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User guide for fact sheets

Maintain ledger accounts

Most small business owners begin with maintaining a cash book, a stock record or lists of debtor and creditor invoices to help manage their business. If you understand or have been involved in this recording process previously, moving towards maintaining the ledger accounts will be much easier.

The Ledger is a separate notebook that contains a page for each and every account in use by the business. It allows you to determine the balance of each account by posting – i.e. transferring amounts entered in the journal to its respective accounts.

As an illustration, let’s have a look at the transactions that happened at Peter’s Repair Service:

General Journal

 Date

 Accounts & Description

Referrence

Debit

Credit

 01.07

 Cash at Bank

         Peter, Capital

 To record cash invested by the owner.

 

XXX

7,000

 

7,000

 03.07

 Spare Parts

 Office Supplies

          Cash at Bank

 Purchase of spare parts and office
 supplies.

 



XXX

800

150

 

 

950

 08.07

 Cash at Bank

 Accounts Receivable

         Fees Revenue

 Revenue earned for repair service.

 

 

XXX

 

55

80

 

 

135

 30.07

 Telephone Expense

           Cash at Bank

 Paid July phone bill.  

 

XXX

70

 

70

 

For example, the ledger for the 'Fees revenue' and 'Telephone expense' accounts will be:

Ledger Book

ACCOUNT: Cash at Bank

 Date

 Explanation

Debit

Credit

Balance

 

 1.07

 Balance forward

 

 

$

 01.07

 Peter, Capital

$7,000

 

7,000

 03.07

 Spare Parts, Office Supplies

 

$950

6,050

 08.07

 Fees Revenue

55

 

6,105

 30.07

 Telephone Exp

 

70

6,035 (Dr)

 

To post the previous example transactions, you will also need the ledger pages for the following accounts;

  • Accounts receivable
  • Spare parts                        
  • Office supplies                 
  • Peter, capital                    
  • Fees revenue                   
  • Telephone expense

For example, the ledger page for the ‘Fees revenue’ and ‘Telephone expense’ account will be;

ACCOUNT: Fees Revenue

 Date

 Explanation

Debit

Credit

Balance

 

 01.07

 Balance forward

 

 

$

 08.07

 Cash at Bank

 

$135

135 (Cr)

 

ACCOUNT: Telephone Expense

 Date

 Explanation

Debit

Credit

Balance

 

 01.07

 Balance forward

 

 

$

 08.07

 Cash at Bank

$80

 

$80 (Dr)

 

If you’re using a manual system, it is good practice to put a posting reference number or even just a check mark (like XXX) in the general journal as you post them to the ledger accounts. Otherwise, you may forget to post an item or some items may be posted twice.

After doing the posting for each and every account used by your business, you will have a list of accounts and ending balances to help you prepare your financial statements.

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To help you maintain good financial records and make sound business decisions, it is important to have a basic understanding of accounting and bookkeeping.


 

Basic accounting and bookkeeping involve recording business events as they occur and then gathering those events into one place, such as in a Profit & Loss Statement or a Balance Sheet.

 


 

To help you record and maintain your financial records, you should consider: 

 

  • Setting up a record keeping system.
  • Recording your transactions accurately and promptly. 
  • Preparing summaries of your records to produce financial statements.

 

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