What is a general ledger? #
A general ledger is a record of all the financial transactions of a company. It is the main accounting record that shows all of the company’s accounts, including assets, liabilities, equity, revenues and expenses. The general ledger is the backbone of an accounting system and it serves as the central repository for all the financial transactions of the company.
Each financial transaction is recorded in the general ledger as a debit or credit entry in the appropriate account. The general ledger is organized into separate accounts for each type of asset, liability, equity, revenue, and expense. Each account has its own balance that is calculated by adding up all the debit entries and subtracting all the credit entries.
The general ledger is important as it provides a detailed record of all the financial transactions of a company, it helps to ensure the accuracy and integrity of financial statements and it provides a basis for the preparation of financial statements such as balance sheet and income statement. It also serves as a reference for budgeting, forecasting, and auditing.