How to Record Cash Received or Payment in the Ledger

Posting is the process of transferring the entries from the books of original/prime entry (journal) to the ledger.

No new information is needed to prepare ledger accounts. The information that has already been recorded in the journal is just transferred to the relevant ledger accounts.

Let’s illustrate the format of a ledger account by preparing a journal entry and then transferring it to the relevant ledger accounts.

Transaction: on September 1, 2018, Kofa Enterprise sold books to customers for cash ₦50,000.

First, Let’s post this transaction to the general journal and then to the relevant ledger accounts.

The debit part of the above journal entry is “cash account” and the credit part is “sales account”. So the amount of the journal entry (₦50,000) is written on the debit side of the cash account and credit side of the sales account.

Ordinarily, cash paid out is usually recorded in a special book of accounts called a cash book. The examples below show how cash received and paid out are recorded in the ledger.

Example 9.2.1:

2^nd August 2016, Cash sales ₦5,000

Solution:

Steps to Record the Transaction Using the Double-Entry Principle:

Note: The business organization received cash of ₦5,000 as a result of the sales, therefore, cash A/C was debited. If the cash A/C is debited, obviously, the corresponding account should be entered on the credit side of sales to complete double entry.

Example 9.2.2:

3^rd Sept. 2016. Bought a motor van by cash ₦2,000

The cash account is debited when cash is received. The cash account is credited when cash is given out.

Solution:

Dr. Motor Van
Cr. Cash A/C

In example 9.2.1, we used the formal format while in example 9.2.2, we used the informal format (T-form)

Note: The two accounts opened involved two asset accounts