Ledgers – Questions and Answers

Q1. What is a ledger?
A1. A ledger is a principal book of accounts that contains all the accounts (personal, real, and nominal) where transactions are posted from the journal in a classified manner.

Q2. Why is a ledger called the “book of final entry”?
A2. The ledger is called the book of final entry because all financial transactions recorded in the journal are ultimately transferred and summarized in the ledger.

Q3. What is the purpose of preparing a ledger?
A3. The purpose is to provide a classified record of all transactions, help prepare trial balance, and ensure accuracy in accounting.

Q4. What is the difference between journal and ledger?
A4. Journal records transactions chronologically (book of original entry), while the ledger classifies transactions account-wise (book of final entry).

Q5. Ledger is also known as:

a) Subsidiary book
b) Primary book
c) Principal book
d) Cash book
Answer:  c) Principal book

Q6. The process of transferring entries from journal to ledger is called:
a) Journalizing
b) Posting
c) Balancing
d) Entry
Answer:  b) Posting

Q7. Which of the following accounts will appear in a ledger?
a) Purchase Account
b) Sales Account
c) Capital Account
d) All of the above
Answer:  d) All of the above

Q8. Balancing a ledger means:
a) Posting entries
b) Preparing journal entries
c) Finding the difference between debit and credit
d) Making trial balance
Answer:  c) Finding the difference between debit and credit

Q9. Which document is used for ledger posting?
a) Invoice
b) Cash memo
c) Journal
d) Bank statement
Answer:  c) Journal

Q10. Debit balance in ledger indicates:
a) Income
b) Liability
c) Asset or Expense
d) None
Answer:  c) Asset or Expense

Q11. Which of the following is not a type of ledger?
a) General Ledger
b) Sales Ledger
c) Purchase Ledger
d) Trial Ledger
Answer: d) Trial Ledger

Q12. The ledger prepared for customers’ accounts is called:
a) General Ledger
b) Debtors Ledger
c) Creditors Ledger
d) Subsidiary Ledger
Answer:  b) Debtors Ledger

Q13. If total debits are more than total credits in a ledger account, it shows:
a) Credit Balance
b) No Balance
c) Debit Balance
d) Suspense Balance
Answer:  c) Debit Balance

Q14. In which book will you record transactions before posting into the ledger?
a) Cash Book
b) Trial Balance
c) Journal
d) Balance Sheet
Answer:  c) Journal

Q15. What are the main types of ledger accounts?
Answer:

• Personal Accounts (e.g., customers, suppliers)

• Real Accounts (e.g., cash, furniture)

• Nominal Accounts (e.g., salary, rent, commission)

Q16. What is ledger folio?
Answer: It is a column in the journal that contains the page number of the ledger where the account is posted.

Q17. Ledger is also known as:
a) Book of Entry
b) Book of Original Entry
c) Principal Book
d) Cash Book
Answer:  c) Principal Book

Q18. Which account is credited when goods are sold on credit?
a) Cash A/c
b) Sales A/c
c) Purchases A/c
d) Debtor’s A/c
Answer:  b) Sales A/c

Q19. The process of transferring journal entries into ledger accounts is called:
a) Journalizing
b) Posting
c) Balancing
d) Trialing
Answer:  b) Posting

Q20. Which of the following is a real account?
a) Salary A/c
b) Capital A/c
c) Cash A/c
d) Rent A/c
Answer:  c) Cash A/c

Q21. Credit balance in a ledger account means:
a) More income
b) More expenses
c) More credits than debits
d) Error in trial balance
Answer:  c) More credits than debits

Q22. Ledger balances are transferred to:
a) Final Accounts
b) Journal
c) Cash Book
d) Sales Book
Answer:  a) Final Accounts

Q23. Which account is debited when furniture is purchased for cash?
a) Cash A/c
b) Purchases A/c
c) Furniture A/c
d) Capital A/c
Answer:  c) Furniture A/c

Q24. When rent is paid, which account is credited?
a) Rent A/c
b) Capital A/c
c) Cash A/c
d) Debtors A/c
Answer:  c) Cash A/c

Q25. Debit balance in the cash account means:
a) Cash received
b) Cash paid
c) Cash withdrawn
d) Overdraft
Answer:  a) Cash received

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Q26. Define Ledger. Why is it called the Principal Book?
Answer:
A ledger is the book of final entry which contains all accounts of a business. It is called the Principal Book because final balances for preparation of the trial balance and financial statements are taken from it.

Q27. What is the significance of balancing a ledger account?
Answer:
Balancing helps in determining the net result of each account at the end of a particular period (whether it has a debit or credit balance), useful for trial balance and final accounts.

Q28. Differentiate between General Ledger and Subsidiary Ledger.
Answer:

• General Ledger: Contains all types of accounts – personal, real, nominal.

• Subsidiary Ledger: Maintains detailed accounts related to a specific ledger (like customers in the Debtors Ledger).