Lesson Progress
0% Complete

The ledger is a principal book which contains permanent records of all the transactions of the business in a classified and summarized form.

Ledger is also called the “Book of final Entry” or “Book of Secondary Entry”, because the transactions are finally incorporated in the ledger. The ledger is used for the Double entry book-keeping.

Classification of the Ledger

(a) Personal Ledger: These are the ledgers for creditors account and debtors account e.g. purchases ledger and Sales ledger.

(b) General Ledger: These are ledgers which contain the real and nominal accounts. It contains the Sales account, purchases account, return Inwards and return outwards account, as well as all the other accounts for assets, expenses and Income etc.

(c) Private Ledger: These are the ledgers for capital and drawings account of the proprietor. The account is prepared in other to ensure privacy.

(d) Sales Ledger or Debtors Ledger: This is a record of the Sales of good made by the organization to various individuals and enterprises. The sales ledger Contains personal account of customers and Debtors.

(e) Purchase Ledger or Creditors Ledger: This ledger contains accounts of creditors i.e. it is on account for suppliers or creditors.

(f) Nominal Ledger: These ledger contains accounts of losses, expenses, Income and gain.

Nature of a Ledger

(i) Ledger is divided into separate sections called “Accounts”.

(ii) A ledger is divided by a central line into two parts. 

(iii) The abbreviation “Dr” is placed on the left side to indicate the “Receiving Account”.

(iv) The abbreviation “Cr” is placed on the right side to indicate the “Giving Account”.

(v) Ledger has column for Date, Particulars, Folio and Amount on both sides of the account.

(vi) Folio is used for reference purposes.

Format of a Ledger Account

ledger

Importance of Ledger

(i) Ledger is a permanent record of transaction

(ii) It helps in the preparation of balance sheet.

(iii) The principle of Double entry is applicable in the ledger.

(iv) It aids preparation of total balance i.e. in order to check the arithmetical accuracy of postings.

(v) The totality of the ledger shows the detailed transaction of organization i.e. financial position.

(vi) It helps to know the profit or loss because it aids preparation of profit and loss.

(vii) The data supplied by various ledger accounts are summarized, analyzed and interpreted for obtained various accounting information.

Responses

Your email address will not be published. Required fields are marked *

back-to-top
error: