A ledger is the principal book or computer file for recording and totaling economic transactions measured in terms of a monetary unit of account by account type, with debits and credits in separate columns and a beginning monetary balance and ending monetary balance for each account.
Overview
The ledger is a permanent summary of all amounts entered in supporting journals which list individual transactions by date. Every transaction flows from a journal to one or more ledgers. A company's financial statements are generated from summary totals in the ledgers.
Ledgers include:
- Sales ledger, records accounts receivable. This ledger consists of the financial transactions made by customers to the company.
- Purchase ledger records money spent for purchasing by the company.
- General ledger representing the five main account types: assets, liabilities, income, expenses, and Capital.
- Distributed ledger, sometimes called a shared ledger, is a consensus of replicated, shared, and synchronized digital data geographically spread across multiple sites, countries, and/or institutions.
For every debit recorded in a ledger, there must be a corresponding credit so that the debits equal the credits in the grand totals.
Etymology
The term ledger stems from the English dialect forms liggen or leggen, meaning "to lie or lay" (Dutch: liggen or leggen, German: liegen or legen); in sense it is adapted from the Dutch substantive legger, properly "a book laying or remaining regularly in one place". Originally, a ledger was a large volume of scripture or service book kept in one place in church and openly accessible. According to Charles Wriothesley's Chronicle (1538), "The curates should provide a booke of the bible in Englishe, of the largest volume, to be a ledger in the same church for the parishioners to read on."
In application of this original meaning the commercial usage of the term is for the "principal book of account" in a business house.
See also
- Bookkeeping
- Debits and credits
- Specialized journals
Notes
References
-  This article incorporates text from a publication now in the public domain: Chisholm, Hugh, ed. (1911). "Ledger". Encyclopædia Britannica (11th ed.). Cambridge University Press.Â
Further reading
- Business Owner's Toolkit: General Ledger. (n.d.). Business Owner's Toolkit. Retrieved March 29, 2011, from http://www.toolkit.com/small_business_guide/sbg.aspx?nid=P06_1450
- General Ledger Entries. (n.d.). NetMBA Business Knowledge Center. Retrieved March 30, 2011, from http://www.netmba.com/accounting/fin/process/ledger/
