Definition and Explanation of Ledger


Definition and Explanation of Ledger:

Learning Objectives:

  1. Define and explain the term “ledger” What are the features or characteristics of ledger?

When all the transactions of a given period have been journalised, the next thing is to classify them according to the accounts affected. All similar transactions must be brought together. For instance, all transactions relating to cash must be put in one place. Similarly, all transactions with a customer or a supplier must be assembled at one place. The book in which this classification is done is called the ledger.

The ledger is a book which contains a condensed and classified record of all the pecuniary transactions of the business generally brought, transferred or posted from the books of original entry.

Ledger is called the king of all books of accounts because all entries from the books of original entry must be posted to the various accounts in the ledger. It should be noted that journal contains a chronological record while ledger contains a classified record of all transactions.

Features of Ledger:

The following are the features of ledger.

  1. It has two identical sides – left hand side and right hand side. The left hand side is called debit side and right hand side is called credit side.

  2. Debit aspects of all the concerned transactions is recorded on the debit side, while credit aspect on credit side according to date.

  3. The difference of the total of the two sides represent balance. The excess of debit side over credit side indicates debit balance, while excess of credit side over debit side indicates credit balance. If the total of the two sides are equal there will be no balance.

  4. Usually balance is drawn at the year end and recorded on the deficit side to make the two sides equal. This balance is known as closing balance.

  5. The closing balance of the current year will be the opening balance of the next year.

You may also be interested in other articles from “Ledger” chapter:

  1. Definition and Explanation of Ledger

  2. Advantages of Ledger

  3. Difference Between Ledger and Journal

  4. Form of Ledger and Method of Posting

  5. Example of Ledger Accounts | Preparing Ledger Accounts

  6. Preparing a Trial Balance | Accuracy of Ledger

Other Related Accounting Articles:

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