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Asked Dec 15, 2019
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What does a ledger show? What’s the difference between a ledger and the chart of accounts?

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Ledger: Ledgers are the foundation of financial reporting and allow views of historical transactions and aid in reporting and preparing financial statements.

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Ledgers are the primary step in posting of financial transactions in the Accounting process. A ledger indicates the summary total of the debit or credit postings made in the account for the fiscal year or period of review. The posting to Debit or Credit side of the ledger account is decided depending on the type of account. For example : Sales Ledgers are used to record revenues of a company and have a credit balance, Purchase Ledgers and Expense Ledgers are used to record purchases made and expenses incurred, respectively, and have a debit balance etc. Every debit in a ledger account is represented by an equal credit in another ledger account in the double entry system of book keeping. Data flows from the General Ledger, Debtors Ledger and Creditors Ledger to the trial balance and this forms the base of preparation of Financial Statements such as Income Statements, Balance Sheet Etc.

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Financial Accounting

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