What are ledgers used for in financial accounting?

Ledgers are fundamental components of financial accounting, specifically designed to write and record financial transactions. They serve as the main repository for all accounting entries, taking the form of various accounts that track individual financial activities. Each ledger is structured to reflect specific categories such as assets, liabilities, equity, revenues, and expenses, allowing businesses to maintain detailed and organized financial data.

By documenting all transactions, ledgers enable companies to monitor their financial health, ensure compliance with accounting standards, and prepare accurate financial statements. This organized record-keeping is critical for financial analysis, as it lays the groundwork for the preparation of summary documents, tax calculations, inventory management, and annual reports.