CBSE Class 11-commerce Answered

A ledger is a book of accounts which contains all the details of the accounts such as assets, liabilities, capital, revenues and expenses. All the business transactions recorded in the books of original entry are transferred to ledger. Ledger is also called the principal book because the trial balance is drawn from it and from the trail balance, financial statement is prepared.

Basically, all ledger accounts are given in five categories such as assets, liabilities, capital, revenues/gains and expense/losses. Further, these accounts are classified into two groups- permanent and temporary accounts. They are also relevant for preparing the financial statement.

1. Permanent accounts: All assets, liabilities and capital accounts are permanent accounts. They are balanced and carried forward to the next accounting period.
2. Temporary accounts: All revenue and expense accounts are temporary accounts. They are closed at the end of the accounting period by transferring them to trading and profit and loss account.