Business Studies

Ledger entries and it’s use in business

A ledger can be defined as an important book of account in which all accounts are recorded . It contains account of individuals, account of properties (assets) of the business and also account of expenses and incomes.

Items on a ledger

The following are the items on a ledger

  • Date: This is to record the actual time the transaction took place.
  • Particulars: This explains the kind of transaction that took place, you will find sales, purchases, capital, cash under this column
  • Folio: Folio is used to show the page of the book of original entry that was used to record the transaction before being transferred into the ledger
  • Discount received or given: Discount allowed and discount received are presented under this column. This will provide a means of reconciliation when cost is being calculated.
  • Amount: This is always shown with the unit of the currency being used. In  Nigeria for instance you have the sign of the Naira

Classification of ledger

A ledger can be classified into two. They are:

  1. Personal ledger: The personal ledger are accounts in which persons or organization  transactions are recorded It consists of debtors and creditors.
  2. Impersonal ledger: This is an account that relates to assets, liabilities,income and expenses . It is divided into nominal and real account.

Record cash transaction

Cash transaction are recorded in the cash book. A cash book is a ledger. It is a book of original entry  where all cash received in a business should be recorded in the debit side of the cash account and all cash paid out of the business should be recorded on the credit side of the cash account, the difference between the total amount on the  credit side and that of the debit side is the cash balance in hand at a particular time.

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