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Ledger books are among the most common — and most important — documents in a company’s accounting system. While many different types of ledgers exist, the most common are the sales, purchases, cash, and general ledgers. Each of these ledger books holds a specific type of business transaction, making it easy for the company to find information at a later time. Accountants are responsible for preparing the company’s books and recording transactions accordingly. Financial statements are the final result of the information taken from a company’s accounting books.
The sales ledger books contain all transactions that relate to the selling of inventory or services to customers. Accountants record the transaction date, a short description, and the amount of the sale. The ledger usually contains data for a given month as this is the most common procedure in accounting systems. Other information — such as sales discounts, returns, or other allowances — may be in this ledger as well. Only data related to the company’s sales should be in this accounting book at any given time.
Purchases have their own separate book in an accounting system. These ledger books only contain information on the money a company spends to acquire the items needed to run business operations. Accountants list information similar to the sales ledger book, that is, transaction date, a short description, and the dollar amount for items purchased. A subledger may also exist here, called accounts payable. This subledger lists all the vendors to whom the company owes money for purchased goods or services.
Cash ledger books contain all transactions for activities that use cash. The purpose of this ledger is to help a company reconcile its bank accounts at month end. In some cases, this ledger may not have copious activity during the month given the size and nature of the business. Accountants usually record cash transactions, and then, they may give the ledger to an individual who reconciles the bank account. The separation of duties among accountants who handle the cash ledger helps prevent improprieties — such as fraud or embezzlement — from occurring.
The general ledger is a catchall for transactions that do not fall under the purpose of the other ledger books. Accountants often use this ledger as a last resort for business transactions. Recording too many transactions here can result in lost information or data that takes some time to comb through when finding information. Accountants often set specific rules for using a general ledger.