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Unit 13 Solutions: Ledger

Answers to the Unit 13 exercises. Each answer is as long as its marks call for: a sentence or two for 1 mark, and full working for each numerical problem.

A. Very Short Answer Questions (1 Mark Each)

1. Why is the Ledger called the Principal Book of Accounts?

The Ledger is called the Principal Book of Accounts because it keeps a classified and permanent record of every account in one place, and the Trial Balance and final accounts are prepared directly from its balances.

2. Define Posting and Balancing of a Ledger Account.

Posting is the process of transferring entries from the Journal (and subsidiary books) to the respective Ledger accounts. Balancing is finding the difference between the two sides of a Ledger account and writing it on the shorter side as Balance c/d, so that both sides show the same total.

3. What do c/d and b/d stand for in ledger balancing?

c/d stands for carried down (the balance written on the shorter side to close the account for the period), and b/d stands for brought down (the same balance shown on the opposite side at the start of the next period).

4. What does a Debit balance in a Personal Account signify? What does a Credit balance signify?

A Debit balance in a Personal Account means the person is a Debtor who owes money to the business; a Credit balance means the person is a Creditor to whom the business owes money.

B. Numerical Problems for Practice (8 Marks Each)

Problem 13.1: From the following transactions of Lumbini Store, prepare Furniture Account and Pradhan’s Account and balance them:

  1. Opening balance of Furniture on Chaitra 1: Rs. 90,000.
  2. Chaitra 5: Purchased furniture on credit from Pradhan for Rs. 25,000.
  3. Chaitra 12: Purchased additional furniture for cash Rs. 15,000.
  4. Chaitra 18: Returned damaged furniture worth Rs. 3,000 to Pradhan.
  5. Chaitra 22: Sold old furniture costing Rs. 10,000 for cash Rs. 10,000.
  6. Chaitra 26: Paid cash Rs. 21,000 to Pradhan in full settlement of his account.
  7. Chaitra 30: Provided depreciation on furniture Rs. 7,000.

Step 1: Journal Entries

DateParticularsL.F.Debit (Rs.)Credit (Rs.)
2082-12-05Furniture A/c …………………………………………… Dr.
To Pradhan’s A/c
(Being furniture purchased on credit from Pradhan)		25,000
25,000
2082-12-12Furniture A/c …………………………………………… Dr.
To Cash A/c
(Being furniture purchased for cash)		15,000
15,000
2082-12-18Pradhan’s A/c …………………………………………… Dr.
To Furniture A/c
(Being damaged furniture returned to Pradhan)		3,000
3,000
2082-12-22Cash A/c ……………………………………………….. Dr.
To Furniture A/c
(Being old furniture costing Rs. 10,000 sold for cash at cost)		10,000
10,000
2082-12-26Pradhan’s A/c …………………………………………… Dr.
To Cash A/c
To Discount Received A/c
(Being cash paid to Pradhan in full settlement of Rs. 22,000 [25,000 - 3,000] and discount received)		22,000
21,000
1,000
2082-12-30Depreciation A/c ………………………………………… Dr.
To Furniture A/c
(Being depreciation charged on furniture)		7,000
7,000

Step 2: Ledger Accounts

1. Dr. …………………………………………… Furniture Account …………………………………………… Cr.

DateParticularsJ.F.Amount (Rs.)DateParticularsJ.F.Amount (Rs.)
2082-12-01To Balance b/d90,0002082-12-18By Pradhan’s A/c3,000
2082-12-05To Pradhan’s A/c25,0002082-12-22By Cash A/c10,000
2082-12-12To Cash A/c15,0002082-12-30By Depreciation A/c7,000
2082-12-30By Balance c/d1,10,000
Total1,30,000Total1,30,000
2083-01-01To Balance b/d1,10,000

(Note: The Debit side (Rs. 1,30,000) is larger than the Credit side (Rs. 20,000), so Furniture Account has a closing Debit balance of Rs. 1,10,000, the value of furniture now held by the business.)

2. Dr. …………………………………………… Pradhan’s Account …………………………………………… Cr.

DateParticularsJ.F.Amount (Rs.)DateParticularsJ.F.Amount (Rs.)
2082-12-18To Furniture A/c3,0002082-12-05By Furniture A/c25,000
2082-12-26To Cash A/c21,000
2082-12-26To Discount Received A/c1,000
Total25,000Total25,000

(Note: Pradhan’s Account has equal Debit and Credit totals of Rs. 25,000, so his account is fully settled with zero closing balance, after a Discount Received of Rs. 1,000.)

Working notes:

  • Opening balance: The Rs. 90,000 is not journalized; it is entered directly as To Balance b/d on the first day.
  • Chaitra 18: Furniture is a fixed asset, so the return is credited to Furniture A/c, not to Purchase Return A/c (which is used only for goods bought for resale).
  • Chaitra 22: Furniture costing Rs. 10,000 was sold for Rs. 10,000, so there is no profit or loss on the sale and the full Rs. 10,000 is credited to Furniture A/c.
  • Chaitra 26: After the return, Pradhan was owed 25,000 - 3,000 = 22,000. He accepted Rs. 21,000 in full settlement, so discount received is 22,000 - 21,000 = 1,000.
  • Furniture balance: 90,000 + 25,000 + 15,000 - 3,000 - 10,000 - 7,000 = 1,10,000.