In the past few lessons, I discussed the basic principles of handling transactions. With these basic principles, you will be able to manage the bookkeeping of your household or micro business. Over the next few lessons I am going to show you how to use proper ledger paper in your General Journal. I am also going to explain cash journals, posting transactions from the cash journal to the general ledger, balancing a general ledger and preparing a Trial Balance. Obviously these topics are quite vast, so I will be covering them over a number of articles.
Ledger Paper and Subsidiary Journals is Lesson 9 in the Authentically Ash Basic Bookkeeping Course. In this lesson I will explain how to use ledger paper in your General Journal. I will also explain what subsidiary journals are. At the end of this article you will find a free ledger paper template that you can download as a PDF.
How to use Ledger Paper
Up until now, I have used a simplified version of a general ledger for all of the examples. I did this so as to teach you the basic principles of bookkeeping without the distraction of correct format. I think that now is a good time to show you the full version of the ledger accounts. Below you will see an example of ledger paper:
- Vertical line which divides the page of the ledger into two – hence why we call it a T-account.
- Left hand side of page is called the debit side. This is indicated by the abbreviation Dr.
- Right hand side of the page is called the credit side. This is indicated by the abbreviation Cr.
- Name of each account, e.g. Bank, Capital, Equipment etc. This is written above the account in the middle of the page.
- A folio number is the account number. It is like numbering the pages in a book. A folio number makes accounts easier to find, especially when you have many accounts. In business (or household) a separate page is generally used for each account.
- Date (year / month | day) on which the account is debited.
- Name of the contra-account that is credited
- Folio number of the subsidiary book in which this transaction is recorded (more on subsidiary books in the next section).
- Amount by which the account is debited
- Date (year / month | day) on which the account is credited.
- Name of the contra-account that is debited
- Folio number of the subsidiary book in which this transaction is recorded
- Amount by which the account is credited
Here is an example of the Bank account from Johnson Mechanics:
What are subsidiary journals?
In many businesses and households, a large number of transactions take place on a monthly basis. To enter each of these transactions (such as buying groceries) directly into the ledger account can become a tedious task. For this purpose, subsidiary journals were created. The purpose of subsidiary journals is to group similar transactions together, total them, and then only add the total into the general ledger.
There are two main types of subsidiary journals, namely the Cash Receipts Journal and the Cash Payments Journal. By the names you can deduce that money received by your business or household will be recorded in the Cash Receipts Journal, and money that is paid by your business or household will be recorded in the Cash Payments Journal.
You will make use of source documents, such as Cash Receipts, Cash Slips, Invoices, Proof of payments etc. to fill the information into the subsidiary journals. It is very important that you keep any proof documents in a filing system for at least 5 years. If your books are ever audited, then you will need to provide the auditors with all the proof documents.
This has been a short article today, you should now know how to use ledger paper for your general ledger, and have an idea of what Subsidiary Journals are. In the next lesson I am going to cover the Cash Receipts Journal in more detail. Here is the PDF General Ledger Paper Download.