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Ledger In Accounting

Last Updated On -29 Jan 2025

Ledger In Accounting

A ledger in accounting is the principal book or record used in maintaining and organizing all the financial transactions of a business. 

Imagine running a business without any knowledge of entry or exit of money– very chaotic. The ledger acts as a compass in the business guiding the company of all its financial records and helping them solve the related problems.

The following blog will help in understanding the features and structure of a ledger. 

 

What is a Ledger? 

A ledger is often called the “book of final entry” because all the transactions are mentioned here eventually. It mentions assets, liabilities, equity, income, and expenses individually, helping organize all of it in a structured manner. It acts as a powerful tool helping the companies keep track of their finances, growth, and all the financial plans for the future.

 

Key Features of a Ledger In Accounting 

The ledger has characteristics that distinguish it from other financial tools and ensure all the functions are fulfilled accordingly and in an organized manner. 

The Key Features of a Ledger In Accounting are: 

  • Classification of Transactions:  Each ledger defines a different financial activity for example cash flow, rent sales etc. 
  • Double-Entry System:  Every transaction has one account with debit and one with credit 
  • Balance Maintenance:  The ledger provides balance for each account. 
  • Prepares Financial Statements:  Provides the information related to trial balance, income statement, and balance sheet. 

 

Types of Ledger 

The ledger organizes all the data in different categories for better understanding, and help in the preparation of financial statements with clarity. 

Here are the Types of Ledger 

  • General Ledger:  All the financial statements are recorded here, it contains the summary of assets, liabilities, equity, income, and expenses. Examples are cash, accounts payable, and sales revenue. 
  • Sub-Ledger:  This gives a detailed breakdown of specific accounts that go into the general ledger. Examples are inventory ledger, payroll ledger, and fixed assets ledger. 

 

Structure of a Ledger 

A ledger has a T structure typically, with two sides, that is debit and credit. The ledger format is very simple and has a lot of clarity which is an important factor in understanding the financial records. 

  • Debit ( dr. ) Side:  There is an increase in records assets or expenses and a decrease in liabilities or income. 
  • Credit ( Cr. ) Side:  There is an increase in the liabilities or income and a decrease in the assets or expenses. 

The format of a Ledger in Accounting is: 

 

Date

Particulars 

Debit 

Credit 

Balance 

01/01/2025

Sales 

10,000

 

10,000

02/01/2025 

Rent expense 

 

2,000

8,000

 

Read More: 

 

Frequently Asked Questions ( FAQs ) 

Is the general ledger and sub-ledger different? 

Yes, the general ledger is the main accounting book and the sub-ledger gives a detailed breakdown of specific accounts that go into the general ledger. 

What is the purpose of a sub-ledger? 

Sub-ledgers provide detailed records for specific accounts and help in the proper maintenance of the general ledger. 

Why is balancing the ledger important? 

When the ledger is balanced then the total debits equal the total credits maintaining the double entry system. Any error or unreliable data gets eliminated while balancing which helps give a fool-proof account. 

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