General ledger
General Ledger
The General Ledger (pronounced: /ˈjen(ə)rəl ˈlejər/) is a comprehensive record of all the financial transactions of a business. It is the primary tool for recording, categorizing, and analyzing a company's financial activities.
Etymology
The term "General Ledger" originates from the traditional practice of keeping financial records in a physical ledger or book. "General" refers to the comprehensive nature of this record, encompassing all financial transactions.
Definition
A General Ledger is a complete record of financial transactions over the life of a company. The ledger holds account information that is needed to prepare financial statements, and includes accounts for assets, liabilities, owners' equity, revenues and expenses.
Structure
The General Ledger is typically structured with the following components:
- Account: Each financial transaction is categorized into an account. Accounts can include cash, accounts receivable, accounts payable, sales revenue, and expenses.
- Debit and Credit: Each transaction is recorded as a debit and a credit. Debits increase assets and expenses, while credits increase liabilities, equity, and revenue.
- Balance: The balance of each account is calculated by adding the debits and subtracting the credits.
Related Terms
- Chart of Accounts: A list of all accounts used by a company in its general ledger.
- Trial Balance: A report that lists the balances of all general ledger accounts to ensure that total debits equal total credits.
- Financial Statements: Reports generated from the general ledger that provide a snapshot of a company's financial health.
- Double-Entry Bookkeeping: The system of recording two entries for each transaction, a debit and a credit, in the general ledger.
See Also
External links
- Medical encyclopedia article on General ledger
- Wikipedia's article - General ledger
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