Introduction to Ledger

This note provides provides you with the introduction, objectives of ledger and differences between journal and ledger. A ledger is the most important book of accounts and is the final destination of the entries made in the subsidiary.

Summary

This note provides provides you with the introduction, objectives of ledger and differences between journal and ledger. A ledger is the most important book of accounts and is the final destination of the entries made in the subsidiary.

Things to Remember

  • A ledger is the most important book of accounts and is the final destination of the entries made in the subsidiary.
  • A ledger account is simply a statement of information on a particular head.

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Subjective Questions

Q1:

What is an index?


Type: Very_short Difficulty: Easy

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Answer: <p>An index is a guide which helps in searching and finding out a particular topic in book, particular account in a ledger book, particular letter in the file and particular file in a filing cabinet.</p>

Q2:

What are the importances of indexing?


Type: Short Difficulty: Easy

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Answer: <p>Indexing is a part of filing. Indexing can be regarded as the eye and sight of the filing system of an organization which shows the location and position of the particular information. The following points highlight the importance of indexing in filing: -</p> <ol><li>Indexing helps to locate the required information or files promptly.</li> <li>It helps to arrange a large number of files in a drawer or cabinet in a systematic order.</li> <li>It helps to maintain the secrecy of the information and documents.</li> <li>It gives the detail information of the correspondent like name, address, telephone number, file number, financial position and trading and manufacturing items.</li> <li>It provides a summary of the records for the quick reference.</li> </ol>

Q3:

What is indexing? Explain its importance in filing.


Type: Long Difficulty: Easy

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Answer: <p>An index is a guide which helps in searching and finding out a particular topic in book, particular account in a ledger book, particular letter in the file and particular file in a filing cabinet. It is a means of arranging a large number of files in a definite order.</p> <p>According to J.C. Denyer, &ldquo;An index is anything that indicates or points out. Its prime function is to act as a guide to a body of data or to the collection of funds.&rdquo;</p> <p>Hence, an index is an essential part of filing which provides a ready reference. It is an indicator or guide. It means indicating or pointing out. It is the indicator for locating a particular file, letter, and document. It is the act of showing the location and position of data, information and document preserved in the office.</p> <p>Indexing is a part of filing. The indexing system is closely related with the filing system. Without indexing, the filing system becomes ineffective. The objective of filing is to locate the required information and documents promptly. Such promptness in locating the information and document is possible through indexing. Indexing brings rapidity and effectiveness in filing. Indexing can be regarded as the eye and sight of the filing system of an organization which shows the location and position of the particular information. The following points highlight the importance of indexing in filing: -</p> <ol><li>Indexing helps to locate the required information or files promptly.</li> <li>It helps to arrange a large number of files in a drawer or cabinet in a systematic order.</li> <li>It helps to maintain the secrecy of the information and documents.</li> <li>It gives the detail information of the correspondent like name, address, telephone number, file number, financial position and trading and manufacturing items.</li> <li>It provides a summary of the records for the quick reference.</li> <li>It saves time and effort while searching out a document by providing a ready reference.</li> <li>It increases the efficiency of the staff in carrying out their assigned duties.</li> <li>It also brings rapidity and efficiency in filing and other regular functions of the office.</li> </ol>

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Indexing
Introduction to Ledger

Introduction to Ledger

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Ledger

The journal cannot fulfill all the requirements of accounting. It registers all the transactions in the chronological order in the same place. It is the basis of preparing ledger accounts. It mixes up the records of different transactions due to which the position of a particular account cannot be reported. It fails to report the result of the transactions relating to a particular account during a period. So, ledger was introduced.

Meaning and Definition

The ledger is the second step of accounting. It is the principal book of accounts. It contains all the accounts appeared in the journal or subsidiary books. It makes a classified record of all the transactions in summarized form. It is the final destination of all the accounts created in the primary books. It is the final source of all accounting information.The following are the main definitions of ledger:

"Ledger is a book of accounts which contains in a suitably classified form, the final and permanent record of trader's transactions." -V. J. Vickery

"A ledger is the most important book of accounts and is the final destination of the entries made in the subsidiary." -W. Pickles

From the given definition, we say that a ledger is a bound or register book which contain a large number of the account. It is the principal book of the account which make a final record of all the transaction in a classified manner.

Ledger Account

A ledger account is simply a statement of information on a particular head. It is the summary records of all the transactions relating to a particular person or property or income or expenses. It is the details of the amount debited and credited to a particular person or income or expenses during a given period. The ledger account contains two sides which are debit and credit. Its left-hand side is called debit side and the right-hand side is called credit side. It shows the benefits on one side and sacrifices on another side for a given period. It is balanced and closed at the end of a given period to know the net effect or result.

Objectives

The main objectives of ledger are as follows:

  1. To make a permanent record of all the financial transactions in a classified manner.
  2. To supply detailed information on any account for a given period easily and immediately.
  3. To know the net effect of all the transactions on a particular account at a given point of time. The net effect is the difference between total debit and credit of the account concerned.
  4. To help to prepare trial balance in order to examine the arithmetical accuracy of the books of accounts.
  5. To serve as the principal account for obtaining all accounting information at least cost and time.

Differences between Journal and Ledger

Bases of differences Journal Ledger
Step Journal is the first step of the accounting cycle. Ledger is the second step of the accounting cycle.
Meaning It is a primary book in which all the financial transactions are recorded in the same place. It is a primary book in which all the transactions are posted in a classified manner.
Process The process of recording transactions in a journal is called journalizing. The process of transferring transactions from journal to the ledger is called ledger posting.
Basis It is the basis for preparing ledger. It is the basis for preparing trail balance.
Information It provides detail information about the financial transactions. It provides summary information about the financial transaction
Narration It requires narration. It does not require narration.
Result It does not show the net result of the transactions performed. It shows the net result of the transaction performed.

Lesson

Ledger

Subject

Accountancy

Grade

Grade 9

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