LEDGER ACCOUNTS

LEDGER ACCOUNTS

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.

 


Ø    DISTINCTION BETWEEN JOURNAL AND LEDGER:

Journal

Ledger

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.

Ø     


POSTING TRANSACTIONS TO THE LEDGER:

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.

Ø     VOUCHER:

                             (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.

Demo Video for CA/CMA/CS/B.Com of Accounts:https://www.conceptonlineclasses.com/demovideos

Visit Website:https://www.conceptonlineclasses.com/

#LEDGERACCOUNTS

Latest Blogs

Salary of a Qualified CMA

Salary of a Qualified CMA


Why to choose career in "CMA" ?

The Reasons to Choose a Career in "CMA"


What Is Balance ScoreCard

What Is Balance ScoreCard A balanced scorecard is a strategic management performance metric used to identify and improve various internal business functions and their resulting external outcomes. Balanced scorecards are used to measure and provide feedback to organizations. #BalanceScoreCard




Top Reviews

Introduction to Statistics for CA Foundation

Introduction to Statistics for CA Foundation Business Mathematics, Logical Reasoning and Statistics is designed as per latest CA Foundation syllabus for Paper 3 to provide a firm grounding in the principles, techniques and practice. The book adopts self-study approach and has been written in student-friendly manner. With a blend of conceptual learning and problem-solving approach, it offers in-depth understanding of the basic mathematical and statistical tools. #introductiontostatistics


Chapter X of Companies Act 2013

Chapter X of Companies Act 2013 The company shall place the matter relating to such appointment for ratification by members at every annual general meeting. ... Under the Act, the provisions for rotation of auditors in the listed Company & certain other class of Companies, have been provided for. #chapterxofcompaniesact2013


Relevant sections under the Companies Act, 2013 dealing with fraud and false statements

Relevant sections under the Companies Act, 2013 dealing with fraud and false statements The new parent corporate law “The Companies Act 2013” is mostly ... I am limiting my write-up to the provisions to the Act, and I request the readers to refer relevant rules, if any, before ... in the 2013 Act is the Section 447 dealing with “Punishment for fraud”. ... Section 448


What is Corporate Image

What is Corporate Image A corporate identity or corporate image is the manner in which a corporation, firm or business enterprise presents itself to the public. The corporate identity is typically visualized by branding and with the use of trademarks, but it can also include things like product design, advertising, public relations etc #WhatisCorporateImage


What is Energy Audit

What is Energy Audit An energy audit is an inspection survey and an analysis of energy flows for energy conservation in a building. It may include a process or system to reduce the amount of energy input into the system without negatively affecting the output. #whatisenergyaudit