What is a ledger in accounting?

What is a ledger in accounting?

• A. A summary of financial ratios
• B. A collection of accounts where transactions are recorded
• C. A document that tracks cash flow
• D. A list of revenue sources for a business

Answer: (B)

A ledger in accounting serves as a comprehensive collection of accounts where all financial transactions are systematically recorded. It represents the central component of the double-entry accounting system, where each transaction is entered in at least two accounts: one account is debited, and another is credited, ensuring balance in the accounting equation. The ledger provides detailed information for each account, making it easier for accountants to track the financial position of a company over time. By organizing account balances and transaction histories, the ledger simplifies the process of preparing financial statements, as it consolidates data required to assess the company's performance. In contrast to the other options, which pertain to specific aspects of financial reporting or analysis, the ledger encompasses a broader scope that directly documents the company's financial movements through various accounts. Thus, understanding the structure and purpose of a ledger is essential for anyone involved in accounting and financial management.

A ledger in accounting serves as a comprehensive collection of accounts where all financial transactions are systematically recorded. It represents the central component of the double-entry accounting system, where each transaction is entered in at least two accounts: one account is debited, and another is credited, ensuring balance in the accounting equation.

The ledger provides detailed information for each account, making it easier for accountants to track the financial position of a company over time. By organizing account balances and transaction histories, the ledger simplifies the process of preparing financial statements, as it consolidates data required to assess the company's performance.

In contrast to the other options, which pertain to specific aspects of financial reporting or analysis, the ledger encompasses a broader scope that directly documents the company's financial movements through various accounts. Thus, understanding the structure and purpose of a ledger is essential for anyone involved in accounting and financial management.