A general ledger is a record-keeping system for a companys financial data. It 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. 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. Each account in the general ledger consists of one or more pages. An organizations statement of financial position and the income statement are both derived from income and expense account categories in the general ledger.
General ledgers work using a double-entry accounting method. This approach shows expenses and income items in dollar amounts as debits and credits. Each general ledger item or entry can be divided into four main parts: a journal entry describing the item number of the transaction posted to the account, a description for the specific transaction, the debit amount, and the credit amount.
The general ledger is an integral component of a companys accounting system, serving as the central repository for all financial transactions. Its effective functioning is vital for accurate financial reporting and to prepare financial reports. The trial balance is a report that lists every general ledger account and its balance, making adjustments easier to check and errors easier to locate.
