1. Ledgers

Question 1

What is a ledger?

Answer 1

To prepare financial statements on the completion of every individual transaction would be a time consuming and cumbersome administrative task.

Instead businesses use ledgers to record and analyse the transactions undertaken. When the time comes to prepare the financial statements, the relevant information can be extracted easily from the ledgers.

Question 2

Traditionally, in manual accounting in what three books are a business’s transactions recorded in?

Answer 2

1. The nominal ledger
2. The receivables ledger
3. The payables ledger

Question 3

What is the nominal ledger?

Answer 3

The nominal ledger contained a separate ledger account for each type of income, expense, asset and liability and for capital.

Question 4

What is the receivables ledger?

Answer 4

The receivables ledger contained a separate ledger account for each credit customer.

Question 5

What is the payables ledger?

Answer 5

The payables ledger contained a separate ledger account for each credit supplier.

Question 6

How should transactions in ledger accounts be recorded?

Answer 6

The transactions in ledger accounts should be recorded:
1. In chronological order and dated so that transactions can be related to a particular period of time.
2. Built up in cumulative totals.
- Day by day (e.g. total sales on Monday, total sales on Tuesday)
- Week by week
- Month by month
- Year by year