The Ledger

Question 1

Name and explain two forms of ledger accounts

Answer 1

traditional= t-account
modern= running balance method. dr cr balance

Question 2

Name and explain the two sections that the general ledger is divided into

Answer 2

Balance sheet account section. consist of owners equity + assets + liabilities
Nominal account section. consist of income and expense accounts

Question 3

Explain the meaning of a balance on a ledger account,

Answer 3

Asset accounts : totals assets in possession at the end of the month
Liability account: total amount owed to another at the end of the month
Income account: total income received for the month
Expense accounts: Total expenses paid during a month.
Owner’s equity: total interest the owner has in the business at the end of a certain period

Question 4

Explain the importance of the ledger

Answer 4

Ledger accounts form the basis of the double entry system using data from the prime entry records (journals).
Information is periodically summarised and transferred from the ledger to the profit and loss