A ledger refers to a business’s main accounting records. A ledger records all the financial information which is essential for preparing financial statements. It includes the accounts of owner’s equity, revenues, assets, liabilities and expenses. While a journal records the changes in the accounting equation due a financial event, a ledger account debits or credits these changes into specific accounts.
The purpose of maintaining ledger accounts is to provide the management with the important information for the purpose of performance and budgeting. Preparing a ledger account is a process of listing all the transactions that affect a single account. Ledgers are used to calculate the balance of each account by summarizing all the activities of that account.
Transaction Posting in Ledger Account
A ledger uses the T-account format for displaying the balances in each account. The entries are transferred from the journal to the corresponding ledger account. The credits are transferred to the right side and the debits are transferred to the left side of the respective ledger account. The account balance is calculated at the bottom of each ledger account.
Most companies today have computerized accounting systems for updating the ledger accounts. As soon as the journal entries are entered, the accounting software automatically updates the ledger accounts.
