Answer to Question #199194 in Accounting for Ziyanda Ngese

Question

Discuss with an applicable example of the ledger approach in the teaching of Accounting under the following headings: 2.1 The concept “ledger approach” in the teaching of Accounting (4) 2.2 Essence (importance) of the ledger approach (10) 2.3 Advantages and disadvantages of the ledger approach (6) 

Answer 1

The ledger approach; is a system in accounting where transactions are recorded and kept in a special book with each assigned a special page known as a folio. It's also referred to as a "double-entry system" since, for every credit entry made as a result of an accounting transaction, there must be a corresponding debit entry in another item's account. The use of T - accounts is a remarkable aspect of the Ledger Approach; T account has two sides i.e. Debit side (Dr.) for making debit entries and the Credit side for credit entries, balancing figures are then provided below to showing the differences between the total values of both sides of the account. The balancing figure is used for closing the account in the current period and preparing it for the proceeding period.

Example of an accounting transaction and how Ledger approach is applied:

On 1^st May, 2021 Josh invested $2000 in Josh enterprises Limited.

recording will be as follows:

Bank account

Dr. Cr.

2021 $ 2021 $

May 1^st Capital 2000

Capital account

Dr. Cr.

2021 2021 $

May 1^st Bank 2000

Importance of Ledger Approach:

• The use of T - accounts enables the learner to appreciate the accounting rule of double-entry, where for every credit entry there must be a corresponding credit entry.
• Enables the learners and teachers to determine the correct balancing for closing the account and preparing them for the proceeding period.
• It also provides a mechanism for monitoring the changes in various items such as inventory, fixed assets, liabilities, revenues as well expenses by providing balances in real-time.
• It forms the basis for determining other financial statements such as income statements and statements of financial position by posting the balances to the trial balance.
• It provided room for checking any errors that may have been made either in making entries or when the transactions were recorded by use of a trial balance, usually extracted after all the ledger accounts have been balanced off.
• T - accounts are a foundation in accounting as knowing which accounts are affected challenge the reasoning and previous knowledge for accounting.

 

Advantages of Ledger Approach:

• The of ledgers allows for correction of errors made in the recording of the transaction early enough.
• The balance of the various items such as assets, liabilities among others can be established in real-time.
• It provides the basis for determining other financial statements such as income statements and balance sheets.

 

Disadvantages of the Ledger approach:

• Unsafe as anyone can access the book or the computer file.
• Inaccuracy of the values in the ledger may give the wrong impression of the book values of the items affected.
• Cannot be used to calculate the final account unless a trial balance is extracted.
• Accounting soft-wares are prone to attacks by malware and hacking which can hold the organization at ransom.