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IMPORTANCE/ADVANTAGES OF LEDGER ACCOUNTS

Ledger Accounts are the most important record of business accounting. Every business transaction whether it is recorded in journal or cash book or subsidiary books must be posted into Ledger Accounts. Its importance is summarized herewith:

  1. Separate accounts. There are separate ledger accounts for different parties and heads, so the information regarding every account is collected at one place. For example, if we prepare Ram’s Ale, information regarding Ram’s purchases, sales, payments and bills drawn and accepted etc. will be brought to Ram’s A/c from purchases book, sales book, cash book, bills payable book and bills receivable book etc.
  2. Requisite information at a glance. The correct position and status of every account can be ascertained at a glance by going through it. In case of personal accounts, we know what we have to receive or pay the particular party. Information regarding purchases, sales and returns are easily available from their ledger accounts.
  3. Preparation of trial balance. Ledger accounts facilitate the preparation of trial balance, which is e rest of examining arithmetical accuracy in the books of accounts. Trial balance is prepared with the bales of ledger accounts.
  4. Facilitating the preparation of financial statements. Ledger Accounts supply information for preparation of Trading, Profit & Loss Ale and Balance Sheet. They also help in identifying adjustments, which are incorporated in Final Accounts.