Ledger

General (nominal) ledger is principal book for recording and totaling monetary transactions by account required to prepare trial balance. Each ledger account summarises transactions and events which affect it within particular period and shows net position of that account by the end of the period. The book consists of ledger accounts for each asset, liability, equity, expense and revenue items.  Financial statement is prepared by transferring respective ledgers account items and their balance at the end of reporting period.

Ledger can be prepared in two formats:

T Ledger:

Debit				Credit
Date	Particulars	Jrnl ref.	Amount	Date	Particulars	Jrnl ref.	Amount

Columnar Ledger:

Date	Particulars	Jrnl ref.	Debit Amount	Credit Amount	Balance

Balancing off a ledger account: Once the transactions for a period have been recorded, it will be necessary to find the balance on the ledger account

Ø  Total both sides of the T account and find the larger total.

Ø  Put the larger total in the total box on the debit and credit side.

Ø  Insert a balancing figure to the side of the T account which does not currently add up to the amount in the total box. Call this balancing figure ‘balance c/f’ (carried forward) or ‘balance c/d’ (carried down).

Ø  Carry the balance down diagonally and call it ‘balance b/f’ (brought forward) or ‘balance b/d’ (brought down).

Closing and Opening Ledger account: At the period end ledger account should be closed off. Financial position ledger account opens up for recording of transaction in the next accounting period. Income statement ledger accounts are closed by transferring to income statement. Therefore, there is no carried forward or brought forward balance for revenue and expenses items.
Statement of financial position ledger accounts: Assets and liabilities ledger account are key in construction of cash flow form indirect method. Assets/liabilities at the end of a period = Assets/liabilities at start of the next period.