Ledger – Principal Book of Accounts, Ledger Accounts & Posting
Ledger – Principal Book of Accounts: All journals are posted into ledger chronologically and in a classified manner Ledger is the principal book of accounts where similar transactions relating to a particular person or property or revenue or expense are recorded. It is a set of accounts. It contains all accounts of the business enterprise whether real, nominal or personal. The main function of a ledger is to classify or sort out all the items appearing in the journal or other subsidiary books under their appropriate accounts so that at the end of the accounting period each account will contain the entire information of all the transactions relating to it in a summarised or condensed form. check out more details for Ledger Accounts, Ledger Posting from below…
For instance, all the transactions that have taken place with Mr. Mathur will be entered in Mathur’s Account. Similarly, all items relating to cash, sales, purchases, salaries, discount, etc. appear in their respective accounts.
The book which contains accounts is known as the ledger. Since finding information pertaining to the financial position of a business emerges only from the accounts, the ledger is also called the Principal Book. As a result, all the necessary information relating to any account is available from the ledger. This is the most important book of the business and hence is rightly called the “King of All Books”. Also Known as Book of Final Entry.
As and when the transaction takes place, it is recorded in the journal in the form of journal entry. This entry is posted again in the respective ledger accounts under double entry principle from the journal. This is called ledger posting.
- The rules for writing up accounts of various types are as follows:
- Assets: Increases on the left hand side or the debit side and decreases on the credit side or the right hand side.
- Liabilities: Increases on the credit side and decreases on the debit side.
- Capitals: The same as liabilities.
- Expenses: Increases on the debit side and decreases on the credit side. Incomes or
- gain: Increases on the credit side and decrease on the debit side.
The student should clearly understand the nature of debit and credit
A debit denotes:
- (a) In the case of a person that he has received some benefit against which he has already rendered some service or will render service in future. When a person becomes liable to do something in favour of the firm, the fact is recorded by debiting that person’s account : (relating to Personal Account)
- (b) In case of goods or properties, that the value and the stock of such goods or properties has increased, (relating to Real Accounts)
- (c) In case of other accounts like losses or expenses, that the firm has incurred certain expenses or has lost money. (relating to Nominal Account)
A credit denotes:
- (a) In case of a person, that some benefit has been received from him, entitling him to claim from the firm a return benefit in the form of cash or goods or service. When a person becomes entitled to money or money’s worth for any reason. The fact is recorded by crediting him (relating to Personal Account) (
- b) In the case of goods or properties, that the stock and value of such goods or properties has decreased. (relating to Real Accounts)
- (c) In case of other accounts like interest or dividend or commission received, or discount received, that the firm has made a gain (relating to Nominal Account)