Definition

A ledger may be defined as a book that contains, in a summarized and classified form, a permanent record of all transactions.

Or in other words, we can say a group of accounts with different characteristics.

It is also called the Principal Book of accounts.

For example:– salary account, and debtor account.

Sub- ledger it is defined as a group of accounts with common characteristics. And is a part of ledger accounts.

For example:- customer account, vendor account, etc.

The difference between a ledger and a sub-ledger is that ledger accounts control sub-ledger accounts whereas a sub-ledger is a part of the ledger account.

Features Of Ledger

• Ledger is prepared from the journal.
• Ledger is a master record of all the accounts of the business.
• The Ledger account shows the current balances of all accounts.
• Ledger accounts summarize the effect of transactions upon assets, liabilities, capital, incomes, and expenditures.

Features Of Sub-Ledger

• Sub-ledger in accounting provides up-to-date information about the daily activities of the business.
• It keeps individual track of all balances.
• Help locate errors in individual accounts.
• A sub-ledger is a collection of different ledgers used in an account.

Utilities of ledger

The main utilities of a ledger are summarized as follows :

• Provides complete information about a particular account: Complete information relating to a particular account is available in one place in the ledger.

• Information on income and expenses: In the ledger, a separate account is maintained for each income and expense. The amount of total income and total expenses are known from the ledger accounts.

• Preparation of trial balance: Ledger helps in preparing trial balances which ensure arithmetical accuracy of the transaction recorded in the books of account.

• Helps in preparing final accounts: After preparing the trial balance, final accounts are prepared to know the profitability and financial position of the business.

Utilities of sub-ledger

The utilities of the sub-ledger are as follows :

• Track customer information: If a client has an outstanding credit debt or needs money refunded, a company can use a sub-ledger to verify the information quickly.

• Protect financial information: A sub-ledger allows a financial supervisor to isolate certain records so that employees can view only parts of the company’s financial information. This added level of security is important for large corporations.

• Create separate databases: Large companies usually process large amounts of financial data that may be too big for one database. Software programs organize this data into isolated files to calculate financial information in the general ledger of a business.

Conclusion

So here I conclude that a ledger is compulsory in the recording process whereas a sub-ledger is optional.

The ledger is used for preparing trial balance but the sub-ledger is not used for the same.
Sub ledger is controlled by the ledger.

The sub-ledger supports the transaction of each specific account indicated on the ledger.

Definition

Current assets are defined as cash and other assets that are expected to be converted into cash or consumed in the production of goods or rendering of services in the normal course of business.

Or in other words, we can say that the expected realization period is less than the operating cycle period although it is more than the period of 12 months from the date of the balance sheet.

For example, goods are purchased with the purpose to resell and earn a profit, debtors exist to convert them into cash i.e., receive the amount from them, bills receivable exist again for receiving cash against it, etc.

List of current assets

The list of current assets is as follows:-

• Cash in hand
• Cash equivalents
• Bills receivables
• Sundry debtors
• Prepaid expenses
• Accrued income
• Closing stock
• Short-term investments ( marketable securities )
• Other liquid assets

Now here are a few definitions for the above list of current assets which are as follows:-

• Cash in hand

Cash comprises cash on hand and demand deposits with banks.

• Cash equivalents

Cash equivalents are short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.

• Bills receivables

It means a bill of exchange accepted by the debtor, the amount of which will be received on the specific date.

• Sundry debtors

A debtor is a person or entity who owes an amount to an enterprise against credit sales of goods and/or services rendered.

• Prepaid expenses

Expense that has been paid in advance and benefit of which will be available in the following years or year.

• Accrued income

Income that has been earned in the accounting period but in respect of which no enforceable claim has become due in that period by the enterprise.

• Closing stock

Stock or inventory at the end of the accounting period which is shown in the balance sheet and which is valued on the basis of the “ cost or net realizable value, whichever is lower “ principle is called closing stock.

• Short term investment

Investments that are also known as marketable securities and are held for a temporary period of time i.e, for less than 12 months, and can be easily converted into cash are called short-term investments.

Criteria for classification

Now let us see the classification of assets in the case of companies as per Schedule III of the Companies act 2013.

An asset is a current asset if it satisfies any one of the following criteria which are as follows:-

• It is held primarily for the purpose of being traded.

• It is expected to be realized in or is intended for sale or consumption in the company’s normal operating cycle.

• It is expected to be realized within 12 months from the reporting date.

• It is cash and cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least 12 months after the reporting date.

Here is an extract of the balance sheet showing current assets