Definition of General Ledger
A general ledger is a grouping of perhaps hundreds of accounts that are used to sort and store information from a company's business transactions. The general ledger is organized as follows:
- Balance sheet accounts (assets, liabilities, equity), and
- Income statement accounts (revenues, expenses, gains, losses)
Under the double entry system of accounting and bookkeeping, every business transaction will affect two (or more) general ledger accounts . In addition, each transaction's debit amount(s) must be equal to its credit amounts. As a result, the general ledger is expected to have the total amount of debits equal to the total amount of credits. Further, when the account balances are listed on a trial balance , the totals should be equal.
Examples of a General Ledger
In a manual accounting or bookkeeping system, the general ledger is a "book" with a separate page or ledger sheet for each account. (When a significant amount of detailed information is needed for an account such as Accounts Receivable, a subsidiary ledger is often used.)
In a computerized system, the general ledger will be an electronic file of all the needed accounts. This also facilitates the electronic preparation of the company's financial statements.
