part 1,  part 3, part 4

Creditors Ledger

With the transactions shown in part 1, let us produce the ledger card for the Service & Parts Co. We will also assume that we owed them €500 at the beginning of the year.

The folio reference points back to the bank payments daybook (BP1 - Bank Payments, Page 1) and to the purchase invoices daybook (PB1 - Purchase Invoices, Page 1)
The layout of the card with balance b/f (brought forward) on the credit side and balance c/f (carried forward) on the debit side ensures that you can always calculate how much you owe a supplier. The balance c/f is always the balancing amount on the ledger card i.e. when you subtract the debits from the credits (payments from the invoices) this is how much you owe the supplier.
When you create a list of suppliers you owe money to you always take the balance b/f amount. So for the 31st January, the amount owed is the balance b/f for the next month being the 1st February (1/2/06).

Debtors Ledger

With the transactions shown in part 1, let us produce the ledger card for JB & Co.  and Red Tails Ltd and we will also assume that at the beginning of the year they owed us €1135 and €1210 respectively.

The folio reference points back to the bank receipts daybook (BR1 - Bank Receipts, Page 1) and to the Sales invoices daybook (SI1 - Sales Invoices, Page 1)
The layout of the card with balance b/f (brought forward) on the debit side and balance c/f (carried forward) on the credit side ensures that you can always calculate how much  a customer owes you. The balance c/f is always the balancing amount on the ledger card i.e. when you subtract the credits from the debits (receipts from the invoices) this is how much the customer owes you.
When you create a list of customers who owe you money, you always take the balance b/f amount. So for the 31st January, the amount owed is the balance b/f for the next month being the 1st February (1/2/06).

Bank Account Ledger

We will now add an additional transaction for wages to the transactions shown in part 1, and produce our bank account ledger card. We will assume that we had €2,500 in our bank account at the beginning of the year.

The Bank Payments Daybook, page 1

NL713 is the nominal ledger for net wages (wages paid)

Note:
We could also enter each receipt and payment individually in this bank account instead of the totals. Entering the totals makes it quicker.

The folio reference points back to the bank receipts daybook (BR1 - Bank Receipts, Page 1) and to the bank payments daybook (BP1 - Bank Payments, Page 1)
The layout of the card with balance b/f (brought forward) on the debit side and balance c/f (carried forward) on the credit side ensures that you can always calculate how much  is in your bank account. The balance c/f is always the balancing amount on the ledger card i.e. when you subtract the credits from the debits (receipts from the payments) this is how much money you have in the bank.
When you create a list of your bank accounts (you can have more than one, but usually the list contains only one), you always take the balance b/f amount. So for the 31st January, the amount is the balance b/f for the next month being the 1st February (1/2/06).

So we now have the following  lists at 31/1/06

So from this list we now know

1. How much money we have
2. How much we are owed
3. How much we owe

What we don't know is how much money we have made. We need a profit & loss statement and for that we need to create nominal ledger accounts. We also need to know our wages costs and with the addition of a wages payment to our bank account, we need to record wages transactions in the General Journal daybook.

General Journal Daybook, Page 1

Now we are ready for part 3 to build our nominal ledger and create our profit and loss statement and balance sheet.

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(c) Nilsson Denver Ltd 2007