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Ledger Accounts

Ledger accounts are where all financial transactions are recorded in a double entry format. They are divided into separate accounts for different types of transactions like sales, purchases, assets, and liabilities. The general ledger refers to the overall system of these individual ledger accounts. At the end of each accounting period, totals from day books are posted to the individual ledger accounts. The totals of each ledger account are then compiled into a trial balance, which is used to generate the business's financial statements.

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0% found this document useful (0 votes)
551 views1 page

Ledger Accounts

Ledger accounts are where all financial transactions are recorded in a double entry format. They are divided into separate accounts for different types of transactions like sales, purchases, assets, and liabilities. The general ledger refers to the overall system of these individual ledger accounts. At the end of each accounting period, totals from day books are posted to the individual ledger accounts. The totals of each ledger account are then compiled into a trial balance, which is used to generate the business's financial statements.

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furqan
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We take content rights seriously. If you suspect this is your content, claim it here.
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Ledger Accounts

Definition
In simple terms the ledger accounts are where the double entry records of
all transactions and events are made. They are the principal books or files for
recording and totaling monetary transactions by account. A
company's financial statements are generated from summary totals in the
ledgers.
The division of the ledger
In most companies each class of transaction and their associated assets and
liabilities are given their own account. For example, there will be separate
accounts for sales, purchases, rent, insurance costs, cash assets, inventory
assets, liabilities to pay suppliers (payables), amounts due from customers
(receivables) etc. There is no rule as to how many accounts a business
should have but the system should facilitate effective and efficient
accounting and control. Each account in the system is referred to as a
'ledger.'
The general ledger
The term 'general ledger' is used to refer to the overall system of ledger
accounts within a business. It is sometimes referred to as the 'nominal'
ledger. It houses all the separate ledgers required to produce a complete trial
balance and, consequently, set of financial statements.
Ledgers as part of an accounting system
At the end of each day (or other period, as deemed appropriate) the totals
from the day books are posted to the ledger accounts in double entry format.
As stated above, each class of transaction, asset, liability and item of equity
will have its own ledger account. The totals of each ledger will eventually be
transferred onto a summary list of balances referred to as 'the trial balance.'
Once the business has finalised their accounting controls the totals from the
trial balance are transferred into the financial statements.

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