LEDGER and TRIAL BALANCE
Ledger is a book of storing all Business transactions for a particular account in a tabular form such as asset, liability, owner equity, revenue, expense, gain, and loss accounts. And transfer the entries to the respective accounts in the Ledger. Ledgers are divided into four types
• Sales ledger: It records accounts receivable and consists of the financial transactions made by customers to the company.
• Purchase ledger: records money spent for purchasing by the company.
• General ledger: Consists of assets, liabilities, income, expenses, and Capital.
• Distributed ledger: It is also called as a shared ledger. It contains shared and synchronized digital data geographically spread across multiple sites, countries, and institutions.
By Ledger, we will know
• How much amount is due from each customer and how much amount the firm has to pay to each supplier/ creditor
• The amount of Purchase and Sales during a particular period.
• Amount paid or received on account of various items.
• The position of Assets and Capital.
Performa of Ledger
It has Two equal Parts 1. Left Hand Side → Debit side (Dr) 2.Right Hand Side → Credit side (Cr)
|Date||Particulars||Journal entries||Amount||Date||Particulars||Journal entries||Amount|
If an account is debited in the journal entry, the posting in the ledger should be made on the debit side of that particular account.
The A/c credited in the Journal entry, the posting in the ledger should be made on the credit side of that particular A/c
• To’ is written before the A/cs which appear on the debit side of leger.
• “By” is written before the A/cs appearing on the credit side.
It’s a combination of all general Ledgers which are revenue and Capital of a business. In other words, It holds both Debit and Credit balances. By this, you can observe the business will either profit or loss. And this trial balance should have Equal balances in both Debit and Credit. If not it would show that there is an error in the nominal ledger accounts. This error must be found before a profit and loss statement and balance sheet can be produced.