Double-entry accounts help businesses to understand their costs and profits more by keeping track of both expenditure and where the money came from to pay for it. For example, when purchasing a vehicle on credit for $50,000, the asset value of the business will increase by the value of the vehicle ($50,000) but as it is not yet paid for, the debt ($50,000) will be added to the accounts payable. By using double-entry bookkeeping for all transactions, it is ensured that the accounting equation always remains balanced which means that the balance sheet will balance at the end of the trading period.

The sales ledger is a log of all sales made by a business. Credit sales will be logged as an account receivable initially but this can be amended later when payment is made. 

The general ledger is a log of all financial transactions made by a company over a specified trading period. An accountant will use the sales ledger, purchase ledger and cashbook to inform them in the creation of the general ledger. The general ledger will contain both debit and credit transactions that should mirror each other and therefore the ledger should balance overall.

The purchase ledger is a log of all purchases made from a supplier. Credit purchases will be logged as an account payable initially but this can be amended later when the payment is made.

The cashbook records all transactions made by a business in cash. Cash receipts will be recorded as debits and cash payments will be recorded as credits. The cash book makes it easy to calculate the cash balance at any point in time which can be checked against the cash on hand in the business. A triple column cashbook has a column for cash on hand, a column for cash at the bank and a column for discounts. Discounts may be received and given for early payment.

Purpose and completion of double entry accounts, including all those in the following ledgers: sales ledger (all personal trade receivable accounts), purchase ledger (all personal trade payable accounts), cash book (cash, bank, discount allowed, discount received), general ledger (all other accounts).

Balancing all ledger accounts accurately to show total columns, balance carried down (c/d) and balance brought down (b/d).

How to Balance a Ledger

Step 1 - Add up each side of the ledger (debits and credits).

Step 2 - Add the larger number as the total for the period in both debit and credit columns.

Step 3 - Work out the difference between the total and the smaller column.

Step 4 - Enter this difference as balance carried down (balance c/d).

Step 5 - Under the total, enter the same value as the balance c/d as balance brought down (balance b/d) in the opposite column. This will be account for in the next period.

Have a Go

Copy and complete the cash ledger to the left. Follow the steps above to balance the ledger.

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