The entire group of accounts maintained by a company is the
a. Journal.
b. Statement of financial position.
c. Ledger.
d. T-account.
The correct answer and explanation is :
The correct answer is c. Ledger.
Explanation:
In accounting, the term ledger refers to the entire group of accounts maintained by a company. A ledger is a central record-keeping system that compiles all the financial transactions recorded in the company’s books. It is essentially the collection of all the accounts used by the business, where each account tracks specific financial data, such as assets, liabilities, equity, income, and expenses.
Here’s a breakdown of each option:
- Journal: The journal is the first place where transactions are recorded in chronological order, often referred to as the book of original entry. Each journal entry contains the date, accounts affected, and the amounts to be debited and credited. After journal entries are made, they are transferred to the appropriate accounts in the ledger. Thus, the journal is part of the accounting cycle, but it is not the group of accounts themselves.
- Statement of Financial Position: This is another term for the balance sheet, which is a financial statement that provides a snapshot of a company’s financial position at a specific point in time. It lists the company’s assets, liabilities, and equity but does not represent the collection of all accounts. Therefore, this is not the correct answer.
- Ledger: As mentioned, the ledger contains all the individual accounts of a business. Each account tracks a specific type of financial information, and transactions from the journal are transferred (posted) to these accounts. The ledger is crucial for creating the company’s financial statements, such as the income statement and balance sheet, as it summarizes the financial data needed to prepare these reports.
- T-account: A T-account is a visual representation of a ledger account. It is a simplified, diagrammatic tool used to show how debits and credits affect the account. While it helps in understanding ledger entries, it is not the group of accounts itself.
In summary, the ledger is the correct term for the collection of all accounts maintained by a company.