Ledger
Definition
In banking, a ledger is a comprehensive record of financial transactions over the life of an account.
Detailed Explanation
A ledger in the context of banking is a principal book or computer file for recording and totaling an account's transactions, with debits and credits in separate columns and a beginning and ending balance for each account.
The ledger provides a detailed record of all financial transactions that occur over the life of an account, helping to track the flow of money in and out. For each transaction, the ledger records the date, description, debit or credit amount, and the resulting balance, ensuring that all financial activities are accurately documented and easy to review.
This systematic process is critical for the reconciliation of accounts and is fundamental to the accounting process. In modern banking, ledgers are typically maintained through digital systems, which offer enhanced accuracy, accessibility, and efficiency compared to traditional manual entry systems.
These digital ledgers enable real-time transaction processing and can be integrated with other financial management tools.
Example
A bank's ledger for a business checking account may show an initial deposit, various payments made via check or electronic transfer, deposits received, fees charged, and interest earned. Each entry adjusts the account balance accordingly, providing a clear and up-to-date financial statement for the account holder.
Key Articles Related To Ledgers
Related Terms
Account: A record summarizing all the transactions pertaining to a single item in the accounting equation.
Account Balance: The amount of money held in a financial repository, such as a bank account, at any point in time.
Credit: An entry recording an amount received, typically in a financial account.
Debit: An entry recording an amount owed, typically in a financial account.
FAQs
What is the difference between a ledger and a journal?
A journal is used to record every transaction in chronological order, while a ledger groups transactions by account, summarizing all operations related to that account.
How does a ledger help in banking?
A ledger helps maintain a detailed record of all transactions, assists in financial planning, ensures accuracy in accounts, and facilitates easy compliance with auditing and regulatory requirements.
Are bank ledgers public information?
No, bank ledgers contain sensitive financial information and are confidential. They are only accessible to authorized bank personnel and the account holder.
Editor: Colin Graves