General Ledger

General Ledger is a primary accounting tool used to record all the financial transactions of a business. It is the backbone of any accounting system which forms the basis for the preparation of financial statements. It contains all the accounts of a business, including assets, liabilities, equity, revenue, and expenses, which are used to prepare the company's financial reports.

Overview

A General Ledger (GL) is a complete record of all financial transactions over the life of an organization. The ledger holds account information that is needed to prepare financial statements, and includes accounts for assets, liabilities, owners' equity, revenues and expenses.

Structure

The structure of the general ledger depends largely on the size of the company and the complexity of its operations. The accounts are usually listed in the order of their appearance in the financial statements. Typically, the order is: assets, liabilities, equity, revenues, and expenses.

Function

The main function of the general ledger is to track all financial transactions over the life of the company. It is used by accountants to prepare the company's financial statements, and to do financial analysis. The ledger is also used by auditors to review the company's financial transactions.

Double-entry bookkeeping

The general ledger is the heart of the double-entry bookkeeping system of a company. In this system, each financial transaction is recorded in at least two accounts, and the total debits must equal the total credits. This system helps to ensure that the accounting equation (Assets = Liabilities + Equity) is always in balance.

See also

• Financial accounting
• Management accounting
• Accounting software
• Trial balance
• Balance sheet
• Income statement
• Cash flow statement

References

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