What is a ledger in Accounting

 A group of accounts is known as a ledger the consolidated view of the similar transactions different accounts are prepared in the ledger As we know, the journal records all business transactions separately and date-wise. The transactions pertaining to a particular person, assets, expense or income are recorded at different places in the journal and they occur on different dates. Hence, the journal fails to bring similar transactions together at one place. Thus to have a consolidated view of the similar transactions different accounts are prepared in the ledger. A ledger account may be defined as a summary statement of all the transactions relating to a person, assets, expenses or income which have taken place during a given period of time and show their net effect.

A group of accounts is known as a ledger. The general ledger is the main book of accounts it contains an account for each asset, liability, proprietorship, revenue, and expense account. The ledger contains the same information as the journal. However, in the journal, each transaction is completely recorded as a unit. The entire effect of a transaction is completely recorded in one place in the journal. Periodically the same information is posted to the ledger where it is accumulated according to individual items. The ledger includes all the basic accounts needed for the preparation of the financial statements.

A journal is maintained only to facilitate the passing of entries in the ledger, so every entry recorded in the journal must be posted into the ledger. A ledger is a register having a number of pages that are numbered consecutively. One account is usually assigned one page in the ledger. However, if the transactions, pertaining to a particular account are more, it may be assigned more than one page in the ledger. An index of various accounts opened in the ledger is given at the beginning of the ledger for the purpose of easy reference. It is the principal book of accounts because it helps us in achieving the objective of accounting.   

How to Classify Accounts in Double Entry System

here is a big question that how to classify accounts in accounting as per the traditional approach in double entry system in accounts that there are three types of accounts, namely, Personal accounts, Real Account and Nominal Accounts which are opened to keep a complete record of all the financial transactions of the business.

Classification of Accounts 

• Natural Person’s Personal Account: An account recording transactions with an individual human being is known as a natural person’s Personal Account, for example, Ram’s Account
• Artificial Person’s Personal Account: An account recording financial transactions with an artificial person created by law or otherwise is called an Artificial Person’s Personal Account, Like Ram Kumar and Sons. Or Suresh Kumar and Co. 
• Representative Personal Account: An account indirectly representing a person or persons is known as a representative personal account. When accounts are of a similar nature and their number is large, it is better to group them under one head and open a representative personal account. For example, such types of accounts can be salaries account Outstanding Accounts, etc.
• Tangible Real Account: such types of accounts relates to an asset which can be touched, felt, seen, and measured e.g. Machinery Account, Cash Account Stock Account, etc.
• Intangible Real Account: Such type of account related to an asset which cannot be, touched physically but can be measured in value. For example Goodwill Account, Trademarks Accounts, etc. 

Few more examples to clarify the types of accounts: 

Drawing Account = Personal Account

Cash Account = Real Account 

Discount Account = Nominal Account 

Salaries Account = Nominal Account 

Bad Debts Account = Nominal Account 

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What is Double Entry System in Accounts

 Double entry system owes its origin to an Italian merchant name Luco Pacioli who wrote the first book entitled ‘De computis et Scripturis’ on double entry accounting in the year 1494 we have seen earlier

that in Double entry system of accounting or Bookkeeping that Every business transaction has two aspects, i.e., when we receive something, we give something else in return. For example, when we purchase goods for cash, we received goods and give cash in return similarly in a credit good, goods are given to the customer and the customer becomes debtor for the amount of goods sold to him This method of writing every transaction in two accounts is known as Double Entry System of Accounting. Of the two accounts, one account is given debit while the other account is given credit with an equal amount. Thus on any date, the total of all debits must be equal to the total of all credits because every debit has corresponding credit. 

The factor common in double entry system 

To have a clear understanding of the double entry system, it is necessary to keep in mind the following factors which are common to every business :

• The business has to enter into business dealings with a number of persons or firms. Therefore, to keep a record of each asset of the business an account of each person or firm, with whom the business has business dealings, is opened. Such accounts are known as a personal account
• The business must necessarily have some assets such as stock, cash, furniture, etc. with the help of which the business may be carried on. Therefore, an account of each asset in the business is opened for keeping a record of each asset of the business. Such accounts are classified as real or property accounts. 
• There must be certain sources from which the income of the business is derived. Similarly, certain expenses are incurred to earn income. Therefore an account of each expense and income is opened in the books for ascertaining profit and loss of the business for a particular period. Such accounts are known as Nominal Account.

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Types of Branches of Accounting

What are the types of branches of Accounting The real record making period of bookkeeping is normally called accounting? Nonetheless, bookkeeping stretches out a long ways past the real making of records. Bookkeeping is worried

about the utilization to which these records are put, their examination and understanding. A bookkeeper ought to be worried about more than the record making stage. Specifically, he ought to be occupied with the connection between the money related outcomes and the occasions which have made them. He ought to be considering the different options open to the firm, and be utilizing his bookkeeping background keeping in mind the end goal to help the administration to choose the best arrangement of activity for the firm. The proprietor and director of a firm will require some bookkeeping learning all together that they may comprehend what the bookkeeper is letting them know. Speculators and others will require bookkeeping learning all together that they may read and comprehend the money related proclamations issued by the firm and change their associations with the firm as needs are. Hence bookkeeping is a more extensive term and incorporates the recording, arranging and compressing of business exchanges in term of cash, the planning of money related reports, the examination, and understanding of these reports for the data and direction of the administration. 

What are the Branches of Accounting 

- Financial Accounting: The primary reason for this branch of bookkeeping is to learn benefit or misfortune amid a particular period, to indicate money related position of the business on a specific date and to have control over the company's property. Such bookkeeping records are utilized to confer helpful data to outcasts and to meet the lawful necessities. 

- Cost Accounting: The primary point of cost bookkeeping is to discover taken a toll identifying with the different exercises of the business and to have fetched control. The cost bookkeeper is required to collect and translate cost information for the utilization of administration in controlling current operations and in getting ready for what's to come. 

- Management Accounting: it supplies the administration noteworthy data to help the administration to release its different capacities, for example, arranging, control, assessment of execution and basic leadership.

Final Accounts Prepared to Achieve Goals of Accounting

Why we prepare final accounts. Final accounts are prepared to achieve the goals of accounting. So as to know the profit and loss earned by a firm, Income proclamation or Trading and profit and loss account are readied. Accounting report or position proclamation will depict the monetary state of the firm on a specific date. These two proclamations, for example, Trading and Profit and Loss Account and Balance Sheet are set up to give the last after-effects of the business that is the reason both these are all in all called as final accounts. Along these lines, last records incorporate the arrangement of:

•           Trading and Profit and Loss Account

•           Balance Sheet

Final accounts are the methods for passing on to the executives, proprietors and intrigued untouchables a succinct picture of productivity and monetary position of the business. The arrangement of the last records isn't the initial phase in the bookkeeping procedure yet they are the finished results of the bookkeeping procedure which give brief bookkeeping data of the bookkeeping time frame after the bookkeeping time frame is finished. These records rundowns all the bookkeeping data recorded in the auxiliary books and the record running into hundreds or thousands of pages

Trading and Profit and Loss Accounts:

This record is comprised of two records for example trading and Profit and Loss account. Trading concerns i.e. those concerns which buy products from one market and move these in another market at a Profit, set up this records This record is the plan to realize the Trading results or gross profit on Trading, i.e how much gross profit of the business has earned from purchasing and moving amid a specific period. The distinction between the deals and cost of merchandise sold is gross profit. To calculate the cost of merchandise sold, we think about opening stock, buys, direct costs on buying or assembling the products and shutting stock. The equalization of this record speaks to net benefit or gross shortfall and is exchanged to the benefit and deficit account. Then again Profit and Loss account is set up to figure the net profit of the business. There are sure things about salaries and costs of the business which must be contemplated for ascertaining the net profit of the business. These are circuitous nature, for example concerning the entire business and identifying with different exercises which are finished by the business to make the merchandise accessible to the customers. Backhanded costs might move and conveyance costs, the board costs, money related costs and so on. The idea of this record is ostensible record and equalization of this record is exchanged to the Balance sheet's Capital Account as the entire profit or loss will be that of the proprietor and it will increment or lessening his capital.

Analysis of Inventory referred to ABC analysis

Manufacturing organization still find it useful to divide material into three categories when it comes to exercising selective control on materials. An analysis from the material cost will show which a smaller percentage of items of materials in the particular stores may contribute to a large proportion of the value regarding consumption and, on the other hand, a large percentage of items may represent an inferior percentage of the significance of items ingested. Between these a couple of extremes will fall those items the percentage volume of which is pretty much equal to their own value consumption? Items falling from the first category usually are treated as ‘A’ products, second category while ‘B’ items and items of the third type are taken while ‘C’ items. Such analysis of material is referred to as ABC analysis. This technique regarding stock control is referred to as stock control in line with value method or even always better control method, materials usually are listed in ‘A’, ‘B’, ‘C’ categories inside descending order determined by money value regarding consumption.

ABC analysis measures the charge significance of each item of material. It concentrates upon important items, so it is also known while ‘Control by Magnitude and Exception’ (C. My spouse and i. E). It is a scientific technique of material control since it lays emphasis upon discriminating control over different items of store classified judging by investment involved. Thus it is a system of discerning inventory control. The value of this analysis is which a very close control is exercised over the items of ‘A’ group which take into account a high percentage of cost while less stringent control is adequate regarding category ‘B’ and also little control might suffice for type ‘C’ items Different types of material control i. e. buy, stores and issue are to be strictly applied in case there is the items regarding ‘A’ group. In case of ‘C’ items a more elaborate material control just isn't exercised because these items represent a small portion of the particular material cost. These items are offered once a season and various stock options levels i. at the., minimum level, greatest level, ordering level etc. may not be honored. All the period, efforts and cost saved about the ‘C’ group items by lacking an elaborate control could be usefully on the particular ‘A’ and ‘B’ team items.