What is Accounting Ledger? Explained with Examples.

Ledger is an account to record, categorize and sort transactions, for maintaining balance of company’s each assets, liabilities, owners’ equity, revenue, expenses accounts so that balance sheet and income statement can be properly prepared.

The word Ledger means shelf to keep something. As various kinds of things are kept in shelf in order similarly every account of business concern is recorded in the ledger separately or in classified way.

That is why many people think that ledger is derived from the English word ‘ledge’. As per accounting principle the transactions just after their occurrence are recorded in the primary book of account – journal in chronological order of dates with explanations.

But it is not possible to determine the complete results of transactions from journal.

what is accounting ledger

That is, it is not possible to know the information like how much profit under what heads has been earned, how much expenses under what head has been incurred, how much assets and liabilities are there in a particular business concern from journals.

In order to know all these information the transactions of the same nature are to be recorded under different heads or in separate accounts.

That is, all the transactions relating to individual, organization assets, income and expenditure are recorded under the same head of accounts-individual, organization, assets, income and expenditure.

For example;

To record all the transactions with HSBC Bank under HSBC Bank Account or transactions regarding salary-under salary account etc.

In this way if various transactions are recorded in different respective heads of accounts, it becomes possible to determine the complete result of any account at the end of accounting period.

So, it can be said that, the book wherein various entries of journal are posted in brief permanently according to debit and credit under separate heads of accounts is called ledger.

Some definitions of ledger propounded by some famous writers are stated below;

Willium Pickles says;

Ledger is the destination of all entries made in the subsidiary book or journals.

Arthur Field House says;

Ledger is the permanent store house of all the transactions.

L. C. Croper says;

The book in which a trader’s transactions are recorded in a classified permanent form is called the Ledger.

From the above discussion we can say that the book wherein all the transactions of business organizations are recorded in a classified permanent form under different heads of accounts transferring them from journal is called ledger.