Meaning and Need for a Ledger

The Journal records transactions in the order they occur, but it mixes together entries for cash, for a particular customer, for rent, for machinery — everything, jumbled by date. If someone wants to know the total amount a particular customer owes, or how much rent has been paid so far this year, the Journal alone would mean scanning every single entry in the book.

The Ledger solves this by collecting together, in one place, every transaction relating to a particular account — one page (or space) is set aside for Cash, another for each individual customer, another for Rent, and so on. The Ledger is therefore called the "principal book" or "book of final entry", because every transaction, having first passed through the Journal, is finally classified here by account.

The process of transferring entries from the Journal to the appropriate accounts in the Ledger is called posting. Once all transactions for a period are posted, each ledger account can be balanced to show, at a glance, its net position — how much cash is on hand, how much a debtor owes, how much of an expense has been incurred — information the Journal alone could never present this directly.