We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.
Finance

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

What is a Nominal Ledger?

H. Bliss
By
Updated: May 17, 2024
Views: 8,003
Share

In accounting, a nominal ledger contains a detailed list of every transaction that occurred within an account. Many refer to the ledger as being T-shaped because of its T-shaped line dividing the two columns. It is a tool used in accounting as a means of recording and organizing transactions. It is most often used in businesses, but can also be used in detailed personal accounting. A nominal ledger can sometimes be called a general ledger. Many types of accounting records derive their information from the nominal ledger, including balance sheets, trial balance, and financial statements.

Generally, a different nominal ledger is used for each account. It can be used to keep a record of all transactions that occur for a certain checking or savings account. This type of ledger can also be used to record all transactions related to a certain aspect of business or department, like sales, marketing, or human resources. Businesses can use this information to identify which parts of their company are financially successful.

A nominal ledger is divided into debits and credits, with two columns, one placing debits on the left and the other with credits on the right. Also known as debts, debits occur when money is removed from an account. Credits occur when money is added to an account. Types of debits include payroll expenditures, operating expenses, and cash withdrawals. Credits include income from sales, investment income, or refunds from vendors.

When companies create their balance sheets, they use the information on the nominal ledger. This detailed ledger can also help an accountant ensure that the balances on the balance sheets are correct. A balance sheet is a summary of the balances of the accounts held by a business. Balance sheets are usually done at the end of each month.

A trial balance is a list of all of the company's account balances, and is also compiled using information from the company's nominal ledgers. A trial balance differs from a balance sheet because it is a running tally, and can be accessed from an accounting software program at any time. Essentially, a balance sheet is a declaration of a company's account balances as of a certain and specified date and time.

When detailed records are kept with a nominal ledger, a company can help reduce losses caused by human error or theft. When a nominal ledger is examined, it can also help reveal improprieties in the way money was spent or discrepancies in other financial records. A detailed ledger can also help keep a company up to date on its financial situation, reducing costly cash shortage surprises.

Share
WiseGeek is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
H. Bliss
By H. Bliss
Heather Bliss, a passionate writer with a background in communication, brings her love for connecting with others to her work. With a relevant degree, she crafts compelling content that informs and inspires, showcasing her unique perspective and her commitment to making a difference.

Editors' Picks

Discussion Comments
H. Bliss
H. Bliss
Heather Bliss, a passionate writer with a background in communication, brings her love for connecting with others to her...
Learn more
Share
https://www.wisegeek.net/what-is-a-nominal-ledger.htm
Copy this link
WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.

WiseGeek, in your inbox

Our latest articles, guides, and more, delivered daily.