The Ising partition function for a graph counts the number of bipartitions of the vertices with given sizes, with a given size of the induced edge cut. Expressed as a 2-variable generating function it is easily translatable into the corresponding partition function studied in statistical physics. In the current paper a comparatively efficient transfer matrix method is described for computing the generating function for the n×n grid with periodic boundary. We have applied the method to up to the 15×15 grid, in total 225 vertices. We examine the phase transition that takes place when the edge cut reaches a certain critical size. From the physical partition function we extract quantities such as magnetisation and susceptibility and study their asymptotic behaviour at the critical temperature.