Understanding Bookkeeping

Earlier articles have dealt with:-

• the source documents which are the written evidence of the business transaction and

• how these transactions are recorded in the various journal.

This article discuss about the ledger and how its help in the recording process.

The LEDGER:

The ledger basically is a collection of all accounts kept by the business.

There are two types of ledgers:

• GENERAL LEDGER: consists of accounts other than debtors’ and creditors’ accounts

• SUBSIDIARY LEDGER:

1.    Sales or Debtors Ledger which consists of individual debtors’accounts.

2.    Purchase or Creditors Ledger which consists of individual creditors’ accounts.

Salient point to note:- 

• It is very important to note that when we maintain the ledger, we need to make sure they are numbered for easier identification and be arranged in the order in which accounts are presented in the financial statements namely the balance sheet accounts (asset, liability, owner’s capital, owner’s drawing, revenues and expenses)- normally we follow the chronological sequence based on the company’s Chart of Account.

 Append below is a T-Accounts being structured into a THREE-COLUMN FORM OF ACCOUNT

                       Cash Account                                               No:002