A ledger is a book or collection of accounts in which account transactions are recorded. Each account has an opening or carry-forward

balance Balance or balancing may refer to: Common meanings * Balance (ability) in biomechanics * Balance (accounting) * Balance or weighing scale * Balance as in equality or equilibrium Arts and entertainment Film * ''Balance'' (1983 film), a Bulgaria ...

, and would record each transaction as either a debit or credit in separate columns, and the ending or closing balance.

Overview

The ledger is a permanent summary of all amounts entered in supporting journals which list individual transactions by date. Every transaction flows from a journal, to one or more ledgers. A company's

financial statement Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to un ...

s are generated from summary totals in the ledgers. Ledgers include: *

Sales ledger A sales journal is a specialized accounting journal and it is also a prime entry book used in an accounting system to keep track of the sales of items that customers(debtors) have purchased on account by charging a receivable on the debit side of ...

, records

accounts receivable Accounts receivable, abbreviated as AR or A/R, are legally enforceable claims for payment held by a business for goods supplied or services rendered that customers have ordered but not paid for. These are generally in the form of invoices raised ...

. This ledger consists of the financial transactions made by customers to the company. *

Purchase ledger A bought ledger is a system in accounting by which a business records and monitors its creditors. The purchase ledger contains the individual accounts of suppliers from whom the business has made purchases on credit. Information on invoices and cr ...

records money spent for purchasing by the company. * General ledger representing the five main account types:

assets In financial accounting, an asset is any resource owned or controlled by a business or an economic entity. It is anything (tangible or intangible) that can be used to produce positive economic value. Assets represent value of ownership that can ...

, liabilities,

income Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. Income is difficult to define conceptually and the definition may be different across fields. Fo ...

expenses An expense is an item requiring an outflow of money, or any form of fortune in general, to another person or group as payment for an item, service, or other category of costs. For a tenant, rent is an expense. For students or parents, tuition is a ...

, and capital. For every

debit Debits and credits in double-entry bookkeeping are entries made in account ledgers to record changes in value resulting from business transactions. A debit entry in an account represents a transfer of value ''to'' that account, and a credit ...

recorded in a ledger, there must be a corresponding

credit Credit (from Latin verb ''credit'', meaning "one believes") is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately (thereby generating a debt) ...

, so that the debits equal the credits in the grand totals.

Types on the basis of purpose

The three types of ledgers are the general, debtors, and creditors. The general ledger accumulates information from journals. Each month all journals are totaled and posted to the General Ledger. The purpose of the General Ledger is therefore to organize and summarize the individual transactions listed in all the journals. The Debtors Ledger accumulates information from the sales journal. The purpose of the Debtors Ledger is to provide knowledge about which customers owe money to the business, and how much. The Creditors Ledger accumulates information from the purchases journal. The purpose of the Creditors Ledger is to provide knowledge about which suppliers the business owes money to, and how much.

Etymology

The term ''ledger'' stems from the English dialect forms ''liggen'' or ''leggen'', meaning "to lie or lay" (Dutch: ''liggen'' or ''leggen'', German: ''liegen'' or ''legen''); in sense it is adapted from the Dutch substantive ''legger'', properly "a book lying or remaining regularly in one place". Originally, a ledger was a large volume of

scripture Religious texts, including scripture, are texts which various religions consider to be of central importance to their religious tradition. They differ from literature by being a compilation or discussion of beliefs, mythologies, ritual pra ...

or service book kept in one place in church and openly accessible. According to

Charles Wriothesley Charles Wriothesley ( ''REYE-əths-lee''; 8 May 1508 – 25 January 1562) was a long-serving officer of arms at the College of Arms in London. He was the last member of a dynasty of heralds that started with his grandfather—Garter Principal Kin ...

's '' Chronicle'' (1538), "The curates should provide a booke of the bible in Englishe, of the largest volume, to be a ledger in the same church for the parishioners to read on." In application of this original meaning the commercial usage of the term is for the "principal book of account" in a business house.

Overview

Types on the basis of purpose

Etymology

See also

Notes

References

Further reading