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Information sheet 3.2.

Prepare ledger

What Is The Point Of Bookkeeping Ledgers?

You may well ask why the information is first entered into the bookkeeping
journals and then again in the bookkeeping ledgers.

Isn’t this just doubling up on the amount of work?

Well, there is a good reason for doing this...

...whilst the journal is a diary of business transactions carried out in date

order, and whilst the journal shows which General Ledger account to debit and
which one to credit, it does not provide the means for adding up the totals
of each account.

In other words, it does not keep a running tally for each account.

This can only be done in the bookkeeping ledgers.

Of course, you might then say why not just record the information straight to
the ledger accounts and miss out the journal altogether?

The reason for this is that each ledger account only shows one side of the
business transaction, be it a debit or a credit.

You cannot see from one account page which other account is involved in the
transaction (unless you follow the reference back to the journal).

For example, for every entry in the bank sample ledger above there will be an
opposite entry on another account page (following the rule of double entry

So, let's say that the $25 debit on April 1st was a payment for a telephone bill.
You will find the opposite entry on the telephone account ledger page (debit
telephone account; credit bank account).

The totals from the General Ledger are used to produce reports such as
the trial balance, profit and loss (also called an income statement) and balance

Keep in mind, there are always two accounts involved in double entry
bookkeeping for each transaction!
The Accounts Receivable Ledger

This is a subsidiary ledger used to keep track of how much money customers
owe a business.

Only customers who buy goods or services on credit are included here.

A customer who owes money is called a debtor. (The details from cash paying
customers go straight from the General Journal into the Bank and Sales
accounts in the General Ledger).

Each page of the Accounts Receivable ledger is dedicated to a customer and is

headed with the customer’s name.

The information in these pages is taken from the Sales Journal.

Accounts Receivable Illustration

Below is a sample of just two pages from an Accounts Receivable Ledger.

You can clearly see the name of the customer on the top left, the page name on
the right.

The Ref is the page number from the Sales Journal which is where this
information is posted from.

Example Of An Accounts Receivable Ledger

The Accounts Payable Ledger

The accounts payable ledger is another subsidiary ledger used to keep

track of how much the business owes to its suppliers/vendors, also
known as creditors.

This ledger contains one page per supplier and the information is
taken from the Purchases Journal.

It is only used for purchases made on credit.

What Are Subsidiary Ledgers?

They are ledgers supplementary to the General Ledger - which simply means
they are extra ledgers which are not used in the preparation of the reports
mentioned above under ‘General Ledger’.

Instead, the month end overall total from each subsidiary ledger is entered into
their corresponding parent or controlaccount found in the General Ledger.
The control accounts just happen to be called Accounts Receivable and
Accounts Payable!

General Ledger Formats

 A standard ledger account is displayed in a ‘T’ format as in the General

Ledger sample near the top of this page.

 Another format is the three-column ledger, as illustrated in the

Accounts Receivable sample above, which provides a running balance in
the third column. This is handy for seeing the ledger balance at any time
during the month, instead of waiting until month end to calculate the
balance as in the ‘T’ format.
 A third format is the four-column ledger which breaks the running
balance column into two columns, one headed debit and one credit.

Bookkeeping Ledgers are the end of the road for all business transactions.

In fact, the General Ledger is called the Book of Final Entry.

Self-check 3.2.1

1. The three main ledgers used in double-entry bookkeeping

- The chart of accounts
- General ledger
- Accounts receivable ledger
- Bookkeeping software
- Journals
- Accounts payable ledger
2. What does each page of the general ledger represent?
- A debit account
- A journal entry
- An account from the chart of accounts
3. One ledger page shows both the debit and credit sides of a single business
- True
- False
4. Accounts receivable ledgers and accounts payable ledgers are...
- Subsidiary ledgers
- Sub-standard ledgers
- Substantial ledgers
- Option 4
Match the following
5. Accounts receivable
- creditor
- debtor
- control account
6. Accounts payable
- creditor
- debtor
- control account
7. General ledger
- creditor
- debtor
- control account
8. What standard format is a ledger in?
9. One of the things a ledger is good for is...
- Keeping a running tally of each account
- Producing reports
- Both of the above
10. What is another name for the general ledger?
- Book of numbers
- Book of accounts
- Book of final entry
Answer key 3.2.1

1. General ledger, Accounts receivable ledger, Accounts payable ledger

2. An account from the chart of accounts
3. False
4. Subsidiary ledgers
5. Debtors
6. Creditors
7. Control account
8. T
9. Both of the above
10. Book of final entry