Don’t know what a general ledger is?
Not to worry, just keep reading and in about 4 minutes you’ll have all the important information you need on the subject.
In simple terms, a general ledger is a record containing all the financial transactions that happen in your business. It is the foundation of any double entry bookkeeping system. The information contained in a general ledger is incredibly important when it comes to preparing your businesses financial statements such as the income statement or the balance sheet, and to track your company’s overall financial health.
What is a General Ledger used For?
The information in a general ledger can be used to assess and analyse the financial state of a business at any given point. It gives the full story as to what is going on with businesses finances and provides a detailed and comprehensive record of transactions. When an issue or mistake is present in a financial statement, the only option of correcting it is using the data in the general ledger. This may entail sifting through hundreds of past transactions, but when it comes to financial statements, accuracy is imperative.
How is a General Ledger used in Double Entry Bookkeeping?
As previously mentioned, the general ledger is the foundation of a double entry bookkeeping system for any business. It is split into two columns, debits on the left and credits on the right. Each entry has a debit, along a credit that balances it out, hence the name – double entry.
What is contained in a General Ledger?
A general ledger stores all the businesses financial transactions. Each transaction is separated into a sub ledger. Sub-ledgers would be liabilities, owner’s equity, assets, expenses, and revenues.
What is the difference between a General Journal and a General Ledger?
A general journal is a separate book of accounts that records each financial transaction as they happen, as both a debit and a credit. All transactions are first recorded here in chronological order, of when they took place. After being recorded here, the transaction is then entered into the general ledger based on the type of account affected and separated into the above-mentioned sub-ledgers.
Are you still unsure of what a general ledger is? Well, the good thing is that you don’t really have to know. That’s what we’re here for. We are well equipped to handle all the important details regarding your bookkeeping, so you don’t have to worry about them. That way you can spend your time and energy on what’s really important to your business so that you can build some real momentum.