Can anyone explain the basics of a general ledger?
General Ledger accounts and entries are based on ALOE, Assets minus Liabilities equals Owners Equity. Assets always have a debit balance, Liabilities and Owner’s Equity always have credit balances. (When your bank says they’ve credited your account by adding money to it, it’s because you’re a liability on their books since it’s your money and they owe it to you) A general ledger uses a double entry system. For each journal entry made, a debit and a credit are posted, and the total of the debits equals the total of the credits. These debits and credits are posted to the general ledger accounts, and the total of all transactions in each account is that account’s balance. The total of all the debit account balances is always equal to the total of all the credit account balances. For example, you have an asset account called Cash and another asset account called Building. You have a liability account called Bank Loan. Since you don’t own a building and don’t owe the bank any money, those a
