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What is a Ledger of Accounting?

A ledger in accounting is the cornerstone of financial record-keeping, acting as a comprehensive repository for all transactions. It meticulously categorizes entries, ensuring accuracy in tracking a company's financial health. By maintaining a clear financial narrative, it's indispensable for informed decision-making. How might a well-maintained ledger influence your business's strategic planning? Continue reading to uncover its pivotal role.
Terrie Brockmann
Terrie Brockmann

A ledger of accounting is a complete record of all the accounts used in business or personal finance record keeping. Usually people call the ledger of accounting a general ledger, and an accountant or bookkeeper uses it in conjunction with an accounting journal. The journal is a daily recording of financial transactions, and the general ledger differs because a bookkeeper records the transactions by account names. Typically, a general ledger has five classifications: assets, expenses, liabilities, owner's equity, and revenue.

Generally, the page layout for the journal and the ledger are different. The most common general ledger is a four-column design that has columns for the debit and credit transactions and the debit or credit running balance. Other columns record the date of entry, the posting reference that coordinates with the journal entry, and a description of the item or transaction. The posting reference, or Post. Ref., is the journal page number where the entry was posted and is important for crosschecking the entries.

Ledgers are used in financial recordkeeping.
Ledgers are used in financial recordkeeping.

One of the advantages of the ledger of accounting is that it provides the bookkeeper with a snapshot of the financial situation. Unlike the journal, a ledger maintains a running balance. A business owner can view the transactions for a certain category without searching through the journal entries. For instance, if a person wanted to see how many clients had outstanding bills with his or her company, he or she would check Accounts Receivable under the heading Assets in the ledger.

Posting is the procedure of copying the dates, description, and monetary amounts to the ledger from the journal. Typically, a bookkeeper uses the posting reference of a journal entry as an indication that he or she posted a journal entry to the general ledger. For example, if a person takes a coffee break while posting the journal entries to the ledger of accounting, he or she can easily find what has been completed by comparing the posting references. If properly done, the completed entries will have posting entries. Incomplete entries will not have a posting reference number.

Other important notations in the ledger of accounting include indicating if an account is closed and if other situations apply to the account. Sometimes a bookkeeper indicates errors in accounting by writing adjusting or correcting in the ledger. When the balance is transferred to another page, the bookkeeper writes balance on the page. These notations are important to the integrity of the process.

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    • Ledgers are used in financial recordkeeping.
      By: robert cabrera
      Ledgers are used in financial recordkeeping.