Need of Ledger (2024)

Introduction

A ledger is a workbook or collection of accounts that records the transactions of an account. Each account has a starting balance or a carry forward balance, and each transaction is recorded as a debit or credit in a separate column, with the ending balance or ending balance recorded. In the field of cryptocurrencies and NFTs (Non-Fungible Tokens), ledgers are essentially hardware wallets and are the safest way to store cryptocurrencies or non-fungible tokens.

Ledger Account

The ledger account contains records of commerce. This is a separate record in the general ledger associated with a particular asset, liability, capital item, income type, or expense type.

Types of Ledger

Ledgers are of three types:

1. Sales ledger
2. Purchase ledger
3. General ledger

Sales Ledger

A sales ledger is a ledger that holds transactions for the sale of products, services, or cost of goods sold by a company to its customers. This general ledger provides ideas for sales and income statements.

Purchase Ledger

A purchase book is a book that organises transactions for a company to purchase a service, product, or merchandise from another company. It reveals how much a company has paid to another company.

General Ledger

General ledger can be divided into two types: nominal ledger and private ledger. Nominal books provide information about expenses, income, depreciation, insurance and more. Private books also provide personal information such as salaries, wages and capital. Private books are not accessible to everyone.

How does a general ledger work?

The general ledger is the basis of the system used by accountants to store and organise the financial data used to create a company’s financial statements. Transactions are posted to individual sub-ledger accounts as defined in the company’s chart of accounts.

The transaction is then finalised or summarised in the general ledger, and the accountant creates a trial balance that acts as a report of the balances in each general ledger. The interim balance sheet is checked for errors, adjusted by posting additional required entries, and the adjusted interim balance sheet is used to prepare the financial statements.

Need of Ledger Accounts

The ledger is one of the most important books. This is a persistent repository of all types of transactions. The ledger is very important. The importance and necessity of the ledger is as follows:

1. Transactions are permanently recorded in the ledger. As a result, all accounting-related information from the general ledger is immediately available.
2. With the help of a ledger, you can easily check the mathematical accuracy of your calculations.
3. With the help of a ledger, you can easily determine the total amount to pay to an individual and an organisation.
4. It’s easy to calculate the income, expenses, and profit and loss of a business organisation.
5. Ledger plays an important role in preventing fraud and fraud.
6. With the help of a ledger, it is possible to maintain a complete account for your organisation according to the double entry accounting system.
7. Annual financial statements are created using information from the ledger.
8. All information about your ledger is systematically available to help all business organisations make decisions.
9. Through the ledger, all commerce is permanently recorded in your account’s books.
10. The information stored in the general ledger provides an accurate overview of the company’s actual financial situation, such as: B. Income, expenses, liabilities and capital.
11. Ledger helps you create closing accounts for your organisation.
12. You can check the mathematical accuracy of your accounts through your ledger.
13. All problems that arise from your account can be avoided by the ledger.
14. All kinds of misunderstandings can be easily resolved using the information stored in your ledger.

Conclusion

Ledger is the backbone of business accounting because it keeps all records of all transactions in separate accounts. Towards the end of the accounting period, all accounts contain complete information on all related transactions.The ledger provides a comprehensive report of all transactions. This helps the company screen out expenses and income. If a deviation is found between the two, the necessary measures will be taken.