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Ledger Accounts


 
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Ledger Accounts

Definition

In simple terms the ledger accounts are where the double entry records of all transactions and events are made. They are the principal books or files for recording and totalling monetary transactions by account. A company's financial statements are generated from summary totals in the ledgers.

The division of the ledger

In most companies each class of transaction and their associated assets and liabilities are given their own account. For example, there will be separate accounts for sales, purchases, rent, insurance costs, cash assets, inventory assets, liabilities to pay suppliers (payables), amounts due from customers (receivables) etc. There is no rule as to how many accounts a business should have but the system should facilitate effective and efficient accounting and control. Each account in the system is referred to as a 'ledger.'

The general ledger

The term 'general ledger' is used to refer to the overall system of ledger accounts within a business. It is sometimes referred to as the 'nominal' ledger. It houses all the separate ledgers required to produce a complete trial balance and, consequently, set of financial statements.

Ledgers as part of an accounting system

At the end of each day (or other period, as deemed appropriate) the totals from the day books are posted to the ledger accounts in double entry format.

As stated above, each class of transaction, asset, liability and item of equity will have it's own ledger account. The totals of each ledger will eventually be transferred onto a summary list of balances referred to as 'the trial balance.' Once the business has finalised their accounting controls the totals from the trial balance are transferred into the financial statements.

Created at 10/23/2012 1:55 PM  by System Account  (GMT) Greenwich Mean Time : Dublin, Edinburgh, Lisbon, London
Last modified at 11/30/2012 11:02 AM  by System Account  (GMT) Greenwich Mean Time : Dublin, Edinburgh, Lisbon, London

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ACCAPEDIA - Ledger Accounts