A ledger is a record-keeping tool, either a physical book or an electronic file, used to register and organize information about quantities or values—most commonly financial amounts belonging to an individual, business, or other organization. Ledgers play a central role in accounting, where they show what is owed and what is receivable and form the basis for preparing financial reports.

Function and format

At its core a ledger contains a systematic list of transactions organized by account. In manual systems this took the form of a bound book with separate pages or columns for different accounts; in modern practice it is usually a database or an accounting software module. Entries in a ledger indicate increases and decreases in accounts; in double-entry bookkeeping every transaction affects at least two ledger accounts through corresponding debit and credit entries.

Types of ledgers

  • General ledger: The principal ledger that aggregates balances for all the company's accounts (assets, liabilities, equity, revenue and expenses). It collects totals that are used to prepare financial statements.
  • Debtors (accounts receivable) ledger: A subsidiary ledger that tracks amounts owed to the organization by customers or clients, often listing individual customer balances and invoices.
  • Creditors (accounts payable) ledger: A subsidiary ledger that records amounts the organization owes to suppliers or other creditors, including outstanding bills and vendor balances.

Relationship with journals and posting

Transactions are frequently recorded first in a journal (a chronological log) and then transferred, or posted, to the appropriate ledger accounts. In traditional bookkeeping this posting was performed periodically (for example, monthly); in computerized systems posting may occur immediately as transactions are entered. Totals and balances in the ledger are used to reconcile accounts and to produce trial balances and financial statements.

Ledgers can be maintained for many specific purposes beyond the examples above—such as payroll, inventory, or fixed assets—and may be organized as subsidiary ledgers that support the general ledger by providing more detail on particular account groups.