Ledger Account Examples

Updated on April 29, 2024
Article byTanmay Agarwal
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

Examples of Ledger Account

The following Ledger accounts example provides an outline of the most common Ledgers. The ledger accounts are the separate records of the business transactions carried by an entity prepared using the reference of the daily journal entries and are related to a specific account, which can be an asset or a liability, capital or equity, expense, or revenue item.

Key Takeaways

  • A ledger account is a record that contains all the transactions for a specific budget in a company’s financial records.
  • Ledger accounts track the balance and activity of individual accounts, such as cash, accounts payable, and accounts receivable.
  • Ledger accounts are an essential part of the accounting system and are used to prepare financial statements and monitor a company’s financial performance.
  • Under a ledger account, fixed assets are held for a long term and are not expected to convert into cash in a short time.
Ledger Account Examples

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Source: Ledger Account Examples (wallstreetmojo.com)

A ledger accountLedger AccountLedger in accounting records and processes a firm’s financial data, taken from journal entries. This becomes an important financial record for future reference. It is used for creating financial statements. It is also known as the second book of entry.read more contains information about a particular account’s opening and closing balances and the periodical debit and credit adjustments based on daily journal entries. A ledger account’s most important information is the periodical (usually annual) closing balances about a specific item or charge. The ledger accounts are essential in the formation of trial balancesTrial BalancesTrial Balance is the report of accounting in which ending balances of a different general ledger are presented into the debit/credit column as per their balances where debit amounts are listed on the debit column, and credit amounts are listed on the credit column. The total of both should be equal.read more and the company’s financial statementsCompany's Financial StatementsFinancial statements are written reports prepared by a company's management to present the company's financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more.

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Common Examples of Ledger Accounts

Some common examples of ledger accounts are:

  1. Cash
  2. Inventory
  3. Fixed AssetsFixed AssetsFixed assets are assets that are held for the long term and are not expected to be converted into cash in a short period of time. Plant and machinery, land and buildings, furniture, computers, copyright, and vehicles are all examples.read more
  4. Accounts ReceivableAccounts ReceivableAccounts receivables is the money owed to a business by clients for which the business has given services or delivered a product but has not yet collected payment. They are categorized as current assets on the balance sheet as the payments expected within a year. read more
  5. Capital
  6. Debt
  7. Accounts PayableAccounts PayableAccounts payable is the amount due by a business to its suppliers or vendors for the purchase of products or services. It is categorized as current liabilities on the balance sheet and must be satisfied within an accounting period.read more
  8. Accrued ExpensesAccrued ExpensesAn accrued expense is the expenses which is incurred by the company over one accounting period but not paid in the same accounting period. In the books of accounts it is recorded in a way that the expense account is debited and the accrued expense account is credited.read more
  9. Sales or Revenue
  10. DividendDividendDividends refer to the portion of business earnings paid to the shareholders as gratitude for investing in the company’s equity.read more
  11. Interest IncomeInterest IncomeInterest Income is the amount of revenue generated by interest-yielding investments like certificates of deposit, savings accounts, or other investments & it is reported in the Company’s income statement. read more
  12. OpexOpexOperating expense (OPEX) is the cost incurred in the normal course of business and does not include expenses directly related to product manufacturing or service delivery. Therefore, they are readily available in the income statement and help to determine the net profit.read more
  13. Administrative ExpensesAdministrative ExpensesAdministrative expenses are indirect costs incurred by a business that are not directly related to the manufacturing, production, or sale of goods or services provided, but are necessary for the smooth functioning of business operations, such as information technology, finance & accounts.read more
  14. DepreciationDepreciationDepreciation is a systematic allocation method used to account for the costs of any physical or tangible asset throughout its useful life. Its value indicates how much of an asset’s worth has been utilized. Depreciation enables companies to generate revenue from their assets while only charging a fraction of the cost of the asset in use each year. read more
  15. Taxes

Practical Examples of Ledger Accounts

To better understand the working of ledger accounts, let’s discuss some ledger accounts examples:-

Example #1

Mr. John Wick wants to start a new clothing business. He has a total sum of $100,000 in his savings that can be invested. In addition, he owns a small shop at a primary location that can be used to start a retail clothing outlet. He purchased furniture, including shelves, a counter desk, and other equipment for the store for $15,000. He also hires a staff of two for customer support and other office work for $5,000 each.

Mr. Wick decided to start with men’s clothing and purchased a complete range of clothes from the wholesale market, which cost him around $75,000. The initial purchase got sold in not more than one month for $95000.

Mr. Wick wants to journalize these transactions and create ledger accounts for April 2019.

  • Journal Entries
Ledger Account Example 1
  • Ledger Accounts Example
Ledger Account Example 1-1
Ledger Account Example 1-2
Ledger Account Example 1-3
Ledger Account Example 1-4
Ledger Account Example 1-5
Ledger Account Example 1-6

Example #2

David Baker wants to start a forging factory, where he can manufacture high-quality chef and military knives. On January 1, 2018, he invested a sum of $1,000,000 as capital and started The Damascus Forging Works. He took a bank loan of $750,000 at 5% PA and invested the remaining amount of $250,000 from his savings. He opened a current account and deposited $800,000.

Afterward, he made the following transactions.

  • On January 2, he rented a factory in the nearby industrial area for $20,000 per month and deposited $100,000 in advance by cheque.
  • On January 4, Mr. Baker purchased the necessary machinery for $500,000, paid by cheque.

After setting up the factory, he started production on 5thJan, and the following transactions took place during the 1st year:-

Ledger Account Example 2

Since Mr. Baker maintained all the accounting records himself, he wants our help to create ledger accounts for the firm.

The ledger accounts:-

Ledger Account Example 2-1
Ledger Account Example 2-2
Ledger Account Example 2-3
Ledger Account Example 2-4
Ledger Account Example 2-5
Ledger Account Example 2-6
Ledger Account Example 2-7
Ledger Account Example 2-8
Example 2-9
Example 2-10
Example 2-11
Example 2-12
Example 2-13
Example 2-14
Example 2-15
Example 2-16

Frequently Asked Questions (FAQs)

What is the purpose of a ledger account?

The purpose of a ledger account is to record and track all the transactions related to a specific budget in a company’s financial records. Therefore, this allows businesses to monitor the balance and activity of individual accounts and prepare financial statements based on accurate and up-to-date information.

Ledger accounts can broadly be classified into?

Ledger accounts can be classified into real accounts, also known as permanent accounts, and nominal accounts, also known as temporary accounts.

When are ledger accounts balanced?

These accounts are balanced at the end of each accounting period, typically at the end of the month, quarter, or year. Balancing a ledger account involves verifying the total debits equal the total credits for the account. Balancing this account is vital because it ensures that it is accurate and complete.

Recommended Articles

This has been a guide to Ledger Account Examples. Here we discuss the most common examples of ledger accounts and journal entries and explanations. You can learn more about financing from the following articles –