What are the characteristic features of Ledger in Accounting?

 Are you curious to know as to what are the characteristic features of Ledger in Accounting? Then, let's dive right into it. Let us understand it in simple terminology.

What is Ledger in Accounting?

A Ledger is a book containing all the different types of accounts such as assets, liabilities, revenues, expenses, and capital. It is the book of secondary entry where transactions are transferred from Journal to Ledger. All the transactions are recorded in Journal in chronological order. These transactions are transferred to Ledger from Journal. This process is called "Posting". 

 Each account has a T shape format where the left side is debit and the right side is credit. It also has either a debit balance or a credit balance. Generally, ledger posting is done weekly or monthly as per the requirement of the business entity.

Generally, there are 3 types of Ledgers. They are 

1. Sales (Debtors) Ledger - Here, Debtors/Customers' information is accumulated and stored. This is the information relating to the sale of goods/services to customers on credit. This is also called Accounts Receivable/Debtors.

2. Purchase (Creditors) Ledger - Here, Creditors/Suppliers' information is accumulated and stored. This gives the information relating to the purchase of goods from suppliers on credit. This is also called Accounts Payables/Creditors.

3. General Ledger - This book has various accounts such as Capital, Assets, Liabilities, Expenses and Revenues. This gives the information relevant for preparing Trial Balance, Profit and loss a/c and Balance Sheet.

What are the characteristic features of Ledger in Accounting?

The most relevant features are as follows:

1. A Ledger is a book containing all the different types of accounts such as assets, liabilities, revenues, expenses, and capital. It is the book of secondary entry because transactions are recorded in Ledger after they have been recorded in Journal. It is also called the Principal book or book of the permanent record of all transactions.

2. All the transactions are transferred to Ledger from Journal. This process is called "Ledger Posting". In simple words, the transactions recorded as journal entries in Journal are transferred to Ledger as individual Accounts. Generally, ledger posting is done weekly or monthly as per the requirement of the business entity. It means, that all the transactions are first recorded in Journal as Journal entries in chronological order. Journal is the book of Primary Entry of all transactions.

3. Each account has a T shape format where the left-hand side is debit and the right-hand side is credit. Debit is denoted as "Dr" and Credit is denoted as "Cr". It has a T shape format where the left side is denoted as Dr and the right side as Cr. This is the format, Specimen, and design of an account. 

4. Each ledger account has a debit or credit balance at the end of the account. The totals are calculated and balances are obtained. It may have either a debit balance or a credit balance. All assets, expenses and losses have a debit balance. All income, liabilities, capital, and provision accounts have a credit balance.

5. Generally, there are 3 types of Ledgers. They are 

 Sales (Debtors) Ledger - Here, Debtors/Customers' information is accumulated and stored. This is the information relating to the sale of goods/services to customers on credit. This is also called Accounts Receivable/Debtors.

 Purchase (Creditors) Ledger - Here, Creditors/Suppliers' information is accumulated and stored. This gives the information relating to the purchase of goods from suppliers on credit. This is also called Accounts Payables/Creditors.

 General Ledger - This book has various accounts such as Capital, Assets, Liabilities, Expenses and Revenues. This gives the information relevant for preparing the Trial Balance, Profit and loss a/c and Balance Sheet.

6. Each Ledger account has 4 columns on each side. For example, on the right-hand side, we have four columns and also on the left-hand side four columns. They are the Date column, particulars column, Journal folio column, and amount column. 

7. Each ledger account has a separate name or heading for that particular account. For example, cash a/c is the name of the cash ledger account shown on the top of that T shape account. Similarly, we have sales a/c, purchases a/c, machinery a/c, discount received a/c, discount allowed a/c, debtors a/c, and creditors a/c as the title or name shown above T shape account.

8. It helps in reducing errors, frauds, and omission of transactions in the books of accounts. This has become easier due to the double-entry system of bookkeeping, which is a reliable and scientific method for recording business transactions. Thus, it helps in minimizing the errors and fraud that happen while maintaining the books of accounts. 

Conclusion

Thus, a Ledger is a book containing all the different types of accounts such as assets, liabilities, revenues, expenses, and capital. It is the book of secondary entry where transactions are transferred from Journal to Ledger. 

This is the simple content on the characteristic features of Ledger in accounting. Also comment below, if you feel this information as useful or helpful. 

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