News Ledger - Meaning, Ledger Books, Advantages, Format, Posting As Well As Balancing
Ledger books are the books of terminal entry which contains the diverse accounts to which the entries made inwards the Books of Original entry are transferred.
All transactions are recorded inwards ledger accounts, which but agency private records ('accounts') of every major type of property too liability, income too expense (and too the owner's capital). 'Ledger' is the collective substantive for a grouping of accounts. There are inwards fact iii cardinal sub-divisions of the 'ledger':
Division of Ledger Books
1. Sales Ledger: It contains all the private accounts relevant to the business's debtors, i.e. those customers who purchase from the concern on credit damage (they are sent an invoice rather than paying directly away). This, unsurprisingly, mightiness too endure called the 'Debtors ledger'.
2. Purchases Ledger: It contains all the private accounts relevant to the business's creditors, i.e. suppliers from whom the concern has bought goods or services on credit damage (they convey received an invoice rather than paying immediately). Alternatively, this tin ship away endure called the 'Creditors ledger'.
These 2 ledgers are 'personal' ledgers, every bit each concern human relationship they incorporate bears the hollo of a client or supplier.
3. General Ledger or Nominal Ledger: It is referred to every bit beingness 'impersonal', every bit it contains all accounts other than those of debtors too creditors. Examples include property accounts such every bit 'machinery', 'motor vehicles' too 'computers', liability accounts such every bit 'loans payable', income accounts such every bit 'sales' too 'rent receivable' too expense accounts such every bit 'purchases' (cost of goods for resale), 'wages', 'stationery' too 'advertising'. It too contains the 'capital' account.
An of import sub-division of the full general ledger is the cash book, which contains 2 accounts - 'bank' too 'cash', which tend to convey many to a greater extent than entries than whatever other accounts. The banking concern concern human relationship records all payments into too out of the bank, the cash concern human relationship records all cash paid into or out of the business. Additionally, at that topographic point mightiness endure a piddling cash mass which records all the relatively kid purpose expenses such every bit tea too coffee, machine parking costs etc.
Assets Accounts, expenses account, losses account, etc., too too the Total
purchases account, Total sales account, Total Sales returns account, Purchases
Returns account. It is too called every bit Nominal ledger.
Advantages Of Dividing The Ledger:
1. It facilitates segmentation of labour inwards the maintenance of ledger.
2. It becomes slow to locate errors inwards ledger accounts.
3. It helps the ledger clerks to consummate their respective move inwards fourth dimension with
perfection.
4. It becomes slow to refer to whatever detail account.
Format of Ledger
Posting
The procedure of transferring the debit too credit items from mag to classified accounts inwards the ledger is known every bit ‘Posting’.
Rules Regarding Posting
• Separate concern human relationship is opened inwards ledger mass for each concern human relationship too entries from ledger posted to respective concern human relationship accordingly.
• Use the words ‘To” (identifies the accounts to endure written on the debit side) too ‘By’ (identifies the accounts to endure written on the credit side)
• The concerned concern human relationship debited inwards the mag should too endure debited inwards the ledger but reference should endure of the respective credit account.
Balancing
At the terminate of the each calendar month or twelvemonth or whatever specific twenty-four hours it is necessary to create upwards one's hear the remainder inwards an account. To create that, add together the totals of both sides (Debit too credit sides) too detect out the departure inwards both the side. The departure inwards both the sides is ‘Balance’. If the Debit is greater than the credit side, it is a Debit remainder or vice-versa.
The Debit remainder is written on the Credit side as, “By Balance c/d” (carried down) or the Credit remainder is written on the Debit side as, “To Balance c/d. By doing this, 2 sides volition endure equal.
While preparing the Ledger accounts for adjacent period, this remainder would endure transferred from in conclusion catamenia Ledger accounts every bit ‘To Balance b/d’ (brought down) if at that topographic point was debit remainder or ‘By Balance b/d’ if at that topographic point was credit remainder inwards the in conclusion catamenia Ledger.
It should endure noted that Nominal accounts are non balanced, instead the remainder at terminate ask to endure transferred to the Profit too Loss Account.