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Chapter 3

Ledger accounts and the accounting

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4.1 Division of the ledger

In most business entities, each class of transaction and their associated assets and
liabilities are allocated their own ledger account. For example, there will be separate
ledger accounts for sales, purchases, rent, insurance, land and buildings, plant and
equipment, liabilities to pay suppliers, amounts due from customers etc. There is no
rule as to how many ledger accounts an entity should have but the system should
facilitate effective and efficient accounting and control.

The term ‘general ledger’ or ‘nominal ledger’ is used to refer to the overall system of
ledger accounts within a business entity. It houses all the separate ledger accounts
required to produce a complete trial balance and, consequently, a set of financial
statements.

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