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
- Personal ledger: these are the ledger for creditors accounts and debtors account.e.g purchase and sales ledger
- General ledger: these are the ledger for real and nominal accounts e.g expenses account,income account,sales account,purchase account and assets account.
- 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.
- sales or debtors ledger: this ledger contains personal accounts of customers/debtors.
- Purchases or creditors ledger: this ledger contains personal accounts of suppliers /creditors
- 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.
- Which two accounts are affected?give them names.
- What types of account are they? Classify them e.g real,personal or nominal.
- 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
- The proprietor put a further #5,000 into the business by cheque
Effect on: capital Account
Bank Account
For more notes; see: https://passnownow.com/classwork-support/