2.4 Ledgers

The collection of all accounts and their balances in an information system is called a ledger. A ledger is also called books of final entry. It records classified and summarized financial in formation from journals and shows their current balances.

The ledger account is a separate page in a ledger that records increases and decreases in each balance sheet item, classified under assets, liabilities, or owners’equity. The ledger account can be classified into general ledger account and subsidiary ledger account.

1. General Ledger Account

The general ledger account is an account or record used to sort and store balance sheet and income statement transactions. Examples of general ledger include the asset accounts such as Cash, Accounts Receivable, Inventory,Investments, Land and Equipment. Examples of the general ledger liability accounts include Accounts Payable, Notes Payable, and Accrued Expenses Payable. Examples of income statement accounts include Sales Revenue, Service Revenues, Salaries Expense, Rent Expense, Advertising Expense, Interest Expense, and Loss on Disposal of Assets.

2. Subsidiary Ledger Account

The subsidiary ledger account is also called supporting ledger account, which contains the detailed information to support a general ledger account. For instance,the subsidiary ledger for accounts receivable contains all of the information on each of the credit sales to customers, each customer's remittance, return of merchandise, discounts, and so on. With these details, the accounts receivable account in the general ledger takes the role of control account, which only needs to report the aggregate amount of the accounts receivable activities.

3. Posting Journal Entries to the Ledger

The 3rd step of the accounting cycle is to post journal entries to ledger accounts （see Exhibit 2-1）. To ensure that the ledger is up-to-date, entries should be posted from journal to ledger as soon as possible. This might be done daily,weekly, or whenever is required. All entries must be posted to the ledger before financial statements are prepared to ensure that the account balances could be transferred into the corresponding ledger accounts timely and correctly.