General ledger

In bookkeeping, a general ledger is a bookkeeping ledger in which accounting data are posted from
journals and aggregated from subledgers, such as accounts payable, accounts receivable, cash
management, fixed assets, purchasing and projects.[1] A general ledger may be maintained on
paper, on a computer, or in the cloud.[2] A ledger account is created for each account in the chart of
accounts for an organization and is classified into account categories, such as income, expense,
assets, liabilities, and equity; the collection of all these accounts is known as the general ledger. The
general ledger holds financial and non-financial data for an organization.[3] Each account in the
general ledger consists of one or more pages. It includes details such as the date of sale, invoice
number, customer details, and the amount due. This ledger helps businesses track outstanding
receivables and manage cash flow efficiently. An organization's statement of financial position and
the income statement are both derived from income and expense account categories in the general
ledger.[4]

Terminology

The general ledger contains a page for all accounts in the chart of accounts[5] arranged by account
categories. The general ledger is usually divided into at least seven main categories: assets,
liabilities, owner's equity, revenue, expenses, gains and losses.[6] It is the system of record for an
organization’s financial transactions.[7] The main categories of the general ledger may be further
subdivided into subledgers to include additional details of such accounts as cash, accounts
receivable, accounts payable, etc.

The extraction of account balances is called a trial balance. The purpose of the trial balance is, at a
preliminary stage of the financial statement preparation process, to ensure the equality of the total
debits and credits.[8]

Process

Posting is the process of recording amounts as credits (right side), and amounts as debits (left
side), in the pages of the general ledger. Additional columns to the right hold a running activity total
(similar to a chequebook).[9]

The general ledger should include the date, description and balance or total amount for each
account.
Because each bookkeeping entry debits one account and credits another account in an equal
amount, the double-entry bookkeeping system helps ensure that the general ledger is always in
balance, thus maintaining the accounting equation:

Assets = Liabilities + (Shareholder's or Owner's equity).[10][5]

The accounting equation is the mathematical structure of the balance sheet. Although a general
ledger appears to be fairly simple, in large or complex organizations or organizations with various
subsidiaries, the general ledger can grow to be quite large and take several hours or days to audit or
balance. In a manual or non-computerized system, the general ledger may be a large book.
Organizations may instead employ one or more spreadsheets for their ledgers, including the general
ledger, or may utilize specialized software to automate ledger entry and handling. When a business
uses enterprise resource planning (ERP) software, a financial-features module produces subledgers
and the general ledger, with entries drawn from a database that is shared with other processes
managed through the ERP.

References

1. "What is a General Ledger?" (https://www.businessaccountingbasics.co.uk/general-ledger/) .

February 2022.

2. "Understanding the Basics: What is a General Ledger?" (https://blog.workday.com/en-us/2022/

understanding-the-basics-what-general-ledger.html) . 16 December 2022.

3. "Accounting Term Concepts" (https://web.archive.org/web/20151227053147/http://controller.

vpfa.fsu.edu/sites/default/files/media/doc/Accounting/Accounting_Terms_Concepts.pdf)
(PDF). Archived from the original (http://controller.vpfa.fsu.edu/sites/default/files/media/doc/
Accounting/Accounting_Terms_Concepts.pdf) (PDF) on 27 December 2015. Retrieved
12 February 2017.

4. "National Curriculum Statement Accounting Guide Grade 10" (https://web.archive.org/web/201

60422230808/http://ecdoe.gov.za/documents/learners/self-study-guides/accounting-gr10.pd
f) (PDF). Archived from the original (http://www.ecdoe.gov.za/documents/learners/self-study
-guides/accounting-gr10.pdf) (PDF) on 22 April 2016. Retrieved 26 February 2017.

5. "Chapter 9.3 - General Ledger and Charts of Accounts" (http://www.accountingscholar.com/led

ger-accounts.html) . Accounting Scholar. Retrieved 28 February 2017.

6. "Inputs to Accounting" (http://kolibri.teacherinabox.org.au/modules/en-boundless/www.bound

less.com/accounting/textbooks/boundless-accounting-textbook/introduction-to-accounting-1/
what-is-accounting-17/inputs-to-accounting-110-6831/index.html) .
 7. "Understanding the Basics: What Is a General Ledger?" (https://blog.workday.com/en-us/2022/
understanding-the-basics-what-general-ledger.html) . Workday Blog. 16 December 2022.
Retrieved 31 August 2023.

8. "What is a Trial Balance?" (http://accounting-simplified.com/trial-balance.html#purposetrial) .

Retrieved 5 March 2017.

9. "Posting to general ledger accounts" (http://highered.mheducation.com/sites/dl/free/0074713

40x/100328/sample_ch08.pdf) (PDF). Retrieved 26 February 2017.

10. Meigs and Meigs. Financial Accounting, Fourth Edition. McGraw-Hill, 1983. pp.19-20.