Asset Ledger

By 
ALICIA TUOVILA
 
 
Updated Dec 3, 2020
What Is An Asset Ledger?
The asset ledger is the portion of a company's accounting records that details
the journal entries relating only to the asset section of the balance sheet. Asset
ledgers will have many sub-accounts. The larger the company, the more
numerous and complex the asset ledgers will be.

KEY TAKEAWAYS

 The asset ledger is the log of entries affecting asset accounts from all
recorded journal entries.
 The asset ledger is one of many subsidiary ledgers that feed into a
company's general ledger.
 The general ledger is used to construct the company's financial
statements.
 The balance sheet of a company will itemize current and long-term assets,
but the individual transaction data will not be available as it would be in an
asset ledger.
Understanding the Asset Ledger
When a business undertakes any transaction, it will record a journal entry for
both sides of the transaction. Examples of typical business transactions include
purchasing goods from suppliers, making sales to customers, and purchasing
machinery and equipment to be used in manufacturing.

The two parts to a journal entry are called debit and credit. For asset accounts, a
debit increases the account while a credit decreases the account. This is
contrasted with liability and equity accounts, in which a credit increases the
account and a debit decreases it.

Simply put, the asset ledger is the log of entries affecting asset accounts from all
recorded journal entries. Current assets are separated from long-term assets,
and the component accounts of current and long-term assets are broken down.
The sub-accounts to the asset ledger can be extensive. Types of fixed assets, for
example, would be categorized into specific property, plant, and
equipment (PP&E) categories and detailed individually.
The asset ledger is one of many subsidiary ledgers that feed into a
company's general ledger. The information contained in the general ledger is
used to construct the company's financial statements, including the income
statement, balance sheet, and cash flow statement. The general ledger is
considered to be a company's "official accounting record." Consolidated
information from the asset ledger appears in the asset section at the top of the
balance sheet.

Examples of an Asset Ledger

Using our examples from above, let's take a look at how this information would
appear in an asset ledger.

Purchasing Goods From Suppliers

When purchasing goods from a supplier, a company would debit supplies (or
inventory) and credit the cash account. This journal entry involves two asset
accounts. The supplies account would be increased, and the cash account would
be decreased. The amounts in this specific transaction will build with amounts
from other transactions to calculate the supplies and cash account totals at the
end of a fiscal period.

Making Sales to Customers

When making sales to customers, a company may offer a good or service on
credit. In this case, at the time of sale, the journal entry would include a debit to
accounts receivable (AR) and a credit to sales revenue. This journal entry
involves only one asset account, AR, because sales revenue is an equity
account. When the customer pays off their balance, the AR account will be
credited (decreased) and the cash account will be debited (increased).

Purchasing Machinery to Be Used in Manufacturing

If a company purchases machinery, it will record the transaction as a debit to
machinery (a fixed asset account) and a credit to the cash account. This journal
entry involves two asset accounts. Machinery would be increased, and cash
would be decreased.

Let's assume all of these transactions took place during an accounting period.
The company made $250,000 in credit sales on 1/1, purchased $10,000 in
supplies on 1/15, and purchased a $100,000 piece of machinery on 1/31. The
customers paid their outstanding AR balance on 1/11. With only this available
data, the asset ledger would appear as does below.

Asset Date Transaction DR CR Balance

01/1
Cash Customer paid AR balance $250,000   $250,000
1
 01/1
  Purchased supplies   $10,000 $240,000
5
01/3 $100,00
  Purchased machinery   $140,000
1 0
           
Accounts 01/0
Made sales on credit $250,000   $250,000
Receivable 1
01/1 $250,00
  Customer paid AR balance   $0
1 0
           
01/1
Supplies Purchased supplies $10,000   $10,000
5
           
01/3
Machinery Purchased machinery $100,000   $100,000
1
Asset Ledger vs. Asset Section of the Balance Sheet
Asset ledgers are internal records for a company; therefore, they are not
disclosed publicly. For public companies governed by the Securities and
Exchange Commission (SEC), financial statements are available to the public.1
The balance sheet of a company will itemize current and long-term assets, but
the individual transaction data will not be available as it would be in an asset
ledger.

Honeywell International (HON) listed the following assets on its consolidated

balance sheet as of December 31, 2019:

 Current assets
 Cash and cash equivalents
 Short-term investments
 Net receivables
 Inventories
 Other current assets
 Noncurrent assets
 Property, plant, and equipment
 Investments and long-term receivables
 Goodwill
 Intangible assets
 Other long-term assets2

In general, some additional details may be provided in a company's notes to

financial statements, but the specifics of individual business transactions are kept
in records by the company. The transaction details are contained in specific
asset accounts, which are then used to "build up" the asset line items that you
see on a balance sheet.

Both internal auditors and independent auditors may review these and other

ledgers to check for completeness and accuracy to make sure the process of
financial statement compilation is sound.