The Nominal Ledger.  This is a collection of individual accounts in which the Income and Expense, including the Operating Costs, of the Company are recorded and which provides an overview of the activity of the Business.  It is also from this Ledger that the Trial Balance and the Final Accounts of the Company are prepared with one set being sent to Her Majesty’s Revenue & Customs and a second set to Companies House.  The term ‘Final Accounts’ refers to ‘The Trading and Profit and Loss Account’ and ‘The Balance Sheet’, it is these which are sent to H.M.R.C. and Companies House and is a requirement of Law.

In the ‘Month-end’ Accounts regarding the Nominal Ledger all entries are posted to it by a Journal Voucher.  This entails going through each ‘Day Book’ and Cash Book and completing the Journal Voucher by entering on to it the Totals of each column or, in the case of the ‘Sundries’ column, the individual amounts against their Nominal Code numbers and ‘posting’ these entries to the Nominal Ledger account.  Sample vouchers are shown below:-

This Journal Voucher covers items taken from the Purchase Day Book.

 Whilst this one relates to the Sales Day Book

This Journal deals with the items in the Cash Book

And finally, this covers the Petty Cash Book expense.

There may be other Journal Vouchers you may need to raise, for instance – Depreciation, and that may well cover more than one account in the Nominal, then there may be Pre-payments which require a Journal Voucher.

 When all the Journal Vouchers have been ‘posted’ to the Nominal Ledger you then go through this Ledger balancing each individual account or ‘Ruling off’ where there is no balance.

Once you have finally balanced each and every Account in the Nominal Ledger you then have to prepare a Trial Balance – I should add here that when I had to produce ‘Month End Accounts’ the Trial Balance was the final point.  This is a List of the Balances extracted, by Account number and Name, and listed as a schedule showing the Debit Balances in the left-hand monetary column with the Credit Balances shown in the right-hand column.

The Totals of both the Debit and Credit Columns MUST be the same – if not, you have then to begin checking all your entries from the beginning in order to find the mistake.  One of the most common of errors is ‘Transposition’, this is usually in the ‘pence’ of an entry such as writing £89.92 as £89.29 which would give you discrepancy of .63, another is posting entries, from the Journal Voucher, on the wrong side such as an item of £100.00 shown on the Journal Voucher as a Credit which was posted as a Debit, your difference here can be £50.00 or £200.00, either way, the error has to be found and corrected.

The last thing to do in the Nominal Ledger is to ‘close and transfer’ all expense accounts EXCEPT those relating to the Asset Accounts and their Depreciation Accounts.  This is done via journal entry on which you list all the balances as Debits and Credits which close the individual accounts with the Total of all the entries being posted to a ‘Profit & Loss Account’ within the Nominal Ledger.  It is this total that you show on your Balance Sheet with ‘Reserves’, and which should balance your ‘Balance Sheet’.