Compare the Difference Between Similar Terms

Difference Between

Home / Business / Finance / Accounting / Difference Between T Account and Ledger

Difference Between T Account and Ledger

March 24, 2017 Posted by Dili

Key Difference – T Account vs Ledger
 

The key difference between T account and ledger is that T account is a graphical representation of a ledger account whereas ledger is a set financial accounts. Therefore, a ledger can also be interpreted as a collection of T accounts. Understanding T accounts and ledger is essential for obtaining a better knowledge regarding accounting book keeping process. The introduction of new accounting software has made the preparation of T accounts and ledger more convenient and less time-consuming.

CONTENTS
1. Overview and Key Difference
2. What is T Account
3. What is Ledger
4. Side by Side Comparison – T Account vs Ledger
5. Summary

What is a T Account?

A T account is a graphic representation of a ledger account. As the name suggests, it takes the shape of letter ‘T’, and the name of the account is placed above the T (sometimes along with the account number). Debit entries are entered in the left side of the T and credits are entered to the right of the T. The total balance for each T account is shown at the bottom of the account. T accounts are prepared along with the ‘double entry principle’ in accounting which states that every transaction results in equal and opposite effects in minimum two different accounts; one as a debit entry and the other as a credit entry.

E.g. ANK Ltd. purchases goods worth of $2,000 on cash from WOM Ltd. This results in an increase in inventory due to the new purchases and a reduction in cash due to the payment. Thus the following entries will be entered into respective T accounts, i.e. Purchases A/C and Cash A/C respectively.

Purchases A/C                         DR $2,000

Cash A/C                                  CR $2,000

T accounts were used when accounting records were prepared manually. At present, accounting book keeping is largely done electronically, thus a column format is used instead of a T account. However, the concept remains unchanged.Key Difference - T Account vs Ledger

What is a Ledger?

A ledger is known as a collection of financial accounts. Ledger contains all the T accounts according to their class of accounts. Companies prepare different types of ledgers to record various transactions as follows.

Sales Ledger

This is the ledger where all sales made to customers are recorded. Sales ledger is a very important ledger as it records the transactions of the core business activity.

Purchases Ledger

Purchases ledger reports all the funds paid on purchasing. This ledger is crucial for companies that conduct manufacturing or trading operations.

Read More: Difference Between Sales Ledger and Purchases Ledger

General Ledger

This is the principal set of accounts where all transactions conducted within the financial year are recorded. General ledger contains all the debit and credit entries of transactions and is separated with classes of accounts. There are five main types of classes or accounts as follows.

Assets

Long term and short term resources that provide economic benefits

E.g. Property, cash and cash equivalents, accounts receivables

Liabilities

Long term and short term financial obligations that should be settled

E.g. Loan repayment, interest payable, accounts payable

Equity

Securities that represent the owners interest in the company

E.g. Share capital, share premium, retained earnings

Income

Funds received as a result of conducting business transactions

E.g. Revenue, investment income

Expenses

Economic costs that a business incurs through its operations to earn revenue

E.g. Cost of sales, marketing expenses, administration expenses

Subsidiary Ledger

A subsidiary ledger is a detailed sub set of accounts that contains transaction information.  For large scale businesses where many transactions are conducted, it may not be convenient to enter all transactions in the general ledger due to the high volume. In that case, individual transactions are recorded in subsidiary ledgers and the totals are transferred to an account in the general ledger. Subsidiary ledgers can include purchases, payables, receivables, production cost, payroll and any other account type.

Read More: Difference Between General Ledger and Subsidiary Ledger

Difference Between T Account and Ledger

Figure 01: Ledger is a collection of T accounts

What is the difference between T account and ledger?

T Account vs Ledger

T account is a graphical representation of a ledger account. Ledger is a set financial accounts.
Meaning
One T accounts contain one type of an account. Ledger contains many T accounts.

Summary – T Account vs Ledger

The difference between T account and ledger is not a significant one since they are closely related. A business conducts various transactions and maintains numerous records that are different to one another. Furthermore, accounts should be categorized in different classes in accordance with accounting principles which is assisted by T accounts and ledger. The preparation of T accounts and ledger are made convenient through the use of accounting software.

References
1.”General Ledger.” Investopedia. N.p., 26 Nov. 2014. Web. 21 Mar. 2017.
2.”Subsidiary Ledgers.” Subsidiary Ledgers. N.p., n.d. Web. 21 Mar. 2017.
3.”Types of Ledger.” Principles of Accounts for GCE O Level. N.p., n.d. Web. 22 Mar. 2017.
4.”What is a T account? – Questions & Answers.” AccountingTools. N.p., n.d. Web. 22 Mar. 2017.

Image Courtesy:
1. “y2cary3n6mng-vjl146-journals-to-general-ledger (2)” by Peter Baskerville (CC BY-SA 2.0) via Flickr

Related posts:

Difference Between General Ledger and Sub Ledger Difference Between Balance Sheet and Trial Balance Difference Between Sales Ledger and Purchase LedgerDifference Between Sales Ledger and Purchase Ledger Difference Between General Ledger and Trial BalanaceDifference Between General Ledger and Trial Balance Difference Between Gearing and Leverage

Filed Under: Accounting Tagged With: Compare T Account and Ledger, general ledger, Ledger Classes, Ledger Definition, Ledger Features, Ledger Sub accounts, Purchases Ledger, sales ledger, subsidiary ledger, T Account and Ledger Differences, T Account Definition, T Account Features, T Account vs Ledger

About the Author: Dili

Dili has a professional qualification in Management and Financial Accounting. She has also completed her Master’s degree in Business administration. Her areas of interests include Research Methods, Marketing, Management Accounting and Financial Accounting, Fashion and Travel.

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Request Article

Featured Posts

Difference Between Coronavirus and Cold Symptoms

Difference Between Coronavirus and Cold Symptoms

Difference Between Coronavirus and SARS

Difference Between Coronavirus and SARS

Difference Between Coronavirus and Influenza

Difference Between Coronavirus and Influenza

Difference Between Coronavirus and Covid 19

Difference Between Coronavirus and Covid 19

You May Like

Difference Between Haughty and Supercilious

Difference Between Haughty and Supercilious

Difference Between iPhone 4S and HTC Evo 3D

Difference Between Spermatic Cord and Inguinal Canal

Difference Between Spermatic Cord and Inguinal Canal

Difference Between Apple A5 and A6 Processors

Difference Between Saturated and Unsaturated Fatty Acids

Difference Between Saturated and Unsaturated Fatty Acids

Latest Posts

  • What is the Difference Between Argumentative and Expository Essay
  • What is the Difference Between Benzophenone-3 and Benzophenone-4
  • What is the Difference Between Lymphokines and Cytokines
  • What is the Difference Between Gastrolyte and Hydralyte
  • What is the Difference Between Avobenzone and Benzene
  • What is the Difference Between Tight Junction and Adherens Junction
  • Home
  • Vacancies
  • About
  • Request Article
  • Contact Us

Copyright © 2010-2018 Difference Between. All rights reserved. Terms of Use and Privacy Policy: Legal.