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Financial Accounting and Business Management of all kinds of business, industry and services is now possible with HiTech Accounting Software made for specific business segments. Click the following links for more details and free 30 days full featured evaluation download.
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Financial Accounting and Business Management of all kinds of business, industry and services is now possible with HiTech Accounting Software made for specific business segments. Click the following links for more details and free 30 days full featured evaluation download.
We have ready off the shelf Accounting and business management software with inventory control for following user segments.
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Financial Accounting Tutorial Home Page

Necessity of Ledger

Maintaining of ledger is a must in every accounting system. It is necessary as will be clear from its advantages:
(1) Transactions relating to a particular person, item or heading of expenditure' or income are grouped in the concerned account at one place.
(2) When each account is periodically balanced it reflects the net position of that account. For example, how much is due from a customer or how much is payable to a supplier or what is the value of total purchases or what has been the expenditure on salaries? Such information is available by balancing the ledger accounts.
(3) Ledger is the stepping stone for preparing Trial Balance- which tests the arithmetical accuracy' .of the accounting books. .
(4) Since the entries recorded in the journal are referenced into ledger the possibility of errors or defalcations are reduced to the minimum.
(5) Ledger is the destination of all entries made in journal or sub-journals.
(6) Ledger is the "store-house" of all information which subsequently is used for preparing final accounts and financial statements.
Opening entry and its posting. In the case of an existing business we are required to pass an entry in the journal (on the basis of the Balance Sheet prepared at the end of the previous year) for bringing in the new books all assets and liabilities: this is known as Opening entry.
 

Difference between Journal and Ledger.

Journal

1. Is the book of prime entry.
2. As soon as transaction originates it is recorded in journal
3. Transactions are recorded in order of occurrence i.e. strictly in order of dates.
4. Narration (brief description) is written for each entry.
5. Ledger folio is written
6. Relevant information cannot be ascertained readily e.g. cash in hand can't be found out easily.
7. Final accounts can't be prepared directly from journal.
8. Accuracy of the books can't be tested.
9. Debit and credit amounts of a transaction are recorded in adjacent columns.
10. Journal has two columns one for debit amount another for credit amount.
11. Journal is not balanced.
12. With the computerization of accounting journal may not be used for routine transactions like receipts, purchases, sales etc
 

Ledger

1. Is the book of final entry.

2. Transactions are posted in the ledger after the same have been recorded in the journal.
3. Transactions are classified according to the nature and are grouped in the concerned accounts.
4. Narration is not required.
5. Folio of the journal or sub-journal is written.
6. Since transactions of particular nature are grouped at one place therefore relevant information can be ascertained.
7. Ledger is the basis of preparing final accounts.
8. Accuracy of the books is tested by means of list of balances.
9. Debit and credit amounts of a transaction are recorded in two different sides of two different accounts.
10. Ledger has two sides: left side is debit side right side is credit side.
11. Every account in the ledger is balanced at appropriate time.
12. Ledger cannot be avoided. However it may be loose leaf ledger or a computerized ledger. But ledger is a must.


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