We have, so far, made a lot of entries in ledger accounts or T accounts. These accounts all together will form a ledger. We will consider now some practical points about the keeping of ledgers.
Later in the lesson we will then look at making adjustments in the ledger.
We have often mentioned the ledger. The ledger, or book, to which we are referring is the nominal or general ledger. This contains all the income, expense, asset, liability and capital accounts that we have used.
In the nominal ledger we have used a Debtors account, which contains the total amount owed by customers. It has no breakdown of who owes what amount. To obtain this information it is necessary to keep individual accounts for each customer. These show amounts invoiced and paid. Accounts for all customers held together form the sales or debtors ledger. Note that this does not form part of the double entry system - the double entry is still in the Debtors account in the nominal ledger.
Similarly, accounts for each of our suppliers form the purchase (or creditors) ledger. (Note that this refers to the suppliers of both purchases and expenses). Again the actual double entry still takes place in the Creditors account in the nominal ledger.
If, however, a business has only a small number of customers or suppliers, it is possible to keep the individual accounts in the nominal ledger in place of the Debtors or Creditors accounts.
Thus, instead of having in the trial balance:
Dr | Cr | |
Debtors | 450 |
we might have:
Dr | Cr | |
A Evans | 100 | |
B Wilkins | 150 | |
C Mackay | 200 |
We will, however, continue to use the Debtors and Creditors accounts as is normal practice.
To let us concentrate on learning our debits and credits, one important omission has been made from our transactions - we have no date. This is of course of great importance and should be recorded in our ledger accounts for each transaction. For example:
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