Final answer:
The ledger is actually where transactions are summarized after initially being recorded in a journal, forming part of the double-entry bookkeeping system. It uses T-accounts to ensure the accounting equation is maintained, and serves as a unit of account.
Step-by-step explanation:
The statement 'a ledger is where a company first records transactions and other selected events' is not entirely accurate. In business accounting, the first record of any transaction occurs in the journal, which is part of the double-entry bookkeeping system. After being recorded in the journal, the transactions are then posted to the respective ledger accounts. Here, the ledger serves as a collection of all accounts where transactions affecting those accounts are summarized.
A ledger uses a two-column format known as the T-account. This helps in displaying the effects on each account and ensures that the accounting equation (assets equal liabilities plus equity) is maintained.
A type of ledger account, a time deposit account, for example, represents money that depositors have committed to leaving in the bank for a certain period to earn a higher rate of interest. It exemplifies how transaction details involving a specific account are maintained within the ledger. Similarly, ledger accounts record various transaction costs that a bank might incur. In all these records, the ledger serves as a unit of account by providing a standardized way to measure and present the firm’s financial information.
Therefore, the balance sheet of a bank is essentially a summarized version of its ledgers, structured into assets, liabilities, and net worth that reflect the bank's financial position at a point in time.