what is ledger?



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explain what is ledger with few examples..

5 Answer(s)


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When you start learning accounting through Tally or through any other mediums, knowing how to create a ledger, trial balance ,profit and loss account is inevitable. I am writing this to try and explain the types of accounts with examples and how to make entries in your ledger.

We will actually see what we put in debit and what we put in credit.The three basic types of accounts are

Personal account: Usually a bank account, capital etc come under Personal account. It is important to know, after concluding that the transaction is of a personal account, what willbe credit and what will be debit.

Credit: The giver

debit: the receiver

Example: Peter started a business with cash 2000$. Note that Peter's account is a personal account. The capital will be a personal account entry and will be a credit as Peter is the giver.

Manish deposited cash in bank. Manish's account will be a personal account and he is the giver so it will be considered a credit. Bank is the receiver so debit.

Real accounts: Cash, goods all come under real account.

Credit: what goes out is credit

debit: what comes in is debit.

example:

Nelson sold goods for 5000. Since goods are real account entries we find that goods are going out so credit and cash is coming in after the sale so debit.Both transactions are of a real account



Nominal account: This is easy to understand.

Credit: All the earnings out of a business venture will be credit

debit: all the expenses will be debit

example: Mark paid salary to Nike.Snce Mark is paying it is an expense for him so debit and it will be credit for the receiver Nike in his personal account.

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In Simple Words,

Ledger Means posting the Journal entries into an Accounting table format where you will have debit and credit columns and you fill in the details as recorded in the Journal Entries.

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Ledger is a set of accounts.It is the principal book .Each account is opened on a separate page in ledger.

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We will actually see what we put in debit and what we put in credit.The three basic types of accounts are

Personal account: Usually a bank account, capital etc come under Personal account. It is important to know, after concluding that the transaction is of a personal account, what willbe credit and what will be debit.

Credit: The giver

debit: the receiver

Example: Peter started a business with cash 2000$. Note that Peter's account is a personal account. The capital will be a personal account entry and will be a credit as Peter is the giver.

Manish deposited cash in bank. Manish's account will be a personal account and he is the giver so it will be considered a credit. Bank is the receiver so debit.

Real accounts: Cash, goods all come under real account.

Credit: what goes out is credit

debit: what comes in is debit.

example:

Nelson sold goods for 5000. Since goods are real account entries we find that goods are going out so credit and cash is coming in after the sale so debit.Both transactions are of a real account



Nominal account: This is easy to understand.

Credit: All the earnings out of a business venture will be credit

debit: all the expenses will be debit

example: Mark paid salary to Nike.Snce Mark is paying it is an expense for him so debit and it will be credit for the receiver Nike in his personal account.

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