What is a ledger

You can find a ledger in your accounting, and it shows whether you owe someone money or someone owes you money. You have a customer ledger that shows what your customers owe you, and you have a supplier ledger that shows what you owe your suppliers.

What are supplier ledger and customer ledger

In your accounting, you have two main accounts for customers and suppliers. These are called 1500 customer receivables and 2400 supplier liabilities. You do not use these when you bookkeep, but the accounts show the total amount of what you have purchased and what you have sold.

To keep track of which suppliers and customers you have, you should have sub-accounts linked to specific customers and suppliers where you record all your transactions. The sub-accounts have either the numbers 1500 or 2400, the same as the main account but with the same name as the customer or supplier.

These accounts are called ledgers. The individual accounts tailored to customers and suppliers.

Why keep a ledger?

It also becomes easier to detect errors in the entries because a customer ledger will have a positive balance and a supplier ledger will have a negative balance:

Each sale should be recorded as a positive amount on a customer. When the customer has paid, you record the same amount as a negative, and the account ends up at zero. A negative balance on the customer ledger means that you have recorded the sale or payment incorrectly.

Similarly, there should never be a positive balance on the supplier ledgers: the purchase is recorded as a negative, and the payment as a positive.

With ledgers, you can also check that what you have recorded matches what your customers and suppliers have in their accounting. This is called reconciliation. You send the customer or supplier a summary of your ledger. It should match their version.