What is general ledger accounting?
General ledger accounting is a double-entry system of recording transactions that occur in a company. Every transaction is recorded in the general ledger, and information is readily available for those who need it.Double-Entry SystemEvery transaction is recorded under a debit and credit system. Debits must always equal credits.Chart of AccountsEvery item has its own account. The accounts are divided into five different types: assets, liabilities, equity, revenue and expenses. Each account has either a normal debit or credit balance.TransactionsEvery time money is received or paid out, a transaction occurs and is recorded in the general ledger. The entry is recorded and then the amounts are transferred into the correlating accounts. Each account is balanced and the totals are used for financial statements.Balance SheetInformation from the general ledger is used to prepare a balance sheet at the end of an accounting period. A balance sheet lists the company’s assets, liabilities and equi
The general ledger is where all accounting transactions are posted in a double entry system using debits (on the left) and credits (on the right) for each transaction. An additional column to the far right can keep a running total of activity in the account, similar to your checkbook. The debit and credit entries impact at least two ledger accounts and it is usual to capture enough information in each leg of the entry to be able to identify the other one. To extend the comparison to your checkbook, if you also had a register for the types of income and expenses you receive and pay, you could set up a general ledger for yourself. The general ledger provides data for the Balance Sheet and either the Single-Step Income Statement or the Multi-Step Income Statement (depending on which one the company prepares.) The ledger can be electronic or physical depending on whether you are using computer software or a manual system. Most companies use a computerized version of the general ledger, all
