Ledger- Introduction

The journal provides a complete listing of the daily transactions of a business. But it does not provide information about a specific account in one place. For example, to know how much cash balance we have, the accounting clerk would have to check all the journal entries in which cash is involved, and this is very laborious job; because there are hundreds or even thousands of cash transactions recorded on different pages of journal. To avoid this difficulty, the debit and credit of journalized transactions are transferred to ledger accounts. Thus all the changes for a single account are located in one place - in a ledger account. This makes it easy to determine the current balance of any account.
Definition and Explanation of Ledger:

The book in which accounts are maintained is called ledger . Generally, one account is opened on each page of this book, but if transactions relating to a particular account are numerous, it may extend to more than one page. All transactions relating to that account are recorded chronologically. From journal each transaction is posted to at least two concerned accounts - debit side of one account and credit side of another account. Remember that, if there are two accounts involved in a journal entry, it will be posted to two accounts in the ledger and if the journal entry consists of three accounts (compound entry) it will be posted to three different accounts in the ledger. The process of transferring information from journal to ledger accounts is known as posting. The goal of all transactions is ledger. Ledger is known as the destination of entries in journal but it must be remembered that transactions cannot be recorded directly in the ledger - they must be routed through journal. This concept is illustrated below:
1. Transaction

2. Journal

3. Ledger
So, the books in which all the transactions of a business concern are finally recorded in the concerned accounts in a summarized form is called ledger.
Characteristics of Ledger Account:
The ledger has the following main characteristics:
1.
It has two identical sides - left hand side (debit side) and right hand side (credit side).
2.
Debit aspect of all the transactions are recorded on the debit side and credit aspects of all the transactions are recorded on credit side according to date.
3.
The difference of the totals of the two sides represents balance. The excess of debit side over credit side indicates debit balance, while excess of credit side over debit side indicates the credit balance. If the two sides are equal, there will be no balance.
4.
Generally the balance is drawn at the year end and recorded on the lesser side to make the two sides equal. This balance is know as closing balance .
5.
The closing balance of thecurrent year becomes the opening balance of the next year.