| Bookkeeping |
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| Key concepts |
| Financial statements |
| Related professions |
| Part ofa series on |
| Accounting |
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People and organizations |
Inbookkeeping, ageneral ledger is a bookkeepingledger in which accounting data are posted fromjournals and aggregated fromsubledgers, such asaccounts 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 thechart 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 managecash flow efficiently. An organization'sstatement of financial position and theincome statement are both derived from income and expense account categories in the general ledger.[4]
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 intosubledgers to include additional details of such accounts as cash, accounts receivable, accounts payable, etc.
The extraction of account balances is called atrial balance. The purpose of the trial balance is, at a preliminary stage of thefinancial statement preparation process, to ensure the equality of the totaldebits andcredits.[8]
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, thedouble-entry bookkeeping system helps ensure that the general ledger is always in balance, thus maintaining theaccounting equation:
The accounting equation is the mathematical structure of thebalance 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 morespreadsheets for their ledgers, including the general ledger, or may utilizespecialized software to automate ledger entry and handling. When a business usesenterprise 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.