DEFINITIONS, FEATURES NECESSITY OF LEDGER IN ACCOUNTS

LEDGER: The book in which transactions are recorded in classified permanent form is called the Ledger. Ledger is the permanent storehouse of all the financial transactions. A ledger, also known as the second book of entry, is a record-keeping system that records all of a company’s classified financial data. Transactions are recorded in the ledger in different accounts as debits and credits. The ledger is often referred to as a general ledger, and it’s intended to provide a record of every financial transaction that takes place during an operating company’s life.

Features of Ledger:

  1. It is the principal or primary book of accounts
  2. The transactions are classified under appropriate heads, called accounts.
  3. It is the basis of preparing the final accounts
  4. The information contained in the ledger cam be used to draw the conclusion regarding the status of any account.
  5. Importance of Ledger Accounts:
  1. Recording of Transactions Ledger account keeps a permanent record of all financial transactions in a classified manner.
  2. Providing Information Ledger account shows detailed financial information of a business regarding debtors and creditors, assets, and incomes and expenses.
  3. Preparation of Trial Balance Ledger account helps to prepare a trial balance in order to check the arithmetical accuracy of the recording of the financial transactions of the business.
  4. Preparation of Profit And Loss Account Ledger account helps to prepare profit and loss account so as to ascertain the profit or loss of the business.
  5. Preparation of Balance Sheet:Ledger account helps to prepare the balance sheet with a view to show the financial position of the business.

Steps for setting Ledger:

  1. Make a ledger for each account.
  2. Make columns on the far left of the page for the date, journal number, and description.
  3. Make columns on the left side for debit, credit, and balance.
  4. Enter the data from the journals into the associated accounts. Calculate your balance by finding the difference between the debit and credit.
  5. Record and make adjustments to the transactions as they occur, prioritize entering new journal entries.
  6. Combine the accounts to make a complete ledger. The first page is the listing of the chart of accounts that are included in the ledger and the associated numbers.

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