What are the 3 different types (kinds) of Ledgers in accounting?

Do you know, how many types (kinds) of Ledgers are there in accounting? If not, let's dive into it.

Generally, there are 3 types of Ledgers. They are 

1. Sales (Debtors) Ledger 

2. Purchase (Creditors) Ledger

3. General Ledger

Now, we will discuss them in detail as to what are they? Let's look into it in simple terms to understand it easily.

What is the meaning (definition) of Ledger in Accounting?

A Ledger is a bound book containing all the different accounts such as cash account, sales & purchase account, etc. It is also called the book of secondary entry because all the business transactions are recorded in Ledger after they have been recorded in Journal primarily. It is also called the Principal book of accounts. It is also called the book of final entry.

 Ledger posting: Ledger posting is the process of transferring transactions entered in the journal to the respective accounts and they are balanced, accordingly. The ledger contains all the different types of accounts like cash, bank, debtors, plant&machinery, creditors, long term liabilities, expenses and incomes. 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.

Ledger Balances: Each ledger account has a 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.

 LEDGER  DEBIT BALANCES: All assets, expenses, and losses have debit balances like cash a/c, machine a/c, debtors a/c, inventory a/c, investments a/c, sales and purchases a/c. They all have a debit balance.

LEDGER CREDIT BALANCES: All liabilities, incomes, sales, and capital accounts have credit balances like capital, sales, creditors, revenues, loans, incomes, gains, profits and reserves. They all have a credit balance.

All the accounts having debit or credit balances are taken to Trial balance and Trading, profit&loss account, and Balance sheet. It helps in preparing financial statements and finalizing the accounts at the end of the financial year.

What are the 3 different types of Ledgers in Accounting?

Generally, there are 3 types of Ledgers. They are 

1. Sales (Debtors) Ledger 

It contains all the information related to customers/clients to whom goods/services have been sold/delivered on credit. This is the book which has all the debtors' information at one place. This helps to know the total amount due by customers/debtors to the business. They are also referred to as Accounts Receivables and Debtors.

Sales (Debtors) Ledger gathers the information from the Sales Journal. The main purpose is to gather and accumulate the information pertaining to Debtors/Customers. This helps us to know the amount due from each debtor/customer to the business organization. The accounts receivable department may use this information to collect the amounts due from customers. This also helps to manage accounts receivables/debtors while providing credit periods to customers.

2. Purchase (Creditors) Ledger

It contains all the information related to sellers/creditors from whom goods have been purchased on credit. This is the book which has all the creditors' information at one place. This helps to know the total amount due by the business entity to creditors/sellers. They are also referred to as Accounts Payables and Creditors.

Purchase (Creditors) Ledger gathers the information from the Purchase Journal. The main purpose is to accumulate the information pertaining to Creditors/sellers. This helps us to know the amount due to creditors/sellers for the goods purchased on credit. This also helps us to manage the suppliers/creditors to make timely payments to Suppliers/creditors. This would enable to extend the credit period while making payments due to creditors/suppliers.

3. General Ledger

It contains mainly 5 different types of accounts such as assets, revenues/incomes, expenses, liabilities and capital. This helps to know the balances of different accounts as well. General Ledger can be found as the centralized compilation of all the ledger accounts of any business entity. It is again divided as Nominal Ledger and Private Ledger. 

Nominal Ledger contains different nominal accounts such as incomes, expenses, losses, and gains. Private Ledger contains confidential information relating to Capital, Drawings, additional capital, Salary & Wages. 

General Ledger accumulates and obtains the information from Journal. Each month these journals are totalled and then posted to General Ledger. The main purpose of General Ledger is to summarize, gather, and organize the information relating to all the transactions contained in Journal.

Conclusion

Now that we are familiar with the 3 different types (kinds) of Ledgers in accounting. This would be helpful in analysing the different accounts and gathering useful information.

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