INTRODUCTION -
Ledger is the most important book of accounting system it contains all the accounts (assets, liability, Debtor, Creditor, revenue and expenses) to which is the transactions recorded in the book of original entry are posted in ledger the information is classified by nature and propose hot work the ledger includes all the basic accounts needed for the preparation of the financial statements.
DEFINITION -
"Ledger is the permanent store house of all the transactions"(Filed house Arther)
MAIN FEATURES OF LEDGER :
Followings are the main features of ledger :
- It is the second but most important book of accounts.
- The transactions are classified under appropriate heads called accounts.
- The information contained in the ledger account can be used to draw the conclusion regarding status of any account.
- The accounts contain the encoded and samries of all the related transactions.
- It is the basis of preparing the final.
- It helps us in achieving the objectives of accounting .
BALANCING PROCEDURE OF LEDGER -
The following are some steps how to make a account
1. Take up the total of David and credit sides on a rough seets.
2. Subtract lower amount from higher amount on rough seet the difference is called balance.
3. The balance is put on the smaller side of the ledger accounts as the last item write the date on which balancing is being done in date column.
4. If the balance is due side write to balance c/d (c/d means carried down) in particulars column if balance is written on the credit side written by balance c/d in particular column.
5. Now total votes the sides of the account of single lines should be drawn above each total and double line immediately below each total the balance written on the smaller side of the account is called closing balance.
6. In the end the David balance should be brought down to the David side by writing to balance b/d (b/d means brought down) in the particular column in the date column the next date is written in case of credit balance by balance b/d is written in particular column on credit side.
7. The total in the amount column on both sides must be shown horizontally.
Detail information of each column is given below :
1. Date : this column records the date month and year on which the transactions has taken place.
2. Particulars : on the debit side of this column the account is written with prefix "TO" where is on the credit side the account is written with prefix "BY".
3. Amount : the amount written in journal against the debit account is written on debit side and credit account written on credit side of ledger in relevant account.
STEPS INVOLVED IN LEDGER POSTING -
1. Transactions relating to one account over a period are identified from the journal in the order from earlier to latest.
2. Transactions identified are recorded at one place called account.
3. This gives rise to sumrise and classified information relating to each particular account at one place.
4. Each account is divided into two parts i.e debit and credit.
5. Whenever desired two sides are totaled and difference between two totals (known as balance) is find out such balance provides as the ready information regarding the particular account on particular date.
Ledger is very useful book for the business because it has the following advantages :
1. Transaction relating to a particular person item or had of expenditure or income are grouped in the concerd account at one place.
2. When is account is periodically balanced it reflects the net position of that account.
3. Ledger is the stating stone for preparing trial balance - which tests the arithmetical accuracy of the accounting book.
4. Ledger is the destination of all entries made in journal.
5. The ledger accounts helps in preparing trading and profit and loss account.
6. The ledger accounts provide information regarding total purchases and total sales.
7. The ledger accounts give details of various expenses and income of the business.
DIFFERENCE BETWEEN JOURNAL AND LEDGER :
JOURNAL -
1. It is the book of prime entry.
2. As soon as the transaction orginates it is recorded in journal.
3. Transactions are recorded in order of occurrence i.e. strictly in order of dates.
4. Medicine is written for each entry.
5. Accuracy of the books cannot be tested.
6. Journal is not balanced.
7. Ledger folio is written in the journal.
8. Journal has to columns bun for debid amount and another for credit amount.
9. Important information cannot be find out readily i.e. cash in hand cannot be found so easily.
LEDGER -
1. It is the book of secondary entry.
2. Transactions are posted after recording in the journal.
3. Transactions are classified according to the nature and grouped in the concerd accounts.
4. Narration is not entered.
5. Accuracy of the books is tested by means of list of balances.
6. Every accounts in the ledger is balanced at appropriate time.
7. J.F folio is written in it.
8. Ledger has two sides left side is debit and right side is credit side.
9. Transactions of same nature are placed at one place important information can be find easily.