A ledger is a book or collection of accounts in which all financial transactions of a business are recorded and classified under different account headings.
It is often called the book of final entry because it is where transactions from the journal are finally recorded.

In simple terms, the ledger shows the effect of business transactions on each account — such as cash, capital, sales, purchases, expenses, and others.

Every business keeps a ledger to know how much it owes or is owed and to prepare financial statements.

Meaning of Ledger Entries

Ledger entries refer to the act of recording financial transactions into the appropriate ledger accounts from the journal.
Each transaction is entered in two different accounts according to the double-entry principle — one account is debited and the other is credited.

Therefore, ledger entries show how every transaction affects at least two accounts in the books of a business.

1. It contains different accounts such as assets, liabilities, income, and expenses.


2. Each account has two sides — debit (Dr) and credit (Cr).


3. It is used to classify transactions into their proper accounts.


4. Balances can be extracted from it to prepare a trial balance.


5. It helps in preparing the final accounts (Trading, Profit and Loss, and Balance Sheet).

There are three main types of ledger in business studies:

1. General Ledger

It contains all the main accounts of a business such as assets, liabilities, capital, income, and expenses.
Examples of accounts in the general ledger are: Cash, Capital, Rent, Wages, Sales, Purchases, and Bank.

2. Sales Ledger (Debtors’ Ledger)

It contains accounts of all customers who buy goods on credit.
Each debtor has a separate account showing how much they owe the business.

3. Purchases Ledger (Creditors’ Ledger)

It contains accounts of all suppliers from whom goods are bought on credit.
Each creditor has a separate account showing how much the business owes them.

Each ledger account has the following parts:

A ledger account has two sides:

Debit (Dr) Side — for recording increases in assets and expenses or decreases in liabilities and income.
Credit (Cr) Side — for recording increases in liabilities, capital, and income or decreases in assets and expenses.

The Rule of Double Entry

The double-entry principle is the rule that states that every transaction must be recorded in two accounts — one as a debit and the other as a credit of equal amount.

This means:

Debit what comes in, Credit what goes out.

Example:
If goods worth ₦5,000 are sold for cash:

1. Debit Cash Account ₦5,000 (because cash comes in).


2. Credit Sales Account ₦5,000 (because goods go out).

This keeps the ledger balanced.

1. Identify the two accounts affected by the transaction.


2. Decide which account to debit and which to credit.


3. Enter the transaction details (date, particulars, folio, and amount) on both sides of the ledger.


4. Post the debit entry on the left-hand side of one account.


5. Post the credit entry on the right-hand side of the other account.


6. Ensure that both entries are equal in amount.

Transaction:
Jan. 5 – Sold goods for cash ₦10,000.

Ledger Entries:

Cash Account

Sales Account

Balancing a Ledger Account

At the end of a period, each ledger account is balanced to determine whether it has a debit or credit balance.

Steps:

1. Add the debit side and the credit side separately.


2. Find the difference between the two sides.


3. Enter the difference on the side with the smaller total as Balance c/d (carried down).


4. Bring the balance to the opposite side as Balance b/d (brought down) on the next page or period.

Example:

Cash Account

Next page:

This means there is ₦5,000 cash left.

1. They help to keep accurate financial records.


2. They provide information for preparing the trial balance.


3. They make it easy to detect errors and fraud.


4. They show the financial position of a business.


5. They help in the preparation of final accounts.


6. They promote transparency and accountability.


7. They help in decision-making by management.


8. They assist in checking how much is owed or owing.

1. Posting to the wrong account.


2. Entering the wrong amount.


3. Omitting a transaction completely.


4. Double posting on the same side.


5. Reversing debit and credit entries.


6. Wrong folio reference or date.

Summary

Ledger is the book of final entry that contains all accounts of a business.
Ledger entries are the act of recording transactions from the journal into the ledger.
It follows the double-entry principle (debit and credit).
There are three main ledgers: General, Sales, and Purchases Ledgers.
Proper ledger entries ensure accuracy, honesty, and reliability in financial record keeping.