Ledgers (Cambridge (CIE) O Level Accounting)

The Ledger

What is the ledger?

• The ledger is a collection of all the accounts for a business

  • It could be a book where each account is on a new page

  • It could be a spreadsheet file where each account is on a new sheet

• The accounts in the ledger are referred to as ledger accounts

• The ledger is divided into three separate ledgers

  • The sales ledger

  • The purchases ledger

  • The nominal (general) ledger

Why is the ledger divided into three sections?

• Dividing the ledger means that the work can be shared amongst several people

• It is easier to find and check information

  • The same types of accounts are kept together

• It can help to reduce the possibility of fraud

  • If different people work with different ledgers then missing or incorrect information will be easier to find

Sales, Purchases & Nominal Ledgers

What is the sales ledger?

• The sales ledger is a collection of the accounts for all of the credit customers

  •  These are the trade receivables accounts

• The sales account itself does not go into the sales ledger

  • It goes in the nominal ledger

What is the purchases ledger?

• The purchases ledger is a collection of the accounts for all of the credit suppliers

  •  These are the trade payables accounts

• The purchases account itself does not go into the purchases ledger

  • It goes in the nominal ledger

What is the nominal (general) ledger?

• The nominal ledger is a collection of all accounts of a business except for the accounts for credit customers and credit suppliers

  • It is also known as the general ledger

• The most common accounts in the nominal ledger are:

  • Sales account

  • Purchases account

  • Sales returns account

  • Purchases returns account

  • Carriage inwards account

  • Carriage outwards account

  • Discount allowed account

  • Discount received account

  • An account for each other expense

  • An account for each other income

  • Cash and bank accounts

  • Capital account

  • Drawings account

  • Inventory account

  • An account for each type of non-current asset

  • An account for each liability