A ledger is a detailed record or accounting book that contains the following information about financial transactions:
- Debits (Dr.): Records increases in assets or expenses - Credits (Cr.): Records increases in liabilities, equity, or revenue
Types of Ledgers:
- General Ledger: Contains summary accounts for all financial transactions and balances - Sub-ledger: Contains detailed information for specific types of transactions, such as accounts receivable or inventory
Structure of a Ledger:
Each ledger account typically includes the following columns:
- Account Number: Unique identifier for the account - Account Name: Description of the account (e.g., Cash, Accounts Receivable) - Debit Column: Records debits to the account - Credit Column: Records credits to the account - Balance Column: Records the running balance of the account
Features of a Ledger:
- Provides a complete and chronological record of all transactions - Allows for easy tracking and analysis of financial data - Serves as an auditable record for financial reporting - Helps businesses maintain accurate financial statements and ensure compliance with accounting standards - Can be maintained manually or using accounting software
Benefits of Using a Ledger:
- Accurate and reliable financial records - Improved financial reporting and compliance - Better understanding of financial performance - Detection and prevention of fraud - Increased transparency and accountability