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Ledger can be defined as the book of accounts in which various accounts of personal, real, and nominal nature are opened and transactions are posted from the journal book. It is also called the principal book of accounts, as it is considered the most important book of accounts, since the trial balance is prepared by it, and from the trial balance, the financial statements are prepared.
Features of a Ledger.
1. It is the master record of all the accounts.
2. It is prepared from the journal.
3. The current balance of all the accounts can be known by it.
4. It is considered as the most important book of accounts as trial balance and final accounts are prepared from it.
5. It helps to summarize the effect of transactions upon assets, liabilities, capital, incomes, and expenditure.
What is the utility of a ledger?
1. The ledger can help to show the financial position of a business at any time required.
2. Personal accounts show the amount owed or receivable to the business.
3. Real accounts show the value of properties and also the value of stock.
4. Nominal accounts show the sources of income and also expenditure incurred under various heads of accounts.
Posting.
The process of transferring of the debits and credits from the Journal to the Ledger accounts is called posting. In order to know how transactions have changed the account balances, posting is necessary. In posting as an opening entry all assets will show a debit balance, and such accounts will be opened and the relevant amount will be written on the debit side as "To balance brought down". All the liabilities will show a credit balance, and an account for each liability will be opened and the relevant amount will be written on the credit side as "By balance brought down". The excess of assets over liabilities is the proprietors capital and is credited to his capital account.
Balancing of accounts.
Balancing of accounts means that the two sides of an account are totaled and the difference in total of the two sides is written on the side whose total is shorter.
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