A ledger in accounting refers to a book that contains different accounts where records of transactions pertaining to a specific account is stored. It is also known as the book of final entry or principal book of accounts. It is a book where all transactions either debited or credited are stored.
A ledger account is a combination of all the ledgers and contains information related to all the accounting activities of an organisation. It is regarded as the most important book in accounting as it helps in creating a trial balance that acts as a precursor to the preparation of financial statements.
The information stored in a ledger account contains both starting and ending balances which are adjusted during the course of the accounting period with respective debits and credits.
A ledger contains different components which include the various transaction elements such as date, amount, particulars and l.f (ledger folio). Individual transactions are contained within a ledger account and are identified by a transaction number or any other type of notation.
Ledger Format
The ledger consists of two columns prepared in a T format. The two sides of debit and credit contain date, particulars, folio number and amount columns. The ledger format is as follows.
Ledger Account Example
Following are some examples of ledger accounts
- Accounts receivable
- Cash
- Depreciation
- Accounts payable
- Salaries and wages
- Revenue
- Debt
- Inventory
- Stockholders’ equity
- Office expenses
Ledger Posting
The process of transferring entries from a journal to the respective ledger accounts is known as ledger posting. For this process, first, the entries are recorded in journals and then transferred to their respective ledger accounts.
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