Principal books of accounting is known as?
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The principal book of accounting is “Ledger”. It records all types of transactions relating to a real, personal or nominal account. It records transactions relating to an income, expense, asset or a liability.
A ledger classifies a transaction which is recorded in journal to their respective accounts, and in the end calculates a closing balance for the same account. The closing balance is further transferred to the financial statements, and hence ledger is called the books of final entry as it gives true and fair picture of an account.
Template of Ledger:
For example, ABC Ltd purchased machinery for cash amounting to Rs 1,00,000 on 1st January. This transaction will include a machinery account and a cash account. The amount will be recorded in the respective accounts for that period.
The reason being ledger is called a principal book of accounting is, it helps a business in preparation of trial balance and financial statements.