Glossary
Ledger
The set of accounts where all the business's transactions are gathered together.
What it means
The principal book of account containing the individual accounts in which double-entry transactions are recorded and summarised.
Example
The sales ledger holds the accounts of individual credit customers.
Why it matters
Balancing the ledger accounts produces the figures used in the trial balance and financial statements.
In practice
The ledger gathers transactions by account, after they are first recorded in the books of prime entry. It is usually split into three parts. The sales ledger holds customers' personal accounts. The purchases ledger holds suppliers' personal accounts. The general ledger holds the nominal accounts for assets, expenses, income, capital and liabilities.
If a business sells goods on credit, the customer's account in the sales ledger is debited and sales in the general ledger is credited. The balances of all ledger accounts are then listed to form the trial balance.
Students often confuse the ledger with the journal and day books. The day books record transactions in date order when they first happen. The ledger sorts those entries and adds them up account by account. Transactions enter through the day books and are posted into the ledger, which gives the balances used in the financial statements.
If posting from the day books to the ledger is slowing you down, one of our teachers can practise it with you using exam-style questions. Book a trial class.
Related terms
Syllabus reference: Cambridge 0452 and 0985, syllabus for 2027 to 2029, sub-topic 2.1 The double entry system of book-keeping (page 12).
Definitions here are general accounting explanations for study. For your board's exact wording, see its official syllabus via Sources.
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