Books of Accounts | Different Types of Ledger

                      Today in this article let us try to understand about Books of Accounts - Journals and Ledger.

Books of Accounts

          Books of Accounts refer to those books which record all the transactions related to the financial information of a firm or organization.

          Books of Accounts are divided into two types. They are

1.     Journals.

2.     Ledgers.

Now let’s know in detail one by one.

1.  Journals: 

             This is the book of first entry where all the financial transactions are recorded date wise. Traditionally, journals were said as the book of original entry.

2.  Ledger:

              Ledger is also called Principal book. The book which contains accounts is called ledger.  It is a book of final entry. It is a book where every account is maintained separately. A ledger provides a complete record of financial transactions over the period of time. It carries the information required to prepare the financial statements. Ledgers are created whenever a new customer purchases on credit basis or goods are being procured on credit from a new vendor in his name and a record is maintained. Cash ledger is created and maintained for all the cash transactions. There are different types of ledger. The most common ledgers are,

a.     Purchase Ledger.

b.     Sales Ledger.

c.      Purchase Return Ledger.

d.     Sales Return Ledger.

Now let’s see in detail about the most common ledgers.

a.     Purchase Ledger: 

               It is the ledger where all the transactions related to purchases are recorded and maintained in a firm or business. There are two types of  in purchases. They are Cash  Basis and Credit Basis. In cash basis when a transaction occurs both the parties will fulfill their obligation and hence they will just have the record that goods is sold and cash is received. But when it comes to credit purchase only the vendor fulfill his obligation and sends the goods or service while the customer hasn’t fulfilled his obligation as he hasn’t yet paid the amount to the vendor and is obligated to pay in a period of time.

b.     Sales Ledger: 

                   It is the where all the transactions related to the sales of the goods and services are maintained in a firm or business. There are two types of sales. They are credit sales and cash sales.  Cash sales means the sales takes place on the basis of cash i.e. cash is immediately paid by the customer for goods received. While Credit sales is the sales where customer receives goods and pays the amount in a specific period of time usually credit period will be of 60-90 days ideally.

c.      Purchase Return:

                  It is the ledger where all the transactions related to the return of goods to the supplier is maintained i.e. purchase return or return outwards. All the information regarding the return of goods is maintained in this ledger.

d.     Sales Return:

                   It is the ledger where all the transactions related to the return of goods by the customers is maintained. In this ledger the goods information related to the goods that came back to the business from customers due to some reason.