UNDERSTANDING LEDGER, ITS TYPES, AND THE DIFFERENCE BETWEEN PERSONAL AND IMPERSONAL LEDGER 

Ledger: The ledger is a collection of accounts that contains the balances and transaction history of each account. It’s organized by account type (e.g., assets, liabilities, equity, revenue, and expenses). Entries from the journal are posted to the appropriate ledger accounts. The ledger provides a consolidated view of each account’s activity. The Ledger is the main or principal book of accounts in which all the business transactions would ultimately find their place under various accounts in a duly classified form. After recording the business transaction in the journal or special purpose subsidiary books, the next step is to transfer the entries to the respective accounts in the ledger.

Key takeaways:

• The book which contains accounts is known as the ledger
• Finding information pertaining to the financial position of a business emerges only from the accounts.
• The ledger is also called the Principal Book or Book of Final Entry
• All the necessary information relating to any account is available from the ledger

The following are the advantages derived from ledger:

• It is the ledger through which successful application of a double entry system of bookkeeping is ensured. Each and every transaction is divided into two parts -receiver and giver- and recorded in the two concerned accounts in ledger.
• Transactions relating to different persons or concerns are recorded in the account of each person or concern separately. As a result, complete and reliable information is available in respect of each and every account.
• Different types of income and expenses are recorded in different accounts separately. So, it is possible to ascertain the amount of income and expenditure under each head and the overall result at the yearend through trading and profit and loss accounts.
• The separate account is opened for each item of assets and liabilities. It is, therefore, possible to ascertain the value of different assets and liabilities and the true financial position at the yearend through balance sheet.
• Transaction being recorded primarily in journal and therefore finally in the ledger, the possibility of errors and defalcations is remote.
• Valuable information and statistics are collected from ledger and supplied to the management to enable them to run the concern efficiently.

Classification of Ledger: The number of transactions depends on the size of business firm. When the firm is small in size, its transactions are usually limited, hence only one ledger account maybe enough but with the expansion of business, the number of transactions will also increase ,so there is a possibility of having more numbers of ledger account, that is why large scale business organization maintain different ledger accounts. Ledger is classified as:

Personal Ledger

• The ledger where the details of all transactions about the persons who are related to the accounting unit, are recorded
• when the accounts relating to the proprietor of the business are recorded in one book which is known as ‘Self Ledger ‘. This is very confidential.

Debtors’ Ledger

• The ledger where the details of transactions about the persons to whom goods are sold, cash is received, etc. are recorded
• when the customer purchases goods on credit basis, they become the debtors of the firm and all their transaction are recorded in one book known as ‘Debtors Ledger’, which show only debit balances, the total of these accounts indicate the amount be received from debtors.

Creditors’ Ledger

• The ledger where the details of transactions about the persons from whom are purchase goods on credit, pay to them, etc. are recorded
• when the firm purchases goods on credit basis the suppliers become ‘creditors’ and these transactions are recorded in one book known as ‘creditors Ledger’ on the credit side. The total balances of these accounts indicate the total amount to be paid by the company of the supplier.

Impersonal Ledger

The ledger where details of all transactions about assets, incomes & expenses, etc. are recorded

General Ledger

• The ledger where all transactions relating to real accounts, nominal accounts, details of debtors’ ledger and creditors’ ledger are recorded
• when the company record all the accounts related to assets, income and expenditure in one book , which is known as ‘General Ledger’. In the accounts related to the real account and the balances of all types of accounts related to nominal accounts always show only debit balance. On the other hand all the accounts related to incomes show only credit balances.

Nominal Ledger

The ledger where all transactions relating to incomes and expenses are recorded

Private Ledger

• The ledger where all transactions relating to assets and liabilities are recorded Trial Balance
• Trial Balance is the list of debit and credit balances taken out from ledger and it also includes the balances of cash and bank taken from the cash book.

When posting of all the transactions into the Ledger is completed and accounts are balanced off, then the balance of each account is put on a list called Trial Balance.

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Difference between Personal Ledger and Impersonal Ledger

Aspect	Personal Ledger	Impersonal Ledger
Definition	Contains individual accounts of persons or entities.	Contains accounts other than personal accounts.
Purpose	Records transactions related to individuals or entities.	Records transactions related to assets, liabilities, income, and expenses.
Types	Subsidiary Ledger and General Ledger.	Cash Book, Purchases Day Book, Sales Day Book, General Ledger.
Subsidiary Ledger	Contains detailed individual accounts for each person or entity.	Not applicable.
General Ledger	Contains summarized information from subsidiary ledgers.	Contains all impersonal accounts and is the principal ledger.
Examples	Customer Accounts, Supplier Accounts, Capital Accounts.	Cash Account, Inventory Account, Fixed Assets Account, Expense Accounts, etc.
Posting to Ledger	Transactions from the journal are posted to relevant personal accounts.	Transactions from relevant books (e.g., cash book, sales book) are posted to respective impersonal accounts.
Purpose in Financial Reporting	Provides detailed information about individual transactions and balances.	Summarizes financial transactions for reporting and analysis.
Preparation of Trial Balance	Balances of personal accounts are included in the trial balance.	Balances of impersonal accounts are included in the trial balance.