A ledger is a principal book, which contains all accounts to which the transactions recorded in the books of original entry are transferred. As the ledger is the ultimate destination of all transactions, the ledger is called the 'Book of Final Entry or secondary record.'The ledger may be kept in the form of a bound book, a loose-leaf set of pages, or some kind of electronic storage device such as magnetic tape or floppy diskettes or CDs, but it is always kept current in a systematic manner.

Utility of the ledger:

  • It provides complete information about all the accounts in one book.
  • It enables to ascertain what the main item of revenues is.
  • It enables to ascertain what the main items of expenses are.
  • It enables to ascertain what the assets are and of what value.
  • It enables to ascertain what the liabilities are and of what amounts.
  • It facilitates (i.e. make easy) the preparation of Final Accounts.





Þ     It is a book of primary entry.

Þ     It is prepared on the basis of source documents of transactions.

Þ     Recording of transactions in the journal it first stage.

Þ     It is prepared to record all transactions in chronological order.


Þ     It is not balanced.

Þ     Narration is written for each entry

Þ     The process of recording in journal is called ‘Journalizing’

Þ     Journal directly does not serve as basis for the preparation of final accounts.

Þ     It is book of final or secondary entry.

Þ     It is prepared on the basis of Journal.


Þ     Recording in the ledger is second stage.


Þ     It is prepared to know the net effect of various transactions affecting a particulars account.

Þ     All ledger accounts (except nominal account) are balanced in the ledger.

Þ     No narration is required.

Þ     The process of recording in the ledger is called ‘posting’

Þ     Ledger serves the basis for the preparations of final accounts.



Posting is the transferring of amounts from the journal to the appropriate accounts in the ledger. It is to be done daily, weekly, fortnightly or monthly according to the convenience and requirement of the business.

It is necessary to post all journal entries into various accounts in the ledger because posting helps us to know the net effect of various transactions during a given period on a particulars account.                 

Ø     Cross referencing:

The process of using numbering, dating and / or some other identification to relate each positing to the appropriate journal entry is known as cross-referencing. Transactions from the journal are often posted to several different accounts, but cross-referencing allows users to find all components of the transactions in the ledger.

Ø     Balance of an Account:-- After posting into the ledger the next stage is to ascertain the net effect of all transactions           posted to an account.

Balance of an account is the difference between the total of debit and total of credit appearing in an account. It signifies the net effect of all transactions posted to that account during a given period. It may be debit balance or credit balance or a nil balance depending upon whether the debit or the credit side total is higher.

IMP--Normally, personal Accounts and Real Accounts are balanced. Nominal Accounts are not usually balanced but are closed by transfer to Trading and Profit and Loss A/c.

Ø     DEBIT BALANCE:-A debit balance shows that:

i.         Money is owing to the firm; or

ii.        The firms owns some property (cash , goods, furniture etc.); or

iii.      The firm has lost money or has incurred some expenses.

Ø     CREDIT BALANCES: :-- A credit balances shows that: —

a)       Money is owing to some person ; or

b)       The firm has given up so much property ; or

c)       The firm has earned an income.


                             (i.)      A voucher is documentary evidence in support of transaction;

                           (ii.)      A cash memo showing cash sale;

                          (iii.)      An invoice showing sale of goods on credit;

                          (iv.)      The receipt made out by the payees when cash is paid to him are all example of vouchers.

On the basis of the above, first of all, one writes out -which accounts are to be debited and which accounts are to be credited. This is done in the journal.

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