book in which all accounts of the business are kept. In effect, the ledger is a classification and summarization of financial transactions and the basis for the preparation of the balance sheet and income statement. The ledger also allows one to see the balance in a given account at a particular time. For example, the cash balance at the end of the month can be seen to determine whether the business has a cash problem. Also revealed in looking at the cash account are the cash receipts and cash disbursements for the period.

In a computerized environment, accounts may be stored on magnetic tape or disks instead of in a ledger binder.The accounting principles are, of course, still the same.