Last reviewed: July 2026.
Limited company ledger accounts combine ordinary double-entry bookkeeping with accounts unique to corporate ownership and statutory reporting. Share capital, reserves, tax, dividends and director balances must be kept separate and supported by legal records.
How a company ledger differs from a sole trader’s
A limited company is a separate legal entity. Its ledger therefore records share capital, reserves, corporation tax, dividends and transactions with directors or shareholders separately from ordinary business income and expenses. Owners do not have a personal capital account that freely absorbs drawings.
Money taken by an owner must be identified as salary, expense reimbursement, dividend, loan movement, repayment of capital or another lawful transaction. Misclassification can cause tax, legal and financial-reporting problems.
Core ledger structure
- General ledger for assets, liabilities, equity, income and expenses.
- Receivables and payables sub-ledgers for individual customers and suppliers.
- Cash book and bank feeds reconciled to bank statements.
- Fixed-asset register linked to cost and accumulated depreciation accounts.
- Payroll, tax and inventory modules where applicable.
- Share register and supporting company-secretarial records.
Integrated software may update several records from one transaction, but the underlying double entry remains the same. Access controls, posting rules and reconciliations are still necessary.
Share capital and share premium
When shares are issued for cash, the nominal value is credited to share capital. Any amount received above nominal value is credited to share premium or the applicable equity account. Issue costs are treated according to the reporting framework and nature of the transaction.
Example: issuing 10,000 shares with a nominal value of $1 for $1.40 each debits cash $14,000, credits share capital $10,000 and credits share premium $4,000. The share register and board documentation should agree to the ledger.
Retained earnings and reserves
Retained earnings accumulate profits and losses after tax, dividends and specified transfers. Other reserves may arise from revaluations, foreign currency translation, cash-flow hedges or legal requirements. Each reserve should have a clear purpose and reconciliation.
Do not treat every reserve as distributable. The legal ability to pay dividends may depend on realised profits, company law and the company’s circumstances, not merely the total equity balance.
Corporation tax accounts
Current tax expense is recognised with a corresponding tax payable or receivable. Payments to the tax authority reduce the payable. Deferred tax is recorded separately when required by the applicable standard.
The tax ledger should reconcile to computations and returns. Differences between accounting profit and taxable profit are analysed rather than posted directly to revenue or expense without explanation.
Dividends and distributions
Dividends are not operating expenses. Once properly authorised and recognised under the applicable rules, they reduce retained earnings and create a payable until paid. Proposed dividends that are not liabilities at the reporting date may require disclosure rather than recognition.
Board minutes, shareholder resolutions where needed and evidence of distributable profits support the entry. Payments to shareholders should never be posted automatically to dividends merely because they are not payroll.
Director and shareholder loan accounts
A director’s loan account records amounts due to or from the director. A credit balance means the company owes the director; a debit balance generally means the director owes the company. Personal expenses paid by the company, cash advances and repayments must be posted promptly.
These balances can have tax and disclosure consequences. Reconcile them monthly and obtain approval for unusual transactions.
Year-end adjusting entries
Company ledgers require the usual accruals, prepayments, depreciation, inventory, impairment and provision entries. In addition, finance should reconcile share capital, reserves, tax, dividends and related-party accounts to external documents and legal records.
Recurring journals should be reviewed each period. Unsupported round-sum journals and postings directly to retained earnings are warning signs.
Close and reporting controls
- Lock prior periods after approval.
- Use documented journal approval thresholds.
- Reconcile every control account and material balance.
- Review suspense and clearing accounts for old items.
- Compare the trial balance with statutory account mappings.
- Retain evidence for estimates, tax and equity movements.
A close checklist should identify preparer, reviewer, due date and evidence location. Automated postings reduce manual effort but do not remove review responsibility.
Worked month-end example
| Transaction | Debit | Credit |
|---|---|---|
| Issue shares for cash | Bank | Share capital / share premium |
| Record payroll | Staff costs | Payroll liabilities / bank |
| Recognise current tax | Income tax expense | Current tax payable |
| Declare recognised dividend | Retained earnings | Dividend payable |
| Pay dividend | Dividend payable | Bank |
| Record depreciation | Depreciation expense | Accumulated depreciation |
These entries illustrate why a company chart of accounts needs dedicated equity and statutory accounts. Clear account descriptions make financial statements easier to prepare and audit.
Audit trail and record retention
Every ledger entry should be traceable to an invoice, contract, bank record, payroll report, tax computation or authorised journal. Use consistent reference numbers, approval evidence and locked accounting periods so later changes remain visible. A strong audit trail shortens month-end review and makes errors easier to isolate.
Retain records in line with applicable company, tax and regulatory requirements, while controlling access to sensitive payroll, director and shareholder information. Regular backups, user-access reviews and documented close procedures protect both the accounting records and the evidence supporting the statutory accounts.
Related accounting guides
- Limited Company Accounting: Capital, Reserves and Statements
- Dividends Accounting: Recognition, Entries and IAS 10 Rules
- General Ledger in Computerised Accounting: Controls and Close
Authoritative references
- GOV.UK: Prepare annual accounts for a private limited company
- ACCA: Computerised accounting systems — rationale for change
Practical takeaway
Design the company ledger around the legal entity, not the owners’ personal cash movements. Reconcile equity, tax, dividends and director accounts as carefully as bank and trade ledgers, and connect every material balance to supporting documents and the statutory accounts.