The Ledgers What are they and why do we require them

Ledgers Each financial document has to be recorded from a book of prime entry to an account held in one of 3 ledgers. These being: – Sales Ledger – Purchase Ledger – General Ledger

Sales Ledger The Sales ledger is the ‘book’ that holds all the credit customer’s account details. Each customer has an individual account/page. Every transaction is recorded to the account. – Invoices sent for orders places – Credit notes for goods returned – Records of receipts The account identifies monies owed to the business and can be used as a form of reconciliation between the two businesses

Purchase ledger The purchase ledger holds all the credit suppliers accounts. Each supplier has an individual account/page. Every transaction is recorded to the account. – invoices received for orders places – Credit notes for goods returned – Records of payments sent It helps identify the monies owed to external businesses

General/Nominal ledger The Nominal ledger holds all the non- personal accounts It helps to identify where monies have been spent, received, the value of the assets and liabilities. There is a control account for both the sales ledger and the purchase ledger included in the nominal ledger All the account values are balanced and recorded as a Trial Balance at the end of the financial period.

Ledger account- presentation The ledger accounts have a similar format as below and are commonly known as T Accounts The left hand side of the account is the DEBIT (receive) The right hand side of the account is the CREDIT (give) Each financial transactions will be recorded to the debit side of one account and credit side of the corresponding account. Account title code Date ref details £

Codes & coding system If you noticed on the illustration before the ledger account had the account name and a code. The coding system is designed to: – Ensure information can be recorded accurately Each customer and supplier has own unique code – Documents can be filed and retrieved efficiently

Coding system The systems used may be: NUMERIC – used for financial documents: invoices, credit notes, purchase orders & cheques. – Each document will follow in a sequential order ALPHA-NUMERIC – used for products, suppliers, customers, nominal and employees records. – The code is made up of the first few letters of the product, customer, supplier and then a sequence of numbers