The correct answer is 4. To ascertain the collective effect of all transactions pertaining to a particular account. The reason being is that in the ledger account all the effects are recorded for example, how much money is spent on a particular type of expense or how much money is receivable from aRead more
The correct answer is 4. To ascertain the collective effect of all transactions pertaining to a particular account. The reason being is that in the ledger account all the effects are recorded for example, how much money is spent on a particular type of expense or how much money is receivable from a debtor. In ledger accounts, information can be obtained about a particular account.
Ledger is the Principal book of accounts and also called the book of final entry. It summarises all types of accounts whether it is an Asset A/c, Liability A/c, Income A/c, or Expense A/c. The transactions recorded in the Journal/Subsidiary books are transferred to the respective ledger accounts opened.
Importance of preparing ledger accounts:
- Ledger accounts get the ready results i.e. helps in identifying the amount payable or receivable.
- It is necessary for the preparation of the Trial Balance.
- The financial position of the business is easily available with the help of Assets A/c and Liabilities A/c.
- It helps in preparing various types of income statements on the basis of balances shown in ledger accounts.
- It can be used as a control tool as it shows balances of various accounts.
- It is useful for the management to forecast or plan for the future.
Sundry Debtors Sundry Debtors are those persons or firms to whom goods have been sold or services rendered on credit and the payment has not been received from them. In other words, Debtors are the persons or firms from whom the payment is to be received by the business. For Example, Ramen Sold goodRead more
Sundry Debtors
Sundry Debtors are those persons or firms to whom goods have been sold or services rendered on credit and the payment has not been received from them. In other words, Debtors are the persons or firms from whom the payment is to be received by the business.
For Example, Ramen Sold goods to Sam on credit, Sam did not pay for the goods immediately, so here Sam is the debtor for Ramen because he owes the amount to Ramen.
Another Example, If goods worth Rs 7000 have been sold to Sid on credit, he will continue to remain as debtor of the business so long as he does not make the full payment.
Treatment:
Sundry Debtor is considered as a current asset and hence it is shown on the assets side of the balance sheet under the Current Assets heading.
Sundry Debtors are not considered as an item of profit and loss because it is not considered as an item of income or expense. However, the items associated with sundry debtors such as bad debts or provision for doubtful debts or bad debts recovered are shown in profit and loss accounts in the debit and credit sides respectively.
Sundry Creditors
Sundry creditors are those persons or firms from whom goods have been purchased or services rendered on credit and for which payment has not been made. In other words, Creditors are the person or firms to whom some money has to be paid by the business.
For Example, Ramen purchased goods from Sam on credit, Ramen did not pay for the goods immediately, so here Ramen is the creditor for Sam because he owes money to Sam.
Another Example, If Mr. Johnson purchased goods worth Rs 3000 from M/s. Rick & Co. on credit, Mr. Johnson will continue to remain as a creditor of M/s. Rick & Co. as long as the full payment is made by Mr. Johnson.
Treatment:
Sundry Creditor is shown in the liabilities side of the balance sheet under the heading Current Liabilities.
See less