Ledger is a book which contains all accounts affected by various transactions in a business. An account is a classified and summarized record of all transactions relating to a particular person or an item. Hence, ledger can be termed as a classified and summarized record of business transactions relating to all personal, real and nominal accounts.

All transactions which are first recorded in the journal, must invariably be posted into the concerned accounts in the ledger. This is necessary because Journal is just a chronological record of transactions, identifying the accounts to be debited and credited. It does not help us to know the net effect of various transactions affecting a particular account. This can only be achieved by recording the effect of all transactions on each account at one place. Let us illustrate this. Suppose, Mohan Brothers have been selling goods on credit to Suresh. Suresh is allowed to make part payments and make further purchases even before the old balance is cleared.

No doubt, all transactions relating to the goods sold to him and the amounts received from him would be duly recorded in the journal (or its sub-divisions). But the journal, by itself, will not be in a position to readily provide information as to whether Suresh, at a given point of time, owes them any money and if so, how much. This is because the entries for transactions with him have been made at different places in the journal and you will have to go through all entries to obtain the required information. If however, all sales made to Suresh and the amounts received from him are shown at one place, say, in Suresh's Account in the ledger, the required information would be readily available. This is true of all accounts, be they personal accounts, real accounts or nominal accounts.

Ledger, thus is a book where all accounts are maintained and into which all journal entries are posted. As all transactions must ultimately be recorded in the respective accounts, the ledger is called the 'Book of Final Entry'. It is also called the 'Principal Book of Accounts'. In fact transactions can even be directly recorded into various ledger accounts. But, normally, this is not done because in that case we will not have any date-wise record of all transactions and the details thereof. Such record is necessary for future reference.

To sum up

(i)the ledger contains all the personal, real and nominal accounts

(ii)the ledger is a permanent, ultimate and up-to-date record of all transactions,

(iii)the ledger provides a means of easy and ready reference.

The ledger is a bound volume with the pages numbered consecutively. Alphabetical index is also shown at the beginning so that the page in which an account appears can be easily ascertained. In certain modern business, loose-leaf ledgers are maintained, instead of one bound volume. Banks maintain loose-leaf ledgers for customer's deposit accounts.