Ledger

The general ledger account is a record where all the financial transactions are written. It contains all the main transactions which occur in any company or bank. All the Company’s financial statements are released based on data written on the general ledger. This data contains columns like liabilities, revenue, and expenses. All these aspects depend upon the type of transactions. The backbone of an accounting system is the general ledger, which stores and organizes financial data needed to generate financial statements for a company. Individual sub-ledger accounts for which transactions are posted are designated in the Company’s chart of accounts.

MCQs 

1. A book of ledgers is also known as a ledger. 

1. 1. Final entry
   2. Primary entry
   3. Original entry
   4. None of the Above

Answer: 1. Final entry

Explanation: Every company’s bookkeeping requires the use of a general ledger. A general ledger, often known as a “book of final entry,” is a book that records a company’s financial transactions. In a double-entry system, they are recorded as debits or credits, subsequently checked by a trial balance.

Corporate managers, accountants, investors, analysts, and other stakeholders utilise general ledgers to assess a company’s financial performance. In this post, we’ll go over what a general ledger is, its components and page layout, and how to give pertinent data depending on bank accounts.

 2. Which of the following is a ledger account?

1. 1. Events
   2. Journal
   3. Transactions
   4. None of the Above

Answer: 2. Journal

Explanation: A ledger collects all journal transactions for all assets and liabilities, income or expenses in the financial statement. The balance is then transferred to the trial balance to keep different accounts.

 3. The method of transferring items from a journal into their respective ledger accounts or journals is known as. 

1. 1. Balancing
   2. Arithmetic
   3. Entry
   4. Posting

Answer: 4. Posting

Explanation: A journal is a book that records all transactions. It doesn’t contain details about each account. Ledgers contain information about individual accounts. This allows each transaction to be recorded. Each journal item is then transferred to their account’s ledger. This is called posting.

 4. A ledger column that connects the entry to the journal is called as

1. 1. Credit column
   2. L.F column
   3. J.F column 
   4. Debit column

Answer: 3. J.F column

Explanation: J.F. Number is the number entered into the ledger when they made entries to their accounts. This helps determine if all transactions have been properly posted into their respective accounts. It is recorded when the transaction is posted and not at the time it is recorded.

 5. Refer to the left side of the ledger account as.

1. 1. Debit side 
   2. Credit side
   3. Footing 
   4. Balance

Answer:  1. Debit side

Explanation: A ledger is a book that contains all accounts related to assets, liabilities, capital, expenses, and revenues. It’s a complete set of accounting for a business enterprise.

A ledger account can have two sides: the left-hand side and the right-hand side.

The left-hand side of the screen is known as the debit side, while the right side is the credit side.

 6. The principal book Ledger contains.

1. 1. All accounts
   2. Personal accounts only
   3. Only real accounts
   4. Nominal accounts are the only ones

Answer: 1. All accounts

Explanation: A ledger is simply a book that contains all the accounts of a business enterprise, whether they are Real, Personal, or Nominal. In accounting, the “principal book” is also called the ledger. It is also known as the “Principal Book” because transactions first entered into a journal or other subsidiary books are then finally included in the ledger.

 7. Accounts are generally be closed using the statement.

1. 1. To/By balance B/D
   2. Balance c/d
   3. Balance b/d
   4. To/By balance C/d

Answer: 4. To balance C/d

Explanation: The statement “balance” indicates that the balance for the year under consideration has been taken down. This is because the closing balance in the ledger is always transferred into the next accounting period.

The difference amount, which is denoted “by balance c/d” or “to balance c/d”, is the amount that was inserted on the balancing side of the account to balance it. 

 8. When a debit balance is created, the account becomes active.

1. 1. The debit side has more entries than the credit side
   2. The debit amount exceeds the credit amount
   3. The last entry to the debit side of the ledger for the accounting period
   4. None of the above

Answer: 2. The debit amount exceeds the credit amount

Explanation: A debit balance refers to an account balance with a positive balance on the left side. A debit balance is an account that has a negative balance. This includes assets, losses, and expenses. A debit balance is a negative balance in a bank checking account.

This account is considered overdrawn and is therefore not allowed to have any negative balance. The bank will simply refuse to honour any checks that could cause the account to have a debit balance. Alternatively, the bank may increase the account balance by arranging for an overdraft.

 9. Which of these items will appear on the credit side in the ledger account?

1. 1. Rent expenses
   2. Cash received
   3. Received a Discount
   4. Purchases

Answer: 3. Received a Discount

Explanation: The buyer will receive a discount if the seller allows it. The supplier will generally allow a discount when a transaction is on credit, such as trade, early payments, and large volume purchase discounts.

 10. Which of these items is used to prepare the trial balance?

1. 1. Ledger account
   2. Balance sheet
   3. Cash account
   4. Journal

Answer: 1. Ledger account

Explanation: The base for preparing the trial balance is the ledger account. You can then prepare the trial balance by listing every closing balance in the general ledger accounts, either as a debit balance or credit balance.

 11. If the debit side is greater than its credit side, it’s called a “debit” bank account.

1. 1. Bank Overdraft
   2. Bank Loan
   3. Cash at Bank
   4. None

Answer: 3. Cash at Bank

Explanation: To balance an account means determining the net effect of transactions. To balance a ledger account, the difference between the credit and debit sides is calculated to balance a ledger account.

The debit balance is the sum of an account’s debit and credit sides.

 12. A payment to a creditor will?

1. 1. Reduce an asset and reduce a liability
   2. Reduce an asset and lower the owner’s equity
   3. Increase one or more assets and decrease another
   4. To increase an asset or to increase a liability

Answer: 1. Reduce an asset and reduce a liability

Explanation: Reduced Liability, Increase in Asset: A payment to a creditor reduces liability (the creditor) and decreases assets (cash/bank). Or Loan from Bank repaid decreases both the asset (Cash/Bank) and decreases the liability.

 13. Which of the following can be summarised using the T-account?

1. 1. Changes in account balances during a specific time period
   2. Credit and debit to one account in the accounting software
   3. Addition and deletion of a single account within the accounting system
   4. The above describes how accountants use T-accounts

Answer: 4. The above describes how accountants use T-accounts

Explanation: The T-account summarises debits and credits in an account. It also records any changes in the account’s balance. The T account records change over time in an account. A T-account can be described as a ledger account. This is a simplified version of a ledger account.

 14. What does the balance of your cash account indicate?

1. 1. Net income during the period
   2. Net loss during the period
   3. Cash on hand (net)
   4. Net worth

Answer: 3. Cash on hand (net)

Explanation: Net cash on Hand means all cash funds that the Company has derived or held (including interest on reserves, borrowings, and capital transactions) but not reduced for non-cash fees. It also includes cash funds used to pay operating expenses, capital improvements, and replacements and create reasonable reserves for future costs and expenses as determined by the Board.

 15. Which accounts are included in the accounts payable ledger

1. 1. Sales Accounts
   2. Vendor Accounts
   3. Customer Accounts
   4. None

Answer: 2. Vendor Accounts

Explanation: The Accounts Payable ledger (also known as the creditor’s ledger) is the sub-ledger that lists the details of all suppliers and vendors, along with their balances, which highlights the amount due to the Company.

A vendor account is an account owed to Company by an inventory vendor, including Eligible Vendor Accounts.