Definition: A ledger is a written or computerized record of all the transactions a business has completed. These transactions are recorded in the ledger in different accounts. This list of accounts is most often called the chart of accounts. Large companies tend to have many accounts in their chart of accounts while smaller companies might only have a few accounts listed.
What Does Accounting Ledger Mean?
Ledger, in an accounting text, most often refers to the general ledger. Companies use the general ledger to record all of the accounts in the chart of accounts are summarized and categories in the general ledger.
The general ledger or ledger is a record of all the accounts that the company uses. In all modern accounting systems, the general ledger is computerized. A general ledger divides accounts into three account types: assets, liabilities, and equity accounts. Most companies have many of the same general accounts like cash, accounts payable, and retained earnings, but some companies have specialized accounts specific for their operations.
Example
For example, a manufacturer would have raw materials inventory, work in process inventory, and finished inventory accounts in its asset section. A retailer, on the other hand, might have an account for promotional inventory or merchandise not for sale. Many retailers also create different accounts for new promotions and specific inventory classes.
After the accounts are categorized by type, they are arranged in balance sheet order starting with assets, then liabilities, then equity accounts. Here are some example accounts in balance sheet order.
Assets:
- Cash
- Accounts Receivable
- Notes Receivable
- Prepaid Expenses
- Supplies
- Equipment
- Fixed Assets
Liabilities:
- Accounts Payable
- Accrued Liabilities
- Notes Payable
- Lines of Credit
- Unearned Revenue
- Due from Owner
Equity:
- Owner’s Capital/Retained Earnings
- Common Stock
- Distributions
- Contributions/Paid in Capital
