A ledger is a book or database that contains a record of financial transactions. Ledgers are used in accounting to keep track of a company’s financial transactions, including sales, purchases, payments, and receipts.
A ledger typically consists of two types of accounts: the general ledger and the subsidiary ledger. The general ledger contains a summary of all financial transactions for the company, while the subsidiary ledger contains detailed information about specific accounts or transactions.
Each transaction in a ledger is recorded using a double-entry accounting system, which means that each transaction is recorded in two different accounts, with equal debits and credits. This ensures that the ledger always balances, and that the company’s financial records are accurate and reliable.
Ledgers can be maintained manually or using computer software, and they are an essential tool for financial reporting, tax compliance, and decision-making. By keeping track of financial transactions in a ledger, companies can analyze their financial performance, identify areas for improvement, and make informed decisions about future investments and expenditures.
