The General Ledger
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, allowing for greater ease of entry and reporting.
All accounts in the chart of accounts are grouped in one of five categories: Assets, Liabilities, Owner's Equity, Revenue, and Expenses. The general ledger is organized according to the chart of accounts, with a separate register, file, page, or card for each account.
Examples of General Ledger Entries
Account No. 101
|Cash – Regular Checking||Debits||Credits||Balance|
|Date and Explanation||On the Left||On the Right||25,000.15|
|02/22/07 Deposit for Thorndike Widget Sales||12,800.00||37,800.15|
|02/24/07 Transfer to Payroll||11,252.46||26,547.69|
Account No. 102
|Cash – Payroll Checking||Debits||Credits||Balance|
|02/24/07 Transfer from checking||11,252.46||16,272.51|
|02/27/07 Pay Billy Joebob||640.20||15,632.31|
Account No. 401
|Sales – Widgets||Debits||Credits||Balance|
|02/22/07 Thorndike Order||12,800.00||24,343.62|
Account No. 521
|Expenses – Payroll||Debits||Credits||Balance|
|02/27/07 Pay Billy Joebob||640.20||1,850.28|