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Ledger Accounts are classified into five categories. These categories are (a) Assets Accounts, (b) Liabilities Accounts (c) Capital Accounts (d) Revenue Accounts and (e) Expenses Accounts. These ledger accounts may be grouped as: (i) Permanent Ledger Accounts and (ii) Temporary Ledger Accounts. Permanent Ledger Accounts have their opening balances except in case of newly started business. These accounts show closing balances at the end of accounting year and are also carried forward to the next accounting year. Temporary Ledger Accounts do not have any opening and closing balance. These accounts are closed at the end of the accounting year by transfer to Trading or Profit and Loss Accounts. Purchases, Sales and Direct Expenses

Accounts are closed by transfer to Trading A/c. Selling, Distribution, Indirect Expenses and Losses Accounts are transferred to the debit side of income and gains accounts at the credit side of Profit and Loss A/c.

Format of Ledger Account

        Name of Account (Title)                                                                                                                                                                       Page No…… .

Dr.                                                                                                                                                                                                                           Cr.

This format of Ledger Account resembles English Capital letter ‘T’, so it is sometimes called ‘T’ shape account. As teachers generally use this type of Ledger Account while taking classes, so this account is also known as ‘Classroom Account’. Practically ‘T’ shape Ledger Accounts are not used in business houses.

Ledger Accounts are divided in two parts. The left hand side is debit side and the right hand side is the credit side. All business transactions are classified as assets, liabilities, revenue, expense and capital. While preparing these ledger accounts, we have to apply the rules of debit and credit applicable to the particular category of account.