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Get to Grips With Book Keeping: Ledgers

by Andy Lymer and Nishat Azmat

In a small business all the double-entry accounts can be kept in one book, called a ledger. As a business gets larger more books would be required, entering similar types of transactions together. There would be a different book for each type, keeping dissimilar transactions separate. Sales would be entered in one book, purchases in another and cash in another.

The different types of ledgers most businesses use are:

Purchases ledger – this is for suppliers’ personal accounts
Sales ledger - this is for customers’ personal accounts
General ledger – this contains the other double-entry accounts, such as owner’s equity, expenses and fixed assets.

Even though we often may use a computer these days for all but the simplest of accounts, we still use these terms to refer to the different collection of the computer ‘accounts’ just as if it was still all on papers.

Books of original entry are the books in which we first record transactions and are known as day books, for e.g. the purchases day book or the sales day book. The entries from these books are totalled and using the double-entry system is entered into the various ledgers of the business. There are different categories in the ledger, personal accounts and impersonal accounts:

The personal accounts are for customers and suppliers ( debtors and creditors). The impersonal accounts are divided into Real accounts and Nominal accounts. The real accounts are where all the assets are recorded (any possessions), e.g. machinery or inventory. Nominal accounts include accounts in which owner’s equity, revenue and expenses are recorded.


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