About Ledgers

What is a ledger?

A ledger is a book that holds bookkeeping records. Ledger shows the account’s opening balance, records transactions related to accounts in the form of debit and credit operations for the period, and the final account’s balance.

Organizations use ledgers to track all kinds of accounts, for example accounts receivable, accounts payable, sales, payroll, etc. Ledgers can be connected and organized to represent data in various granularities, depending on the use case. Usually organizations have a general ledger that contains summarized data separated into accounts organized by types important for accounting, for example a general ledger may have accounts representing assets, liabilities, revenue, etc. Data from other ledgers which have more granular account structure is usually periodically summarized and transferred to a general ledger.

Double entry bookkeeping

A common way of representing transactions in a ledger is called double entry bookkeeping. This is a way of recording each transaction as two entries, a debit on one account and a corresponding credit on another account. The total debits and credits must balance, i.e., equal each other in such a system.

This way of recording transactions helps reduce bookkeeping errors and makes mistakes easier to find. This also helps to prevent fraud and embezzlement. Ledgers evolved over time, from numbers on stone tablets to bits on a hard drive, but the core concept still mostly remains the same.

Blockchain benefits

With blockchain technology some of the basic concepts of a ledger can be simplified. Using some of the blockchain ideas we can avoid having to store records multiple times in order to prevent tampering with the data and avoid mistakes. All transactions in such a ledger are hashed, cryptographically signed and chained. This makes it very difficult to change ledger records, and even when it is possible it can be quickly detected by other participants in the network because such ledgers are usually publicly auditable.