A ledger is a book or computer file used for accounting records, with three common types: general, purchase, and sales. The general ledger is the most elaborate and uses double-entry bookkeeping, while purchase and sales ledgers track amounts paid and owed to creditors and customers, respectively. Accurate accounting books are necessary and often used for financial statements and investigating past problems. Computer books come in different formats, depending on the needs of the entity.
A ledger is a book or computer file used to enter accounting records. Typically, it lists the debits and credits associated with the entity for which the transactions are recorded. Accounting books were traditionally written on paper and often entered in bound books. With the dawn of the computer age, electronic versions became more common.
There are three common types of ledger: general ledger, purchase ledger, and sales ledger. Often all three are used together. The general ledger is the most elaborate, while the sales and purchase ledgers record the transactions of only creditors and customers, respectively.
The general ledger is generally organized by the five different types of accounts: assets, liabilities, income, expenses, and owner’s equity. Some general ledgers will also show profit and loss. It uses a style of entry known as double-entry bookkeeping. This means that if something is removed from one account, then it must be added to another. The standard format is for debit entries to appear in a column on the left side and credits on the right.
A purchase ledger tracks all amounts paid and owed to a credit provider. This can be one book with several categories or a series of books so there is one for each provider. Common entries include invoice information and credit notes. The amount owed to the supplier is the balance, also known as trade accounts payable.
The sales ledger tracks customer or credit debtor accounts. This record is often referred to as trade accounts or accounts receivable. The balance of this account is the amount owed by credit customers. These types of transactions are recorded as assets. Sales books are often used to determine how much customers owe at the end of the month or to create sales reports.
General ledgers typically serve as a permanent record for all of an entity’s financial transactions. They are often used for the generation of financial statements in each reporting period. These logs can also be useful for investigating past problems. Having accurate accounting books is not only in the best interest of the entity, but also a legal necessity.
Computer books come in different formats, depending on the needs of the entity. Small, simple operations can often use spreadsheets to track accounts. Larger organizations will often use accounting software. This can be a mass-market product, a custom program, or software developed especially for the business.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
