Future Business Leaders of America (FBLA) Accounting Practice Test

What does the term ledger refer to?

1. A record of assets and liabilities

2. A group of accounts

3. A summary of financial statements

4. A process of account organization

The correct answer is: A group of accounts

The term ledger specifically refers to a group of accounts used to organize and maintain financial records. In accounting, a ledger serves as the central repository where all transactions are recorded and categorized into individual accounts for assets, liabilities, equity, revenues, and expenses. Each of these accounts will detail the transactions that pertain to that category, allowing for easy tracking and management of financial data. While the other options touch on different aspects of accounting, they do not accurately capture the overall function of a ledger. A record of assets and liabilities describes specific financial components rather than the broader role of a ledger. A summary of financial statements refers to the presentation of financial outcomes, such as the balance sheet or income statement, which aggregate information from the ledger. The process of account organization can indeed be a function involving a ledger, but it does not define what a ledger actually is. Thus, recognizing a ledger as a group of accounts is essential for understanding its role in the accounting system.