General Ledger

General Ledger

The complete set of accounts used by an organization to record financial transactions, serving as the central repository of all debit and credit entries that affect each account and providing the foundation for financial statement preparation.

For instance, a company’s general ledger contains individual accounts for cash, accounts receivable, inventory, fixed assets, accounts payable, loans payable, capital stock, retained earnings, sales revenue, cost of goods sold, and various operating expenses, each showing beginning balances, transaction details, and ending balances.

The general ledger represents the heart of the accounting system, maintaining the permanent record of all financial activity. Transactions typically enter the accounting system through journals (chronological records) and are then posted to the appropriate ledger accounts, where running balances are maintained. Modern accounting software performs these functions automatically, but the conceptual flow remains the same. The general ledger supports numerous accounting functions: providing audit trails for transactions, enabling account reconciliations, facilitating financial statement preparation, supporting tax compliance, and enabling detailed financial analysis. Subsidiary ledgers often supplement the general ledger by maintaining detailed records for high-volume accounts like accounts receivable or inventory.