A ledger in accounting is also known as the principal book of accounts as well as the book of final entry. It is a book in which all accounts are maintained in a summarized and classified form. All accounts combined together become a ledger and form a permanent record of all transactions.
It is the most important book of accounting as it helps in the creation of trial balance which then acts as a base for the preparation of financial statements.
Example: An account can be either an Asset, Liability, Capital, Revenue or an Expense account. Few examples of each are Furniture, Cash, Creditors, Bank Loan, Capital, Drawings, Sales, Rent, etc.
Related Topic- What is a subledger?
Sample Format of a Ledger Account
- It is shown in “T” format and divided into 2 columns: the left-hand side represents the debit side and the right-hand side represents the credit side.
- The process of transferring a transaction from journal to a ledger account is called Posting. It is an essential task as it summarizes all transactions related to that account at one place.
- Posting is made to accounts from journal entries and various subsidiary books.
Account Types and their Ledger Balances
|Type of Account||Normal Balance|