Basic Ledger. Definition Of Ledger,Types & Example Of Ledger

Basic Ledger
After making entries of the transactions in the ‘Ledger‘ and the subsidiary books, the transactions are written in the ‘Ledger‘, classifying them into different accounts.

Meaning and Definition of Ledger
The ‘ledger‘ is the principal book of the business and the merchant, in which all the transactions taking place in the business are summarised and classified. In this, the transactions related to each party for a certain time are written at one place, which is called the account of that party. The purpose of doing this is to get information about the status of transactions related to an account at a given point of time. In short, ledger presents a summary of business transactions relating to a given period of time. Life

All personal, real and non-real accounts are kept in the ledger. In the traditional ledger, usually one page is maintained for each account, but if the business is large, two or more pages can be kept for one account as required. Conversely, multiple accounts can be created on the same page if the number of articles is small.

Generally, the ledger is in the form of a bound book or loose sheet book or register. The page number is printed on each of its pages. An index is maintained on the first pages of the register, which tells which account is on which page, where the computer is being used, the location of the ledger, floppy diskettes or CDs or It has been replaced by RCDs or DVDs or other similar technology.
Types of Ledger Sub – decision of Ledger

When the transactions are more and more extensive, it becomes necessary to sub-divide the ledger into several books. The sub-division of the ledger depends on the nature and size of the business entity

1. BasicLedger.DefinitionOfLedger,Types&ExampleOfLedger
BasicLedger
Aftermakingentriesofthetransactionsinthe‘Ledger‘andthesubsidiarybooks,the
transactionsarewritteninthe‘Ledger‘,classifyingthemintodifferentaccounts.
MeaningandDefinitionofLedger
The‘ledger‘istheprincipalbookofthebusinessandthemerchant,inwhichallthe
transactionstakingplaceinthebusinessaresummarisedandclassified.Inthis,the
transactionsrelatedtoeachpartyforacertaintimearewrittenatoneplace,whichiscalled
theaccountofthatparty.Thepurposeofdoingthisistogetinformationaboutthestatusof
transactionsrelatedtoanaccountatagivenpointoftime.Inshort,ledgerpresentsa
summaryofbusinesstransactionsrelatingtoagivenperiodoftime.Life
Allpersonal,realandnon-realaccountsarekeptintheledger.Inthetraditionalledger,
usuallyonepageismaintainedforeachaccount,butifthebusinessislarge,twoormore
pagescanbekeptforoneaccountasrequired.Conversely,multipleaccountscanbe
createdonthesamepageifthenumberofarticlesissmall.
Generally,theledgerisintheformofaboundbookorloosesheetbookorregister.The
pagenumberisprintedoneachofitspages.Anindexismaintainedonthefirstpagesofthe
register,whichtellswhichaccountisonwhichpage,wherethecomputerisbeingused,the
locationoftheledger,floppydiskettesorCDsorIthasbeenreplacedbyRCDsorDVDsor
othersimilartechnology.
TypesofLedgerSub–decisionofLedger
Whenthetransactionsaremoreandmoreextensive,itbecomesnecessarytosub-divide
theledgerintoseveralbooks.Thesub-divisionoftheledgerdependsonthenatureandsize
ofthebusinessentity.
Theledgerismainlydividedasfollows:
BasicLedger
Debtors’Ledger—Inthisledger,accountsofsuchcustomersordebtorsarekepttowhom
creditgoodshave
sold,thatis,Debtors’Ledgeriskeptforcreditsales.That’swhyitisalsocalled“Sales
Ledger”(SoldLedgerorSalesLedger).
CreditorsLedger—Inthisledger,theaccountsofthosesuppliersorcreditors/money
lenders(Creditors)arekeptfromwhomthegoodshavebeenpurchasedoncredit.Hence
thisledgerisalsocalledPurchasesLedgerorBoughtLedger.

2. General/NominalLedger—Inthis,realandnon-realaccountsaswellasledgeraccounts
oftotaldebtorsandcreditorsarekept.Sometimestheledgerisdividedintotwoparts
1.NominalLedger—Inthis,transactionsrelatedtovarioustypesofexpenses,losses,
incomeandprofitsarekept.
2.PrivateLedger—Thisledgerholdstransactionswhicharegenerallyconfidentialin
nature;Suchas-CapitalAccount,DrawingsAccount,InvestmentAccountetc.
NecessityandUtilityofLedger
Theaccountsinthe“Journal”arewrittendatewiseandwithoutanyclassification,soifwe
wanttogetinformationaboutthestatusofaparticularpersonoraccount,thenwecannot
getinformationimmediatelyfromit.
Forthis,allthepagesofthejournalwillhavetobeseeninreverse.Itwillalsowastetime.
Similarly,itisdifficulttofindouttheassetsandliabilities,profitandlossetc.ofthebusiness
onlyinthejournalorsubsidiarybooks.Iftheentriesmadeinthejournalorinthesubsidiary
booksarerecordedinthe‘ledger’,thentheirinformationcanbeeasilyandquickly.Thisis
thereasonwhy‘ledger’hasbecomeanintegralpartofbusiness.
WilliamPickleshasrightlysaidthat“Thebookisthemostimportantofthebooksof
accounts,andtheaccountswhicharemadeinthejournaloritssubsidiarybookshavetheir
assignedplace.”Inshort,thefollowingarethereasonsfortheneedandimportanceof
ledger
(1)Fromthepointofviewofobtaininginformation,ledgerisconsideredbeneficialasitsaves
timeandlabor.Ifthereisnoledgerandthereisonlyajournal,thenalotofeffortandtime
willhavetobewastedingettingtheinformationrelatedtoanaccount.Because,allthe
pagesofthejournalhavetobeturnedovertogettheinformation.
(2)Theledgergivesinformationabouthowmuchthetraderhastogivetowhichpersonand
howmuchistobetakenfromwhom.Inotherwords,whatisthestatusofthecreditorsand
thedebtorordebtor,itisknownquicklyandeasilyfromtheledger.
(3)Separateandcompleteinformationofalltheaccountsrelatedtopersonalaccount,real
accountandnominalaccounthasbeenobtainedfromtheledger.
(4)Informationaboutthepositionofassetsandcapitalandliabilitiesisalsoobtainedfrom
theledger.
(5)Theneedofledgerisalsobecausewithoutledger,TrialBalanceandFinalAccount
cannotbeprepared.
(6)Byhavingaledger,thetradercangetmanyothernecessaryinformationregardinghis
businessinashorttime.

3. (7)Theaccountservesasproofinrespectoffinancialdisputesinthecourt.
(8)Onthebasisoftheinformationreceivedfromtheledger,ithelpsinmakingfutureplans
forthegrowthofbusiness.
Summaryisthatledgerisamajorandimportantbookofbookkeepinganditis
necessaryforeverybusinessandtradertokeepit.
LedgerAccounts
Anaccountintheledgerinwhichallthetransactionsortransactionsrelatedtoaparticular
person,thingoractionarekept,iscalledledgeraccount.
(LEDGERACCOUNT)
Example-(i)Relatedtotheperson–Debtors’Account
(ii)StockAccountrelatedtothecommodity
(iii)SalesAccount(SalesA/c)relatingtoactionorwork.
AccountandtheLedger
Theywriteallthetransactionsofaparticularperiodrelatedtoanyonepersonorpropertyor
itemofincomeandexpenditureetc.atoneplaceiscalledaccount.Inotherwords,the
groupofaccountsrelatedtoanitemiscalledledgerandthegroupofaccountsiscalled
ledger,thatis,abookofaccountsinwhichdifferenttypesofaccountsareshown,itiscalled
ledger.
(Theterm‘Account’indicatesthemannerinwhichtheinformationissetoutandtermledger
isthenamegiventothebookinwhichtheaccountsarekept.)A
Becausebothareinherentinthemselves,henceitisalsobeinggiventhenameofLedger
Account.
FormateofLedgerAccount/ledgeraccount
DateParticularLf.Amount
₹
DateParticularLf.Amount
₹
NameofeachColumnandtheirUse
Assaidearlier,eachpageoftheaccountisdividedintotwoparts–debitpartandcreditpart
andeachparthasfourboxeseach.
Thenamesoftheseminesareasfollows:

4. 1.Date–
Thefirstcolumnofeachpartisthedateordate.Inthisfield,thefirstyeariswritten,thenthe
monthiswrittendownandthedateofthetransactioniswrittenchronologically.Remember
that
(i)onlythedatesonwhichthetransactions(ortransactions)relatingtothisaccounttook
placeandarerecordedinthejournalarerecordedinthiscolumn.
(ii)Dateofpostingisnotwritten.
2.Particulars–
Thecolumnafterthedatecontainsthedescription.Eachaccountisprecededbytheword
‘To’inthelefthandsidedescriptionboxand‘By’beforeeachaccountintherighthand
descriptionbox.
3.JournalPageNumber(JournalFolioorJ.F.)–
Inthisfieldthenumberofthepageofthejournalfromwhichtherelatedaccountisbroughtis
written.
4.Amount–
Inthefourthandlastaccount,theamountsrelatedtotheaccountwritteninthestatement
arewritten.InIndia,thecolumncontainingtheamountiswritteninMen,whileinEngland,
Pound-Pen.andU.s.a.ItiswritteninDollarCents.
RelationshipBetweenJournalandLedger
1.Transactionsarefirstrecordedinthejournalbookandthenrecordedintheledger.Thus
Journalisthebookoffirstoriginalentrywhileledgeristhebookofsecondentry.
2.Inthejournal,thetransactionsareenteredsequentiallywhereasintheledger,the
transactionsarerecordedinanalyticalorder.
3.Journalisconsideredmorereliableascomparedtoledgerbecausethefirstentryismade
init.
4.Theprocessofrecordingthetransactionsinthejournaliscalled‘Journalizing’whereas
theprocessofrecordingthetransactionsintheledgeriscalled‘Khatauni’.
DistinctionBetweenJournalandLedger

5. Basisofdifference Journal Ledger
1.Book Journalistheoriginalbookof
Accounts.Alltransactionarefirst
enteredinthisBooks
.Accountingisdonefrom
hejournaltotheledger.
Hencetheledgeriscalled
thebookoflastentry
2.Nature Inthis,accountingisdone
accordingtodateand
sequentially
Inthis,thetransactionare
classifiedandwritten.It
hasmultipleaccounts
3.RecordingTheprocessofrecording
transactioninajournaliscalled
Journalising
Theprocessofwritingin
theledgeriscalled
posting
4.Narration Aftereachentryinthejournal,its
detailsarewriting
Nothinglikethat
5.FinalAccountFinalAccountcannotbe
preparedwithitshelp
Withitshelp,finalaccount
canbeprepared
6.Basis Talkingthisasthebasis,the
ledgerisprepared
Talkingthisasthebasis,
trialBalanceisprepared
.FAQ
Qs.1.WhatisaLedger
An…PrincipalBook
Qs.2.TheDebitbalanceofBankA/cindicates.
An…CashBalanceatBank
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