Ledger, Definition and Format


As we know the second process in accounting is Classifying. This involves putting together all transactions pertaining to a particular account. A ledger account is a combination of all the ledgers and contains information related to all the accounting activities of an organization. It is regarded as the most important book in accounting as it helps in creating a trial balance that acts as a precursor to the preparation of financial statements.

Definition of Ledger:

The book in which accounts are maintained is called ledger. Generally, one account is opened on each page of this book, but if transactions relating to a particular account are numerous, it may extend to more than one page. All transactions relating to that account are recorded chronologically. From journal each transaction is posted to at least two concerned accounts - debit side of one account and credit side of another account. 

Ledger is known as the destination of entries in journal but it must be remembered that transactions cannot be recorded directly in the ledger - they must be routed through journal. This concept is illustrated below:

Characteristics of Ledger:

The ledger has the following main characteristics:
  • It has two identical sides - left hand side (debit side) and right-hand side (credit side).
  • Debit aspect of all the transactions is recorded on the debit side and credit aspects of all the transactions are recorded on credit side according to date.
  • The difference of the totals of the two sides represents balance. The excess of debit side over credit side indicates debit balance, while excess of credit side over debit side indicates the credit balance. If the two sides are equal, there will be no balance.
  • Generally, the balance is drawn at the year end and recorded on the lesser side to make the two sides equal. This balance is know as closing balance.
  • The closing balance of the current year becomes the opening balance of the next year.

Ledger Format:

The ledger consists of two columns prepared in a T format. The two sides of debit and credit contain date, particulars, folio number and amount columns. The ledger format is as follows. 


It appears that each account in the ledger has two similar sides - left hand side is called debit side (briefly Dr.) and right hand side (briefly Cr.) side. Now a days these two words are not used, because it is obvious that the left hand side is debit side and right hand side is credit side.

In this post we have seen what is Ledger, its definition and format. We will come back with another post .

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