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All questions of Unit 2: Ledgers for CA Foundation Exam

Can you explain the answer of this question below:

Which of the following statement is correct?

  • A:

    All Entries except cash transactions can be recorded through journal.

  • B:

    Ledger is a part of subsidiary book.

  • C:

    Purchase book records all the purchases whether cash or credit.

  • D:

    Bank column of cash book always has debit balance.

The answer is a.

Tejas Chaudhary answered
First listen the reason behind all 3 incorrect options.
b).. ledger is not a part of subsidiary books, it is a part of principal or main books since a business man can find the final information relating to different accounts from it.
c) purchase book records only credit records.
d) bank column of cash books could have a credit balance in case of overdraft.
now ultimately the option a is correct as we can record all transactions through journal except cash transactions,
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From the following details find out credit sales during the financial year 2010-2011: 
1. Opening balance of sundry debtors on 1.4.10 Rs. 12,000. 
2. Bills receivable accepted by customer Rs. 13,000 
3. Closing balance of Sundry Debtors on 31.3.11 Rs. 14,000. 
4. Cash received from debtors during the year Rs. 38,400
  • a)
    Rs. 39,400
  • b)
    Rs. 27,000
  • c)
    Rs. 65,400
  • d)
    Rs. 53,400
Correct answer is option 'D'. Can you explain this answer?

Srsps answered
Credit Sales=Closing Debtors+Cash Received from Debtors+Bills Receivable−Opening Debtors
Given:
  • Opening balance of Sundry Debtors on 1.4.10 = Rs. 12,000
  • Bills Receivable accepted by customers = Rs. 13,000
  • Closing balance of Sundry Debtors on 31.3.11 = Rs. 14,000
  • Cash received from Debtors during the year = Rs. 38,400
Now, let's calculate:
Credit Sales=14,000+38,400+13,000−12,000
     Credit Sales=53,400
So, the correct answer is:
Option 4: Rs. 53,400

Furniture of book value of Rs. 20,000 was sold for Rs. 6,000 and new furniture of Rs. 20,000 was purchased. Amount debited towards purchase of new furniture will be:-
  • a)
    Rs. 14,000
  • b)
    Rs. 29,000
  • c)
    Rs. 5,000
  • d)
    Rs. 20,000
Correct answer is option 'D'. Can you explain this answer?

Puja Kaur answered
Calculation:

The selling price of furniture = Rs. 6,000
The book value of furniture = Rs. 20,000

Therefore, the loss on the sale of furniture = Book value of furniture - Selling price of furniture
= Rs. (20,000 - 6,000)
= Rs. 14,000

The amount debited towards the purchase of new furniture will be the cost of new furniture minus the loss on the sale of old furniture.

Cost of new furniture = Rs. 20,000

Amount debited towards the purchase of new furniture = Cost of new furniture - Loss on sale of old furniture
= Rs. (20,000 - 14,000)
= Rs. 6,000

Therefore, the correct answer is option 'D' - Rs. 20,000.

Credit balance in ledger will be either:-
  • a)
    A revenue or an asset 
  • b)
    An expense or an asset 
  • c)
    A revenue or a liability 
  • d)
    An expense or a liability 
Correct answer is option 'C'. Can you explain this answer?

Nandini Iyer answered
In accounting, a credit balance is the ending amount found on the right side of a general ledger account or subsidiary ledger account. A credit balance is normal and expected for the following general ledger and subsidiary ledger accounts: Liability accounts.

A opened an account with Rs. 5,000 on 3/12/09. He deposited Rs. 1,000 on 7/12/09. He withdraw Rs. 2,000 on 15/12/09 and deposited a cheque of Rs. 10,000 on 20/12/09. What is the balance on 31/12/09?
  • a)
    Rs. 18,000
  • b)
    Rs. 14,000
  • c)
    Rs. 4,000
  • d)
    None
Correct answer is option 'B'. Can you explain this answer?

Anuj Choudhury answered
Calculation of balance on 31/12/09:

Opening balance on 3/12/09 = Rs. 5,000
Deposit on 7/12/09 = Rs. 1,000
Balance as on 7/12/09 = Rs. 6,000
Withdrawal on 15/12/09 = Rs. 2,000
Balance as on 15/12/09 = Rs. 4,000
Deposit of cheque on 20/12/09 = Rs. 10,000
Balance as on 20/12/09 = Rs. 14,000

Therefore, the balance on 31/12/09 will still be Rs. 14,000 as there is no further transaction mentioned. Hence, option B is the correct answer.

Which of the following accounts may have a debit or a credit balance?
  • a)
    Partner’s Current Account 
  • b)
    Purchase Account 
  • c)
    Commission (Recd) Account 
  • d)
    None 
Correct answer is option 'A'. Can you explain this answer?

Rajat Patel answered
This account can have either a debit or a credit balance, depending on whether the partner has contributed additional capital (credit) or withdrawn funds (debit) from the business.

 Which of the following is a real account?
  • a)
    Building A/c 
  • b)
    Capital A/c 
  • c)
    Rent A/c
  • d)
    All these.
Correct answer is option 'A'. Can you explain this answer?

Ishan Choudhury answered
There are mainly three types of accounts:
i) Real
ii) Personal and
iii) Nominal accounts.
All assets of a firm, which are tangible or intangible, fall under the category "Real accounts".
Tangible real accounts are related to those things that can be touched and physically felt. Few examples of tangible real accounts are buildings, machinery, stock, land, etc.
Intangible real accounts are those which can't be touched and physically felt. Few examples of intangible real accounts are trademarks, patents, goodwill, etc.

 Purchase Return Account always shows a _______ balance.
  • a)
    Debit
  • b)
    Credit
  • c)
    Either (a) or (b)
  • d)
    None
Correct answer is option 'B'. Can you explain this answer?

Aditya Das answered
A purchase return account shows the credit balance. Purchase return represents the amount of goods returned to the supplier. When goods are bought from a supplier, the purchases A/c will be debited and when the goods are returned, the purchase return A/c will be credited as stock is reduced.

Ledger records transaction in :
a) Analytical order
b) A chronological order
c) Both of the above
d) None
Correct answer is option 'B'. Can you explain this answer?

Naina Sharma answered
The correct option is Option B.
In bookkeeping and accounting, a ledger is a book (or record) for collecting historical transaction data from a journal and organizing entries by account. The ledger provides the transaction history and current balance in each accounting system account, throughout the accounting period.

Journal and ledger records transactions in 
  • a)
    A chronological order and analytical order respectively. 
  • b)
    An analytical order and chronological order respectively. 
  • c)
    A chronological order only
  • d)
    An analytical order only.
Correct answer is option 'A'. Can you explain this answer?

Arjun Singhania answered
In the journal, the transactions are recorded sequentially. Conversely, in the ledger, the transactions are recorded on the basis of accounts. Debit and Credit are columns in the journal, but in the ledger, they are two opposite sides. In the journal, narration must be written to support the entry.

The amount brought into the business by the proprietor should be credited to
  • a)
    Cash account
  • b)
    Capital account
  • c)
    Drawings account
  • d)
    Suspense account
Correct answer is option 'B'. Can you explain this answer?

Moumita Chakraborty answered
The proprietor contributes capital to the business at the time of its commencement and also at any later stage. Capital is the amount invested by the proprietor in the business. When the proprietor brings in the capital, it is recorded in the books of accounts by making the following journal entry:

Capital A/c Dr.
To Cash A/c

Explanation:
• The capital account is debited because the proprietor brings in capital to the business.
• The cash account is credited because cash is received from the proprietor.

Therefore, the amount brought into the business by the proprietor should be credited to the capital account. This will increase the proprietor's capital in the business.

Option 'A' is incorrect because the cash account is debited when cash is received, not credited.

Option 'C' is incorrect because the drawings account is used to record withdrawals made by the proprietor from the business, not contributions made by the proprietor.

Option 'D' is incorrect because the suspense account is used to temporarily record transactions when there is uncertainty about which account to debit or credit. It is not used to record capital contributions.

Hence, option 'B' is the correct answer.

Ledger Book is popularly known as:
  • a)
    Secondary book of accounts
  • b)
    Principal book of accounts
  • c)
    Subsidiary book of accounts
  • d)
    None
Correct answer is option 'B'. Can you explain this answer?

Aryan Khanna answered
Ledger is known as the principal book of accounts or the chief book in which the financial information is classified by its nature and relevance.

 Which of the following is known as “Principal Books of Accounts”?
  • a)
    Ledger
  • b)
    Journal
  • c)
    Trial balance
  • d)
    Balance sheet
Correct answer is option 'A'. Can you explain this answer?

Dhruba Choudhary answered
Ledger is the principal book or computer file for recording and totaling monetary transactions by account, with debits and credits inseparate columns and a beginning balance and ending balance for each account.

Can you explain the answer of this question below:

Credit balance in ledger will be either:-

  • A:

    A revenue or an asset 

  • B:

    An expense or an asset 

  • C:

    A revenue or a liability 

  • D:

    An expense or a liability 

The answer is c.

Vaishnavi Dasgupta answered
**Explanation:**

The correct answer is option C - "A credit balance in the ledger will be either a revenue or a liability."

To understand why this is the correct answer, let's break down the different options and their meanings:

**a) A revenue or an asset:**
- Revenue is the income generated from the primary activities of a business, such as sales of goods or services.
- Assets are resources owned by a business that have economic value and can be used to generate future benefits.
- While a credit balance in the ledger could represent revenue, it does not necessarily indicate an asset. A credit balance could also indicate a liability.

**b) An expense or an asset:**
- Expenses are costs incurred in the process of generating revenue. They decrease the overall profit of a business.
- Similar to option a, a credit balance in the ledger could represent an expense, but it does not necessarily indicate an asset.

**c) A revenue or a liability:**
- As mentioned earlier, revenue represents the income generated from the primary activities of a business.
- A liability, on the other hand, is an obligation or debt owed by a business to external parties.
- A credit balance in the ledger could represent revenue earned but not yet received (i.e., revenue yet to be collected from customers). In this case, it is considered a liability because the business has an obligation to collect the revenue from customers.
- Alternatively, a credit balance could also represent an overpayment or advance received from a customer. In this case, it is also considered a liability because the business has an obligation to provide goods or services in the future to the customer to offset the overpayment.

**d) An expense or a liability:**
- As discussed earlier, expenses represent costs incurred in generating revenue.
- Liabilities are obligations or debts owed by a business to external parties.
- While an expense could be represented by a credit balance in the ledger, it does not necessarily indicate a liability.

Based on the above explanations, option C - "A credit balance in the ledger will be either a revenue or a liability" is the correct answer.

The credit balance of a personal account shows: 
  • a)
    Cash in hand 
  • b)
    The amount payable 
  • c)
    Income 
  • d)
    Amount receivable 
Correct answer is option 'B'. Can you explain this answer?

Jyoti Mukherjee answered
The debit balance of a personal account indicated debt owing by the person and credit balance indicates debts owing to the person concerned. For the business, the first one is account receivable or asset, while the second is accounts payable or liability. Every personal account showing debit balance (i.e. excess of debit side over credit side) will reveal the amount by which the debit side is more than the credit side. Debit balance is recoverable from the person whose account shows a debit balance. A debit balance to a personal account is an asset and therefore the more debit balance to a personal account is an asset and therefore the more debit balances to personal accounts, more the assets are in the form of outstanding recoverables. The debit balance of a personal account shows the amount receivable.

Which of these Account is Debited: 
  • a)
    Income received in advance 
  • b)
    Bank Loan 
  • c)
    Prepaid Insurance Premium 
  • d)
    Reserve for doubtful debts 
Correct answer is option 'C'. Can you explain this answer?

Shruti Mehta answered
Debit and Credit are two fundamental concepts in accounting. Debit refers to an entry made on the left-hand side of an account, while credit means an entry made on the right-hand side of an account.

Debiting an account means increasing the balance of the account, while crediting an account means decreasing the balance of the account.

In the given options, the correct answer is option 'C,' which is Prepaid Insurance Premium. Let's understand why.

Prepaid Insurance Premium

Prepaid insurance premium refers to the money paid by a company to an insurance company for future coverage. It is an asset account and represents the amount of money paid in advance for insurance coverage that has not yet been used.

When a company pays for insurance premiums in advance, it is recorded as a debit entry in the prepaid insurance account. The amount is debited because it increases the balance of the prepaid insurance account.

When the insurance coverage period starts, the company will then credit the prepaid insurance account and debit the insurance expense account. This is because the prepaid insurance amount has been used, and the company must recognize the expense in the current accounting period.

Conclusion

In conclusion, the correct option out of the given accounts that is debited is Prepaid Insurance Premium. It is debited because it is an asset account, and when the company pays for insurance premiums in advance, it increases the balance of the prepaid insurance account.

The credit balance of a personal account shows: 
  • a)
    Cash in hand 
  • b)
    The amount payable 
  • c)
    Income 
  • d)
    Amount receivable 
Correct answer is option 'B'. Can you explain this answer?

Jayant Mishra answered
The credit balance of a personal account shows the amount payable to a person as it denotes a liability due to a person. The person in whose books a personal account has a credit balance has to pay the amount as a debt due.

 If the owner withdraws amount from the business for personal use, then which A/c is to be debited?
  • a)
    Capital A/c 
  • b)
    Drawings A/c 
  • c)
    Owners A/c 
  • d)
    None of these
Correct answer is option 'B'. Can you explain this answer?

Gay Star answered
Drawings is a representative personal account if the owner withdraw amount for from the business for his personal use then we get the journal entry drawings account Dr to cash account, as drawings account is personal account therefore we need to debit the receiver therefore drawings account will be debited

The technique of finding the net balance of an account after considering the totals of both debits and credits appearing in the account is known as 
  • a)
    Posting 
  • b)
    Purchase 
  • c)
    Balancing of an account 
  • d)
    Arithmetically accuracy test 
Correct answer is option 'C'. Can you explain this answer?

Ishan Choudhury answered
Balancing of an accounts means ascertaining the net effect of the transactions, i.e. the difference between the debit and credit side of the ledger account. Thus, when the debit side of the ledger account exceeds the credit side, the balancing figure is termed as debit balance and vice versa. All the assets, expenses and losses show debit balance. Whereas, all liabilities, incomes and gains and capital show credit balance.

 ‘A’ purchased a computer having MRP of Rs. 60,000 for Rs. 45,000 and was offered a cash discount of Rs. 9,000. At what percentage he got trade discount on MRP before getting cash discount?
  • a)
    15%
  • b)
    10%
  • c)
    7 
  • d)
    25%
Correct answer is option 'D'. Can you explain this answer?

Rajat Patel answered
Description: 
Market Price =Rs. 60,000
Less: Purchase Price =Rs. 45,000
Trade discount before discount =Rs. 15,000
Less: Cash Discount =Rs. 9,000
Trade discount after cash discount =Rs. 6,000
Percentage of Trade Discount= (15,000/60,000)*100
= 25%

The process of transferring the transaction relating to changes in a particular item at one place in the form of an account is called __________:
  • a)
    Balancing
  • b)
    Casting
  • c)
    Journalizing 
  • d)
    Posting 
Correct answer is option 'D'. Can you explain this answer?

Poonam Reddy answered
Journal is a book of recording all the transactions. It does not give a summarize details of each of the account. An individual account is opened in ledger to record all the specific transactions of each activity. Each journal item is transferred to the ledger in their respective account. It is termed as posting.

 Ledger Book is popularly known as:
  • a)
    Secondary book of accounts
  • b)
    Principal book of accounts
  • c)
    Subsidiary book of accounts
  • d)
    None
Correct answer is option 'B'. Can you explain this answer?

Jayant Mishra answered
Ledger is the most important book of accounting. It contains summarized, classified description of all the business transactions. It is divided into various parts and each part is termed as "account". It is necessary to gather at one place all transactions, during the period, relating to a particular subject, a person, a thing, a class of expenses, incomes etc. It is only then the net results can be ascertained. Ledger is known as the principal book of accounts or the chief book in which the financial information is classified by its nature and relevance.

After recording the transactions and events in journal and subsidiary books, they will be transferred to 
  • a)
    Profit and Loss Account 
  • b)
    Balance Sheet
  • c)
    Ledger 
  • d)
    Memorandum Books
Correct answer is option 'C'. Can you explain this answer?

Nishtha Bose answered
The correct answer is option 'C) Ledger'.

Explanation:

1. Introduction to Journal and Subsidiary Books:
Journal and subsidiary books are important accounting records that are used to record and classify various transactions and events. These books serve as the primary source of information for recording financial transactions and are essential for maintaining accurate and systematic accounting records.

2. Purpose of Journal and Subsidiary Books:
The main purpose of journal and subsidiary books is to record transactions and events in a chronological order. Journal is the book of original entry where all transactions are initially recorded, while subsidiary books are specialized books used to record specific types of transactions, such as cash transactions, sales, purchases, etc.

3. Recording in Journal and Subsidiary Books:
When a transaction or event occurs, it is first recorded in the respective journal or subsidiary book. The details of the transaction, such as the date, description, and amounts, are recorded in a systematic manner. This ensures that all transactions are properly documented and can be traced back to the original source.

4. Transfer to Ledger:
After recording the transactions and events in the journal and subsidiary books, the next step is to transfer them to the ledger. The ledger is a principal book of accounts where all the transactions are grouped and classified according to their nature.

5. Purpose of Ledger:
The ledger serves as a central repository for all the accounts of a business. It provides a summary of all the transactions related to each account, such as cash, sales, purchases, etc. The ledger helps in determining the balances of individual accounts and provides a complete picture of the financial position of the business.

6. Transferring Transactions to Ledger:
The process of transferring transactions from the journal and subsidiary books to the ledger is known as posting. Each transaction recorded in the journal or subsidiary books is posted to the respective account in the ledger. The posting involves transferring the date, description, and amounts from the journal or subsidiary books to the ledger.

7. Importance of Ledger:
The ledger is considered the principal book of accounts as it provides a comprehensive record of all the transactions. It helps in preparing financial statements, such as the balance sheet and profit and loss account. The ledger is also used for analyzing the financial performance of a business and making informed business decisions.

In conclusion, after recording the transactions and events in the journal and subsidiary books, they are transferred to the ledger. The ledger serves as the central repository for all the accounts and provides a comprehensive record of all the transactions. It is an essential tool for preparing financial statements and analyzing the financial position of a business.

What will be the total sales of the year 2008-09 for A Limited, if they provided following information:
Cash sales                               Rs.80,000
Cash collected from debtors    Rs.1,50,000
Bad debts during the year        Rs.10,000
Debtors at 1st April, 2008        Rs.15,000
Debtor at 31st March, 2009     Rs.10,000
Bad debts recovered                Rs 5000
  • a)
    Rs. 2,35,000
  • b)
    Rs. 2,30,000
  • c)
    Rs. 2,40,000
  • d)
    Rs. 2,25,000
Correct answer is option 'A'. Can you explain this answer?

Puja Nambiar answered
Calculation of Total Sales for the Year 2008-09

Given:
Cash sales = Rs. 80,000
Cash collected from debtors = Rs. 1,50,000
Bad debts during the year = Rs. 10,000
Debtors at 1st April, 2008 = Rs. 15,000
Debtors at 31st March, 2009 = Rs. 10,000
Bad debts recovered = Rs. 5,000

Step 1: Calculation of Opening Balance of Debtors
Debtors at 1st April, 2008 = Rs. 15,000

Step 2: Calculation of Closing Balance of Debtors
Debtors at 31st March, 2009 = Rs. 10,000

Step 3: Calculation of Total Credit Sales
Total Credit Sales = Cash collected from debtors + Closing balance of debtors - Opening balance of debtors
Total Credit Sales = Rs. 1,50,000 + Rs. 10,000 - Rs. 15,000
Total Credit Sales = Rs. 1,45,000

Step 4: Calculation of Total Sales
Total Sales = Cash sales + Total Credit Sales
Total Sales = Rs. 80,000 + Rs. 1,45,000
Total Sales = Rs. 2,25,000

Step 5: Calculation of Adjusted Total Sales
Adjusted Total Sales = Total Sales - Bad debts during the year + Bad debts recovered
Adjusted Total Sales = Rs. 2,25,000 - Rs. 10,000 + Rs. 5,000
Adjusted Total Sales = Rs. 2,20,000

Step 6: Calculation of Total Sales for the Year 2008-09
Total Sales for the Year 2008-09 = Adjusted Total Sales + Opening balance of debtors - Closing balance of debtors
Total Sales for the Year 2008-09 = Rs. 2,20,000 + Rs. 15,000 - Rs. 10,000
Total Sales for the Year 2008-09 = Rs. 2,35,000

Therefore, the correct answer is option 'A', which is Rs. 2,35,000.

The next step after preparation of Ledger is the preparation of ________:
  • a)
    Trial balance 
  • b)
    Final Accounts 
  • c)
    Cash Flow statement 
  • d)
    Balance sheet 
Correct answer is option 'A'. Can you explain this answer?

Priya Patel answered
Following Steps are involved in the preparation of a Trial Balance:
- All Ledger Accounts are closed at the end of an accounting period.
- Ledger balances are posted into the trial balance.
- Trial Balance is cast and errors are identified.
- Suspense account is created to agree the trial balance totals temporarily until corrections are accounted for.
- Errors identified earlier are rectified by posting corrective entries.
- Any adjustments required at the period end not previously accounted for are incorporated into the trial balance.

 The miscellaneous expenses account is likely to have : 
  • a)
    Only debit entries 
  • b)
    Only credit entries 
  • c)
    Both of the above 
  • d)
    Initially only debit entries and subsequently credit entries 
Correct answer is option 'A'. Can you explain this answer?

Priya Patel answered
Miscellaneous expenses are nominal in nature and therefore the rules of nominal account apply to it. The rule is 
Debit all expenses and losses
Credit all incomes and gains
Since, the expenses are to be debited as per the rule hence, it is likely to have debit entries generally.

The next step after preparation of Ledger is the preparation of ________:
  • a)
    Trial balance 
  • b)
    Final Accounts 
  • c)
    Cash Flow statement 
  • d)
    Balance sheet 
Correct answer is option 'A'. Can you explain this answer?

Aryan Khanna answered
After the preparation of ledgers, the next step is the preparation of trial balance. After, pupation of ledger accounts all the balances of the ledger accounts are transferred to trial balance and it should tally. The trial balance checks the arithmetical accuracy of the books of accounts.

 The miscellaneous expenses account is likely to have : 
  • a)
    Only debit entries 
  • b)
    Only credit entries 
  • c)
    Both of the above 
  • d)
    Initially only debit entries and subsequently credit entries 
Correct answer is option 'A'. Can you explain this answer?

Nandini Iyer answered
Miscellaneous expenses are nominal in nature and therefore the rules of nominal account apply to it. The rule is 
Debit all expenses and losses
Credit all incomes and gains
Since, the expenses are to be debited as per the rule hence, it is likely to have debit entries generally.

Discount Account will always have:
  • a)
    Only debit balance 
  • b)
    Nil balance 
  • c)
    Only credit balance 
  • d)
    Debit or Credit balance 
Correct answer is option 'D'. Can you explain this answer?

Dipika Kaur answered
Discount is a nominal account which can have either a debit or a credit balance because discount can be allowed as well as received. If it is discount allowed it can have a debit balance and if it is discount received it can have a credit balance.

 Which of the following accounts may have a debit or a credit balance?
  • a)
    Partner’s Current Account 
  • b)
    Purchase Account 
  • c)
    Commission (Recd) Account 
  • d)
    None 
Correct answer is option 'A'. Can you explain this answer?

Sankar Chakraborty answered
The account of a partner in a partnership may have either a debit or a credit balance. It depends on the specific transactions and activities of the partner. For example, if a partner contributes capital to the partnership, the partner's account would have a credit balance. On the other hand, if a partner withdraws money from the partnership, the account would have a debit balance.

Ledger book is popularly known as
  • a)
    Secondary book of accounts 
  • b)
    Principal book of accounts 
  • c)
    Subsidiary book of accounts 
  • d)
    None of the above 
Correct answer is option 'B'. Can you explain this answer?

Kavya Das answered
Ledger Book as the Principal Book of Accounts

The correct answer is option 'b' - "Principal book of accounts."

Explanation:

A ledger book is a fundamental and essential part of the accounting system. It is the principal book of accounts where all the transactions of a business are recorded in a systematic and chronological order. The ledger book contains a detailed record of each individual account, such as assets, liabilities, capital, revenue, and expenses.

Importance of Ledger Book:

The ledger book serves as the backbone of the accounting system and provides valuable information that helps in preparing financial statements, analyzing business performance, and making informed decisions. Some key reasons why the ledger book is known as the principal book of accounts are:

1. Recording all transactions: The ledger book records every financial transaction that occurs within a business, ensuring that no transaction is missed or overlooked.

2. Classification and categorization: It classifies and categorizes transactions according to different account heads, such as assets, liabilities, equity, revenue, and expenses. This classification makes it easier to analyze and interpret financial data.

3. Posting and summarizing: The ledger book is used to post individual transactions from subsidiary books or journals to the respective accounts. This process of posting helps in summarizing and consolidating the financial information.

4. Monitoring account balances: The ledger book allows businesses to keep track of the balances in each account. It shows the debit and credit entries for each transaction, enabling businesses to monitor their financial position accurately.

5. Preparation of financial statements: The ledger book provides the necessary data for preparing financial statements like the balance sheet, income statement, and cash flow statement. These statements help in assessing the financial health and performance of a business.

Conclusion:

The ledger book is considered the principal book of accounts because it plays a central role in recording, classifying, summarizing, and monitoring financial transactions. It is the primary source for preparing financial statements and provides valuable information for decision-making and analysis.

Chapter doubts & questions for Unit 2: Ledgers - Accounting for CA Foundation 2025 is part of CA Foundation exam preparation. The chapters have been prepared according to the CA Foundation exam syllabus. The Chapter doubts & questions, notes, tests & MCQs are made for CA Foundation 2025 Exam. Find important definitions, questions, notes, meanings, examples, exercises, MCQs and online tests here.

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