bookkeeping Bookkeeping is the recording of financial transactions, and is part of the process of accounting in business and other organizations. It involves preparing source documents for all transactions, operations, and other events of a business. T ...

, a general ledger is a bookkeeping

ledger A ledger is a book or collection of accounts in which accounting transactions are recorded. Each account has: * an opening or brought-forward balance; *a list of transactions, each recorded as either a debit or credit in separate columns (usu ...

in which accounting data are posted from journals and aggregated from subledgers, such as

accounts payable Accounts payable (AP) is money owed by a business to its suppliers shown as a liability on a company's balance sheet. It is distinct from notes payable liabilities, which are debts created by formal legal instrument documents. An accounts payable ...

accounts receivable Accounts receivable, abbreviated as AR or A/R, are legally enforceable claims for payment held by a business for goods supplied or services rendered that customers have ordered but not paid for. The accounts receivable process involves customer on ...

cash management Cash management refers to a broad area of finance involving the collection, handling, and usage of cash. It involves assessing market liquidity, cash flow, and investments. In banking, cash management, or treasury management, is a marketing term ...

fixed assets Fixed assets (also known as long-lived assets or property, plant and equipment; PP&E) is a term used in accounting for assets and property that may not easily be converted into cash. They are contrasted with current assets, such as cash, bank acc ...

, purchasing and projects. A general ledger may be maintained on paper, on a computer, or in the cloud. A ledger account is created for each account in the

chart of accounts A chart of accounts (COA) is a list of financial accounts and reference numbers, grouped into categories, such as assets, liabilities, equity, revenue and expenses, and used for recording transactions in the organization's general ledger. Acco ...

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. 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 Cash flow, in general, refers to payments made into or out of a business, project, or financial product. It can also refer more specifically to a real or virtual movement of money. *Cash flow, in its narrow sense, is a payment (in a currency), es ...

efficiently. An organization's statement of financial position and the

income statement An income statement or profit and loss accountProfessional English in Use - Finance, Cambridge University Press, p. 10 (also referred to as a ''profit and loss statement'' (P&L), ''statement of profit or loss'', ''revenue statement'', ''statement o ...

are both derived from income and expense account categories in the general ledger.

Terminology

The general ledger contains a page for all accounts in the chart of accounts 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. It is the system of record for an organization’s financial transactions. 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 A trial balance is an internal financial statement that lists the adjusted closing balances of all the general ledger accounts (both revenue and capital) contained in the ledger of a business as at a specific date. This list will contain the name ...

. The purpose of the trial balance is, at a preliminary stage of the

financial statement Financial statements (or financial reports) are formal records of the financial activities and position of a business, person, or other entity. Relevant financial information is presented in a structured manner and in a form which is easy to un ...

preparation process, to ensure the equality of the total debits and credits.

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). 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 Double-entry bookkeeping, also known as double-entry accounting, is a method of bookkeeping that relies on a two-sided accounting entry to maintain financial information. Every entry to an account requires a corresponding and opposite entry to a ...

helps ensure that the general ledger is always in balance, thus maintaining the

accounting equation The fundamental accounting equation, also called the balance sheet equation, is the foundation for the double-entry bookkeeping system and the cornerstone of accounting science. Like any equation, each side will always be equal. In the accounting ...

: : Meigs and Meigs. ''Financial Accounting, Fourth Edition''. McGraw-Hill, 1983. pp.19-20. The accounting equation is the mathematical structure of the

balance sheet In financial accounting, a balance sheet (also known as statement of financial position or statement of financial condition) is a summary of the financial balances of an individual or organization, whether it be a sole proprietorship, a business ...

. 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

spreadsheet A spreadsheet is a computer application for computation, organization, analysis and storage of data in tabular form. Spreadsheets were developed as computerized analogs of paper accounting worksheets. The program operates on data entered in c ...

s 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

{{Reflist Accounting journals and ledgers Accounting terminology