The Principal Book: LEDGER

The ledger is the final destination of all transactions in the subsidiary books. It is the most important book of account. It can be defined as a book which contains a permanent record of all transactions in classified and summarized form. The ledger is used for the double entry book keeping.


DIVISIONS OF LEDGER
The divisions of ledger are as follows:

1. Personal ledgers
2. General ledgers
3. Private ledgers
4. Purchases or Creditors ledger
5. Sales or Debtors ledger
6. Nominal ledger

Personal ledgers
These are the ledgers for creditors account and debtors accounts e.g purchases and sales ledger.

General ledgers
 These are the ledgers for both real and nominal accounts e.g sales account, purchases account, expenses account, assets account, income account.

Private ledgers
These are ledgers for capital and drawing accounts of the proprietor. The book is divided into separate sections called accounts which may have one page or more. The main advantage of subdivision is to permit the clerks to attend concurrently to the various groups of accounts, so that delay is avoided in posting and balancing them.

Purchases or Creditors ledger
This ledger contains personal accounts of suppliers/creditors.

Sales or Debtors ledger
This ledger contains personal accounts of customers/debtors.

Nominal ledger
This ledger contains accounts of losses, expenses, incomes and gains.

NATURE OF LEDGER 


This ledger is divided into two parts by a central line. The left side is the Dr side and the right side is Cr side. The Dr side is the side that receives values and the Cr side is the side that gives values. This ledger has columns for date, particulars, folio and amount on the Dr and the Cr sides. The folios are numbered consecutively to make reference be easier and quicker.

DEFINITION OF AN ACCOUNT
An account can be defined as a record in a double entry system that is kept for each class of asset, liability, revenue and expenses. The principle of double entry has been clearly explained. Then, the next thing is the application of the system in the principal book (ledger). It should be noted that when entering a transaction in the ledger (posting the ledger), always use the name of the other account you are posting.

TYPES OR CLASSIFICATION OF ACCOUNTS
Accounts can be classified into:

1. Personal account.
2. Impersonal account.

(1) Personal accounts
These are accounts for the names of individuals, firms and business enterprises e.g John account, Debtors and Creditors account, Lagunju Nig. Ltd accounts.
(2) Impersonal accounts
These are accounts for properties, items of expenditures and income. It can be divided into two namely:
(a)Real accounts
These are accounts for tangible items, that is, things we can see, touch or move. e.g machinery account, land and building account, etc.
(b) Nominal accounts
These are accounts for intangible items, that is, things we cannot see, touch or move. e.g rent account, expenses account, insurance account, discount received account, discount allowed account and interest accounts

RULES FOR DEBITING AND CREDITING

1. The account which ''receives'' is debited with the value that comes into the account.
2. The account that ''gives'' is credited with the value that goes out of the account. 

APPLICATION OF DOUBLE ENTRY SYSTEM IN THE LEDGER
When faced with any transaction, ask yourself three questions.
1. Which two accounts are affected? Give them names.
2. What types of account are they? Classify them e.g real, personal or nominal.
3. Which one is to be debited and which is to be credited?

The account giving the value is credited and the account receiving the value is debited.
''CREDIT GIVER''
''DEBIT RECEIVER''

SUMMARY
1. Increase in assets is entered on the debit side of the account.
2. Decrease in assets is entered on the credit side of the account.
3. Increase in liability is entered on the credit side of the account.
4. Decrease in liability is entered on the debit side of the account
5. Increase in income is entered on the credit side of the account
6. Decrease in income is entered on the debit side of the account.
7. Increase in expenses is entered on the debit side of the account
8. Decrease in expenses is entered on the credit side of the account.