Nominal or general ledger is formal ledger and a part of double entry accounting system/bookkeeping.
Nominal or general ledger is also legally required by Company Act 2006 UK for both private and public limited companies.
Accounts inside nominal ledger are known as control accounts.
Nominal ledger can have two types of accounts.
- Capital accounts
- Revenue accounts
1 Capital Accounts
Capital accounts are related to item of asset, liability and equity, which are recognized in statement of financial position.
Capital accounts are carried forward to the next accounting period. Capital accounts for next accounting period have opening balance brought forward from previous accounting period.
1.1 Debtors/Sales Ledger Control Account
It is used for record transactions from sales daybook and cashbook.
1.2 Creditors/Purchase Ledger Control Account
It is used for record transactions from purchase daybook and cashbook.
1.3 Tangible Non-Current Asset Control Account
It is used for recording transactions from journal general.
Entity may have more than one type of non-current asset such as Land and Building, Vans, Plant, Computers etc.
Separate control account should be opened for each type of tangible non-current asset.
1.4 Cash/Bank Control Account
Cash or Bank control account is used for keep record all cash inflow and outflow arising from cash sales and cash purchases respectively.
It includes cash flow movement arising from transactions with the bank.
2 Revenue Accounts
Revenue accounts are related to item of revenue and expenses, which are recognized in statement of comprehensive income.
Revenue accounts are closed to profit & loss. Revenue accounts for next accounting period have nil opening balance.
2.1 Sales Revenue Control Account
Sales revenue account includes all sales arising from either cash sales or credit sales and sales return.
Cash discounts obtained by customers are not included in sales account rather it is included as finance expense.
Sales revenue is always recorded after deducting trade discounts given.
2.2 Purchase Control Account
Purchase account includes all sales arising from either cash sales or credit sales and sales return.
Cash discounts received from supplier are not included in purchase account rather it is included as finance income.
Purchase is always recorded after deducting trade discounts obtained.
2.3 Operating Expenses
Operating expense includes rent, utility bills, depreciation etc.
Separate expense account should be maintained for each type of operating expense.