
DATE
DESCRIPTION
AMOUNT
DATE
DESCRIPTION
AMOUNT
Jan. 1
Jan. 4
Jan. 19

Capital
Bank loan
Debtor
$500,000
$100,000
$3000
Jan. 3
Jan. 7
Jan. 9
Jan. 16
Jan. 26

Rent expenses
Shop fittings
Creditor
Interest expenses
Drawings

Balance c/d

$3000
$2000
$4000
$700
$5000

588,300

TOTAL $603,000
TOTAL $603,000

Back to General journal ↑




DEBIT
Capital account



CREDIT
DATE
DESCRIPTION
AMOUNT
DATE
DESCRIPTION
AMOUNT



Balance c/d


$500,000
Jan. 1 Cash

$500,000


TOTAL $500,000
TOTAL $500,000

Back to General journal ↑




DEBIT
Purchases account



CREDIT
DATE
DESCRIPTION
AMOUNT
DATE
DESCRIPTION
AMOUNT
Jan. 2

Creditor
$200,000


Income statement


$200,000

TOTAL $200,000
TOTAL $200,000

Back to General journal ↑




DEBIT
Creditor account



CREDIT
DATE
DESCRIPTION
AMOUNT
DATE
DESCRIPTION
AMOUNT
Jan. 9

Cash

Balance c/d
$4000

$196,000

Jan. 2 Purchases

$200,000

TOTAL $200,000
TOTAL $200,000

Back to General journal ↑




DEBIT
Rent expenses account



CREDIT
DATE
DESCRIPTION
AMOUNT
DATE
DESCRIPTION
AMOUNT
Jan. 3

Cash
$3000


Income statement


$3000

TOTAL $3000
TOTAL $3000

Back to General journal ↑




DEBIT
Bank loan account



CREDIT
DATE
DESCRIPTION
AMOUNT
DATE
DESCRIPTION
AMOUNT



Balance c/d

$100,000

Jan. 4 Cash

$100,000

TOTAL $100,000
TOTAL $100,000

Back to General journal ↑




DEBIT
Shop fittings account



CREDIT
DATE
DESCRIPTION
AMOUNT
DATE
DESCRIPTION
AMOUNT
Jan. 7

Cash
$2000


Balance c/d


$2000

TOTAL $2000
TOTAL $2000

Back to General journal ↑




DEBIT
Debtor account



CREDIT
DATE
DESCRIPTION
AMOUNT
DATE
DESCRIPTION
AMOUNT
Jan. 13

Sales
$10,000
Jan. 19 Cash

Balance c/d

$3000

$7000

TOTAL $10,000
TOTAL $10,000

Back to General journal ↑




DEBIT
Sales account



CREDIT
DATE
DESCRIPTION
AMOUNT
DATE
DESCRIPTION
AMOUNT



Income statement


$10,000
Jan. 13 Debtor

$10,000

TOTAL $10,000
TOTAL $10,000

Back to General journal ↑




DEBIT
Interest expenses account



CREDIT
DATE
DESCRIPTION
AMOUNT
DATE
DESCRIPTION
AMOUNT
Jan. 16

Cash
$700




Income statement

$700

TOTAL $700
TOTAL $700

Back to General journal ↑




DEBIT
Drawings account



CREDIT
DATE
DESCRIPTION
AMOUNT
DATE
DESCRIPTION
AMOUNT
Jan. 26

Cash
$5000


Balance c/d


$5000

TOTAL $5000
TOTAL $5000

Back to General journal ↑