When this entry is posted in the Ledger, it must be posted in machinery a/c and as well as in Sales Account.Ģ. For example, for purchase machinery, machinery a/c is debited and purchases a/c is credited in the journal. Every journal entry will have to be posted into all separate and respective Accounts which have been debited and credited in the journal entry. So if there is any difference in their balance, then they have to reevaluate and fix the problem.ġ. The Ledger records all the expenses of the business and all the incomes too. Reason for the disparity in expenses or incomes Management can make effective decisions based on it.Ĥ. Information given by the Ledger Accounts is used further in financial statements to derive the company’s growth or reasons for any loss. The book value of any asset can be derived from the Ledger at any time. Ledger is a hub of all the assets related records of the keeps a separate Account for each asset and all the transactions relating to it. If there are any discrepancies are found amongst both, then necessary actions are taken. Ledger provides a comprehensive report of all the transactions which helps the business to look through the expenses and incomes. Towards the end of the Accounting period, all Accounts will contain the entire information of all the transactions relating to it. Ledger is the spine of business Accounting as it has all the records of all the transactions in separate Accounts. The Sum of all the money which has been given on credit is called Accounts receivable. This Account records all the transactions in which the goods have been sold to the customer in credit. But, many businesses sell in credit and have many customers, for them maintaining a sales Ledger is very important. If the business just has one customer, it will not need to maintain a sales Ledger but just one Account in the Nominal Ledger will be enough. The Sum of all the money owed by a business to its suppliers is known as Accounts payable. Instead, this information is recorded directly within the general Ledger.Įach Account will generally have a credit balance and this shows the amount owed to a supplier by the business. If the purchasing volume is relatively low, then there is no need for a purchase Ledger. It shows which purchases are paid and which are outstanding. Purchase Ledger records all the transactions the company has done with the suppliers. These Accounts are only accessible by selected individuals. Private Ledger- Private Ledger consists of Accounts that are confidential such as capital, drawings, salaries, etc. Examples – Salaries, Sales, Purchases, Returns Inward/Outward, Rent, Stationery, Insurance, Depreciation, etc. Nominal Ledger- As the name suggests it contains all nominal Accounts i.e. It has to match to prepare the financial statements from it. It comprises a debit and credit entry for every transaction recorded into it, to match the total debit and credit balance. The general Ledger is used to record all the transactions in the financial statements of the business. There may be a small set of Ledgers that fall under the general Ledger. (Image will be uploaded soon) Types of Ledger AccountsĪ general Ledger is the master collection of all the Accounts that summarize all transactions occurring within an enterprise. It facilitates the preparation of financial statements in future. It is the only record of the business transaction classified into relevant Accounts. In the Ledger, all the types of Accounts relating to assets, liabilities, capital and revenue are maintained. It is also known as the Principal book of Account as it is the book of final entry of transactions after the journal or all-purpose books. It can also be a bundle of sheets.Īll the items from the journal are recorded in Ledger Accounts and this process is known as posting entries from Journal to Ledger Accounts.Ī Ledger book is an Accounts book to which various transactions of an enterprise are posted under different Accounts. Ledger is in a book with pages consecutively numbered. It is a complete set of Accounts of a business enterprise. So a Ledger is a book of Accounts in which all types of Accounts relating to assets, liabilities, capital, expenses and revenues are maintained. Every item has a separate Account and all these Accounts are recorded in a book called Ledger.Īll the Accounts recognized based on transactions recorded in different journals will be opened and maintained in a separate book called Ledger. Items of the same name under all the books need to be recorded under a special place called to Account. Such recording of business transactions only serves little purpose in the Accounting process. The transactions are written in several Accounting books in chronological order. The Accounting process does not stop here. You already know that business transactions are recorded in various Accounting books.
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