General Ledger

General Ledger Definition

A general ledger is the main accounting record of a business or organization, and contains a complete record of financial transactions over the entire life of a company. A general ledger contains all the accounts for recording transactions relating to a company’s assets, liabilities, owners’ equity, revenue and expenses; it is also a central repository for accounting data transferred from subledgers such as accounts payable, accounts receivable, cash management, fixed assets, purchasing, and projects.

The general ledger is part of an accounting system used to create a company’s financial statements, including the statement of financial position and statement of income. All transactions are posted to the general ledger accounts, then the accountant generates a trial balance. When additional entries are posted, the trial balance is adjusted; the adjusted trial balance is used to general new financial statements.

A general ledger typically employs a double-entry bookkeeping system, so that each transaction has both a debit and a credit in a subledger of the general ledger. The general ledger should include the date, description and balance or total amount for each account.

The list of account names in the general ledger is called the chart of accounts. Examples of general ledger accounts include the asset accounts such as cash, accounts receivable, inventory, investments, land, and equipment. Examples of the general ledger liability accounts include notes payable, accounts payable, accrued expenses payable, and customer deposits. Examples of income statement accounts found in the general ledger include sales, service fee revenues, salaries expense, rent expense, advertising expense, interest expense, and loss on disposal of assets.

Best Practices

It is advisable to love your general ledger because it is seen as your company’s most important and significant financial tool. A company’s general ledger requires frequent and regular maintenance, and should contain the most current information in readily accessible locations. By doing this upkeep properly, your organization should be able to generate accurate financial statements efficiently.

Some best practices that CPAs recommend to facilitate this include:

  • Eliminate or consolidate small balance accounts or general ledger accounts that have fallen into disuse
  • Reduce the number of general ledger accounts overall
  • Use identical chart of accounts for subsidiaries
  • Restrict use of journal entries
  • Use a standard journal entry list or use boilerplate journal entries
  • Modify the general ledger to accommodate activity-based costing


General Ledger System Flow

Source: General Ledger System Flow (ERPro)

Related Content

BoldCFO is about transforming finance operations to grow your business ©