Classwork Exercise and Series (Financial Accounting-SS1): The Principal Book;Ledger

Definition of the ledger

The ledger is the final destination of all transaction in the subsidiary books. It is the most important book of account.The ledger can be defined as a book which contains in a classified and summarized form,a permanent record of all transactions. It is use for the double entry book keeping.

Division of the ledgers

1. Personal ledger: these are the ledger for creditors accounts and debtors account.e.g purchase and sales ledger
2. General ledger: these are the ledger for real and nominal accounts e.g expenses account,income account,sales account,purchase account and assets account.
3. Private ledger: these are the ledgers for capital and drawings account of the proprietor.the book is divided into separate sections called account which may have one page or more.the main advantage of subdivision is to permit the clerks to attend concurrently to the various groups of accounts,so that delay is avoided in posting and balancing them.
4. sales or debtors ledger: this ledger contains personal accounts of customers/debtors.
5. Purchases or creditors ledger: this ledger contains personal accounts of suppliers /creditors
6. Nominal ledger: this ledger contains account of losses,expenses,incomes and gains.

Nature of ledger

DR                                                                                                                                              CR

Date	Particulars	Folio	Amount	Date	Particulars	Folio	Amount

Applications of the double entry system in the ledger

When faced with any transaction,ask yourself three questions.

1. Which two accounts are affected?give them names.
2. What types of account are they? Classify them e.g real,personal or nominal.
3. Which one is to be debited and which is to credited?

NOTE: The account giving value is credited and the account receiving value is debited. For proper understanding of accounting, you must commit into memory the principle which states:

” Credit  Giver”

“Debit Receiver”

Example: Mr. Ola started business with #15,000 cash

Effect on : Capital Account

Cash Account

Account: debit – cash account  with #10,000

credit-capital account with #10,000

Ledger entries

Capital account

#Jan 1 cash                                      10,000

 

Cash Account

#Jan 1  Capital                               10,000

Test and Exercise

Enter the following into the appropriate ledger entries

1. The proprietor put a further #5,000 into the business by cheque

Effect on:  capital  Account

Bank Account

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