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C H A P T E R

Ledger

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Ledger Ledger is the principal book which contains all accounts (Asset Accounts,
Liability Accounts, Capital Accounts, Revenue Accounts, Expense
Accounts) to which the transactions recorded in the books of original
entry are transferred, i.e., posted from the Journal.
2. Posting The process of transferring the transactions recorded in the books of
original entry to the ledger is called posting.
3. 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.

4. Trial Balance It is a statement in which the balances in 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

• A 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
recorded with a view to ascertain the arithmetical accuracy of the books of account.