Ledger Entries & Automatic Postings

While the journal records transactions in chronological order, the ledger organizes the same data by account. The ledger is where you go to answer questions like: "What is the current balance of Accounts Receivable?" or "What transactions hit the Factory Rent account this month?" Every account in your Chart of Accounts has its own ledger — a running history of every debit, every credit, and the resulting balance after each transaction.

In Udyamo ERP Lite, ledger entries are created automatically whenever a journal entry is posted. You do not create ledger entries manually. This chapter explains how ledger entries work, how the running balance is calculated, and — most importantly — how routine business transactions generate automatic accounting postings without any manual intervention.

What You Will Learn

• The structure of a ledger entry and its relationship to journal entries
• How the running balance is maintained
• How to view an account's ledger in the system
• The complete set of automatic postings for invoices, bills, and payments
• How reference linking provides a full audit trail
• How to trace any ledger entry back to its source document

Prerequisites

• Understanding of the Chart of Accounts (Chapter 32)
• Understanding of journal entries and voucher types (Chapter 33)
• Access to the Accounting module in Udyamo ERP Lite

What is a Ledger Entry?

A ledger entry is an individual line in an account's transaction history. It represents the effect of a single journal entry on that account. The ledger entry records:

The key difference between a journal line and a ledger entry is context. A journal line exists in the context of a balanced transaction (debits equal credits across multiple accounts). A ledger entry exists in the context of a single account's history, complete with a running balance.

Running Balance

The running_balance field is what makes the ledger more useful than a simple list of debits and credits. After each transaction, the system calculates and stores the new balance of the account.

For an asset account (normal debit balance), the formula is:

New Balance = Previous Balance + Debit - Credit

For a liability, equity, or income account (normal credit balance), the conceptual balance still follows the same mathematical formula — the sign simply reflects the account's nature.

Consider the ledger for "HDFC Bank — Current Account" (an asset account) over a series of transactions:

At any point, you can see exactly what the bank balance should be. If it does not match your bank statement, you know there is a discrepancy to investigate.

Viewing an Account's Ledger

Udyamo ERP Lite provides a dedicated ledger view for each account, accessible through the route /accounts/:id/ledger.

To view a ledger:

1. Navigate to Accounting > Accounts
2. Find the account you want to examine (e.g., "HDFC Bank — Current Account")
3. Click the account name to open its detail page
4. Click the Ledger tab or button

The ledger view displays all entries for the selected account, ordered by date, with the running balance column. You can typically filter by date range to view a specific period — for example, the current month or the current financial year.

Tip: When reconciling with external records (bank statements, vendor statements), use the ledger view filtered to the relevant period. The running balance column lets you compare the ERP balance at any date with the external balance.

Automatic Postings: The Complete Picture

The core value of ERP accounting is that everyday business transactions automatically generate the correct accounting entries. Below is the complete set of automatic postings for the major transaction types in Udyamo ERP Lite.

Sales Invoice Posting

When you create and post a sales invoice for finished goods worth 1,00,000 plus 18% GST (intra-state):

Ledger impact: Four ledger entries are created — one for each account. The Accounts Receivable running balance increases by 1,18,000. The Sales Revenue balance increases by 1,00,000. GST Payable balances increase by 9,000 each.

For an inter-state sale (IGST applies):

Purchase Bill Posting

When you record a vendor bill for raw materials worth 2,00,000 plus 18% GST (intra-state):

Ledger impact: Four ledger entries are created. Accounts Payable running balance increases by 2,36,000. GST Input Credit balances increase, reflecting the tax credit your business can claim.

Payment Received (Customer Payment)

When a customer pays 1,18,000 against an invoice:

Ledger impact: The bank balance increases by 1,18,000. The receivable balance decreases by the same amount. The net effect on the Balance Sheet is a shift from one asset (receivable) to another (bank) — total assets remain unchanged.

Payment Made (Vendor Payment)

When you pay a vendor 2,36,000 against a bill:

Ledger impact: The payable balance decreases (you owe less). The bank balance decreases (your cash goes down). Both a liability and an asset decrease by equal amounts — the accounting equation stays in balance.

Payment with TDS Deduction

When you pay a vendor 1,00,000 for professional services with 10% TDS deducted (Section 194J):

Ledger impact: The payable is fully cleared, but only 90,000 leaves the bank. The TDS Payable liability increases by 10,000, reflecting your obligation to deposit the withheld tax.

Reference Linking and the Audit Trail

Every ledger entry in Udyamo ERP Lite carries two reference fields: reference_type and reference_id. These fields create a chain of traceability from the ledger all the way back to the original business document.

The traceability chain works as follows:

Ledger Entry
  → references → Journal Entry (via journal_entry_id)
    → references → Source Document (via reference_type + reference_id)
      → e.g., Invoice #INV-2025-0137, Bill #BILL-2025-0089, Payment #PAY-2025-0201

This means you can start from any number in a financial report, drill down to the ledger, from there to the journal entry, and from there to the original invoice, bill, or payment. Conversely, from any business document, you can navigate to its journal entry and see exactly which accounts were affected.

The audit trail route (/accounts/:id/audit_trail) provides a comprehensive view of all changes and transactions related to an account, useful during statutory audits and internal reviews.

Tip: When your auditor asks "What is this 2,36,000 charge to Accounts Payable on 10 April?", you can click on the ledger entry, navigate to the journal entry, and from there to the vendor bill — all within seconds. This level of traceability is what separates ERP from spreadsheet-based accounting.

Understanding the Day Book

The day book (accessible at the reports route) is a chronological listing of all journal entries for a given date or date range. It is essentially the journal register and serves as the primary record of all financial transactions in the order they occurred.

The day book is useful for:

• Daily review — scanning all transactions posted on a given day
• Anomaly detection — spotting unusual entries, unexpected amounts, or missing transactions
• Auditor queries — providing a complete list of all transactions for a period

Tips & Best Practices

Tip: Review account ledgers monthly, not just at year-end. Catching a misposted entry in the same month it occurred is far easier than finding it six months later during the annual audit.

Tip: Use the reference linking to verify automatic postings. When you create your first few invoices and bills, open the generated journal entries and ledger entries to confirm that the accounts and amounts are correct. This builds confidence in the system and helps you understand the posting logic.

Tip: The running balance in the bank account ledger should match your bank passbook balance (adjusted for timing differences like uncleared cheques). If the two diverge significantly, investigate before more transactions accumulate.

Warning: Do not attempt to manually adjust ledger entry running balances. The running balance is system-calculated and maintained. If a running balance appears incorrect, the issue lies in the underlying journal entries — investigate and correct those instead.

Quick Reference