What does the term "ledger" refer to in bookkeeping?

The term "ledger" in bookkeeping refers to a comprehensive record of all financial transactions sorted by account. This means that, within a ledger, transactions are categorized according to various accounts such as assets, liabilities, equity, revenues, and expenses. This classification allows for better organization and analysis of financial data over time.

Using a ledger, bookkeepers can easily track the flow of money in and out of each account, providing an effective way to monitor a business's financial health. By summarizing transactions in this manner, it simplifies the process of preparing financial statements and aids in financial analysis and decision-making.

In contrast, the other options do not encapsulate the full definition of a ledger. For instance, a digital database of transactions does not imply the sorted categorization by account characteristic of a ledger. A summary of daily cash transactions focuses on a specific aspect rather than the broader categorization of all financial transactions. Lastly, a list of bank account transactions only covers one type of financial activity rather than encompassing the complete picture that a ledger provides.