Definition & Format of Ledger

This Free Online Accounting Training Lecture on Accounting Ledger will help you to understand:

  • Definition & Meaning of Accounting Ledger
  • What is Accounting Ledger
  • Format of Accounting Ledger
  • Procedure of Posting Entries in Accounting Ledger

A company usually maintains a book where they enlist the entire group of account that is known as Ledger. or Accounting Ledger With the help of ledger, we can see all the changes of a particular account at a glance. According to the nature of business usually company can maintain several types of ledger but all companies maintain General ledger for having financial statements. A general ledger records all the accounts of assets, liabilities and owner’s equity of any company. Any ledger book is known as General Ledger. Balance sheet maintains an order of account in its report. In the Balance sheet statement, all the assets are recorded first, followed by liabilities, owner’s equity, revenues and expenses. Company also records the accounts in the same order in the ledger book. In order to recognize each individual account, every account is marked with a number in the ledger book. Every account has balance in the ledger book for showing the financial position of any company. For example the owner’s capital account shows the amount of capital that is available in the company, account receivable account represents the amount which is payable from customer.

Ledger book is basically 3 column book where in the first two column debit and credit items are recorded which are posted from the journal book and the third column shows the balances of account after each transaction. The third Column of ledger shows the current balance of account. The debit column is represented by Dr. and Credit column is represented by Cr. Every account has its individual record which is shown in the ledger book. For example, sales account will only show the sales amount, the owner’s capital account will show capital amount.

Fig: Format of General Ledger

The entries of ledger book are carried from journal book and this process of transferring data from journal to ledger is called posting. Through this process all the accounts of journal goes to its individual account in ledger book. All the transaction related to that particular account is written on it.

The following 4 steps are followed in posting in ledger book:

  • 1. Posting the transaction from journal to ledger.
  • 2. Posting the journal reference number from the journal to ledger. Example: J.1
  • 3. Posting the debit and credit amount with their account from journal to ledger with the same amount in same column/side. For example, sales is Cr. and Cash is Dr. at 500 $. In case of writing sales account in ledger cash should be on credit side with the amount of 500 $.
  • 4. Posting the account number from the ledger in the reference column of journal to which debit and credit amount was posted.

The posting must main a chronological order. That means the next journal will come after the previous one. As ledger shows the running balance so the posting process should be done on timely basis. The reference column of ledger account refers the journal page from where it was transferred.