FINANCIAL ACCOUNTING
Chapter-9 Ledger
MEANING OF LEDGER
Transactions are recorded in the Journal and thereafter, they are transferred, i.e.,posted to the relevant account in the ledger. All the accounts put together make a Ledger. Stating differently, Ledger is a book in which various accounts (Asset Accounts, Liability Accounts, Capital Accounts, Revenue Account sand Expense Accounts) are opened and transactions are transferred (posted) in the accounts from
the Journal Book.
A ledger is also called the Book of Final Entry, since all transactions recorded in Book of Original Entry (i.e., Journal) are transferred (posted) in the ledger.
A Ledger may be defined as a "book which contains, in a summarized and classified form, a permanent record of all transactions.” It is the most important book of account, since the Trial Balance is drawn from this and from the financial statements , Trial Balance are prepared. Hence, Ledger is called the Principal account of Book .
Features of Ledger
(i) Ledger is a master record of all the business of the accounts.
(ii) It is prepared from Journal.
(iii) Ledger Accounts show the current balance in all accounts.
(iv) Final Accounts and Trial Balance are prepared from Ledger Accounts.
(v) Ledger Accounts summarize the effect of transactions upon assets, liabilities,
capital, incomes and expenditures.
Utilities of Ledger
1. Provides Complete Information of a Particular Account: Complete information relating to a particular account is available at one place in the Ledger.
2. Information of Incomes and Expenses: In ledger, a separate account is maintained for each income and expense. The amount of total income and total expenses are
known from the ledger accounts,
3. Preparation of Trial Balance: Ledger helps in preparing Trial Balance which
ensures arithmetical accuracy of the transactions recorded in books of account.
4. Helpful in Preparing Final Accounts: After preparing Trial Balance, Final Accounts
are prepared to know the profitability and financial position of the business.
Format of Ledger Account
The format of Ledger account has been explained in an earlier Chapter. For convenience,
it is being repeated here.
Posting the Entries
The method of transferring the transaction written in the Journal to a Ledger is called posting. In other words, the process of transferring of debits and credits from the Journal to the Ledger Accounts is called posting. Posting is necessary as it summarizes all transactions relating to the account at one place and also shows how transactions have changed the account balances.
MECHANICS OF POSTING
The following procedure is followed for posting:
1. Posting of an Account debited in a Journal entry: The steps to be followed are:
First. Identify the account to be debited in the Ledger.
Second. Enter the date of the transaction in the 'Date column on the debit side of the account.
Second. Enter the date of the agreement in the 'Date' column on the credit side.
Third Write the name of the account which has been debited in the respective entry
in the 'Particulars' column on the credit side of the account as By (name of
account debited).
Third. Write the name of the account which has been credited in the personal entry
in the 'Particulars' column on the debit side of the account as "To (name of
account credited)'.
Fourth. Record the page number of the Journal where the entry founds in the Journal
Folio (J.F.) column.
Fifth. Enter the relevant amount in the column of amount on the debit side.
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