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CHAPTER Ledger
CHAPTER

9

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Ledger Ledger is the principal book which contains all accounts (Real, Personal
and Nominal Accounts, under Traditional Classification and Asset
Accounts, Liability Accounts, Capital Accounts, Revenue Accounts
and Expense Accounts, under Modern Classification to which the
transactions recorded in the books of original entry (Journal) are
transferred, i.e., posted.
2. Principal Book It is the book which has record of the transactions in a summarised
manner, i.e., Ledger.
3. Posting The process of transferring the transactions recorded in the books of
original entry to the account in the ledger is called posting.
4. Balancing of Accounts It means totalling the two sides of the account and determining the
difference. Difference between the totals of the two sides is written
on the side with smaller total.
If the total of debit side is smaller, it means that the account has credit
balance. If the total of credit side is smaller, it means that the account
has debit balance.
5. Trial Balance It is a statement in which the balances of the Ledger Accounts are
written. The total of amounts in the two columns should be same and
this is a proof of arithmetical accuracy of transactions recorded in the
books of account.

CHAPTER SUMMARY

• Ledger is a book or register in which all the accounts are put together.
• Posting to the Ledger is the process of transferring information contained in the Journal
to the Ledger.
• Utility of Ledger. Being the principal book of account, a Ledger contains all the information
regarding various accounts. It helps in preparing the final accounts.
• Both Journal and Ledger are essential for a complete and efficient accounting system.
• Balancing of Accounts means totalling the two sides of the account and writing the
difference between the two on the side with the smaller total. In the case of Real Accounts
and Personal Accounts, the difference is carried forward to the credit side—if the credit side
is greater, by writing ‘By Balance b/d’ and to the debit side, if the debit side is greater,
by writing, ‘To Balance b/d’.
Personal and Real Accounts are balanced but Nominal Accounts are closed at the end of
the period by transferring them to Trading Account or Profit & Loss Account.
• Trial Balance. A Trial Balance is a statement in which the debit and credit balances of
all accounts are written with a view to ascertaining the arithmetical accuracy of the books
of account.