Ledger Accounts

Meaning and Concept of Ledger 

We know that all financial transactions are recorded first in the journal in a chronological order. Then in the next step, those journalized transactions are classified periodically into various accounts as per their nature. When all transactions of a particular account are collected at one place, then it is called 'ledger'.

Ledger Account
In other words, a ledger is a book in which all the accounts of a business relating to persons, assets, expenses, incomes etc re maintained. In a ledger, a separate account is opened for each different types of transaction. The journal is known as the book of original entry and the ledger is known as the principal book of accounts.

The main function of the ledger is to classify and summarize all the items appearing in journal and other books of original entry under appropriate accounts, so that at the end of the accounting period, each account contains the entire information of all transactions relating to it.

"The ledger is a book of accounts which contains in classified form, the final and permanent records of a trader's transactions".- F.G. William

Features of the ledger

The following are the some important features of ledgers listed as bellows:

  • Account transactions are recorded in the particular table

  • The balances are calculated at the end of the period

  • Transactions are maintained at chronological order

  • Each account have its separate headings

  • Each ledgers table have two column of amount as debit and credit 

Objectives of the ledger

The following are the objectives of preparing ledgers:

  • To classify the financial transactions

  • To help in preparing trial balance

  • To help in ascertaining profit or loss

  • To depict the financial position

  • To provide the information about purchase and sales

  • To Provide the information about creditors and debtors

Methods to preparing Ledger Account

Basically there are two methods to prepare the ledger account as:

  • T- Account: Its basic form is as same as English letter "T". Each ledger account is divided into two parts. The left hand side of the ledger account is known as debit side and right hand side of the ledger account is known as credit side.
 

  • Specific Ledger Account: Under this method, the ledger account is prepared based on using particular account but their opposite account name is considered with same amount of above account. 

 
 
Classification of Ledgers

Basically the ledger can be classified into to two broad categories presented as below:

  1. Personal Ledgers

    • Account Receivables: It is also known as sundry debtors ledger. This ledger is personal in nature due to the involvement of either natural or artificial person. It is one the short-term current assets.

    • Account Payable: It is also known as sundry creditors ledger. This ledger is personal in nature due to the involvement of either natural or artificial person. It is one the the short-term current liabilities.

  2. Impersonal Ledgers  

    • Assets and Liabilities Ledgers: These ledgers are basically related to Real Account that include long-term tangible and intangible assets plus long-term liabilities like bank loan, debenture or bond. 

    • Capital Ledgers: These ledgers include all those ledgers that contributes capital for the business like equity share capital, preference share capital, retained earnings, etc. 

    • Nominal Ledgers: These ledgers are all those ledgers which consist incomes or expenses

 
Conclusion

Ledger is a book in which all the accounts of a business relating to persons, assets, expenses, incomes etc re maintained. In a ledger, a separate account is opened for each different types of transaction. The main function of the ledger is to classify and summarize all the items appearing in journal and other books of original entry under appropriate accounts. Basically there are two methods (include T- Account and Specific Ledger Account) to prepare the ledger account. Basically the ledger can be classified into to two broad categories as personal and impersonal ledgers.

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