(a) What is a Ledger (b) List out the uses of an invoice to the seller and the buyer (c) Advantages of dividing the ledger into different classes

(a) What is a Ledger?

A ledger is the principal book of accounts in which all transactions, after first being recorded in the books of original entry, are finally classified and posted into their respective accounts. It contains the individual accounts (personal, real and nominal) and from it the balances are extracted to prepare the trial balance and final accounts.

(b) Uses of an invoice

To the seller:

• It is the source document for recording the credit sale in the sales journal.
• It serves as evidence that goods have been sold and dispatched to the buyer.
• It states the amount owed and forms the basis for demanding payment from the buyer.

To the buyer:

• It is the source document for recording the credit purchase in the purchases journal.
• It shows the details of goods received, quantities, prices and any trade discount, for checking against the order and goods received.
• It serves as evidence of the debt owed to the supplier and supports payment.

(c) Advantages of dividing the ledger into different classes

1. It allows the division of labour, so that different clerks can work on different ledgers at the same time.
2. It makes the location of accounts and detection of errors easier and faster.
3. It enables control accounts to be prepared for each subsidiary ledger, providing an internal check.
4. It reduces the size of any one ledger, making the books more manageable and orderly.
5. It improves secrecy and internal control, since sensitive accounts (for example, the private ledger) can be kept separate.